Lenders judge a home loan application on how reliable your income looks on paper, not only on how much you earn. If you live in Ellenbrook and plan to buy or refinance, a few small mistakes with your income and employment details can reduce your borrowing power or slow down approval.
How Does Your Income Affect a Home Loan Application?
Your income sets the loan amount a lender is willing to offer, because it shows whether you can afford the repayments. Lenders look at how much you earn, how stable it is and how much you already spend on debts and living costs.
Different lenders treat the same income in different ways. Some count overtime or bonuses at a high share, and a few count overtime in full for certain industries or roles. Rental income is usually counted at a reduced share, often around 80%, and others count only part of it. That is why a quick check with a broker can show you where you stand before you apply for a home loan. You can also get a rough idea yourself with our borrowing capacity tool.
Common Mistakes With Payslips and Tax Returns
The most common mistake is assuming your payslip tells the whole story. A lender will usually compare your payslips, bank statements and tax records, so any gaps or mismatches can cause questions.
Some examples to watch for:
- Overtime or allowances that appear on your payslips but not consistently over time.
- Side income paid into your account that you never declared.
- Large one-off deposits that are hard to explain.
Gather these details before you start, so your story is consistent across every document. Our team can also talk you through the full range of home loan options once we know how your income is made up.
Self-Employed, Casual and Contract Income: What Lenders Look At
If you are self-employed, casual or on contract, lenders generally want to see a steady history of earnings rather than a single good month. The details vary between lenders, so the right match matters.
Self-employed borrowers should be aware that deductions which lower taxable income can also lower the income a lender is able to use. This is worth discussing with your accountant well before you apply. Casual and contract workers often do better when they can show a regular pattern of shifts or contract renewals over time.
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Example: Overtime Income and a $500,000 Loan
As an example, consider a full-time worker in Ellenbrook who earns a base salary plus regular overtime. They want to borrow $500,000 on an owner occupied home loan with principal and interest repayments over 30 years.
At the illustrative rate of 6.75% p.a., repayments on that loan would be about $3,243 a month. Real rates depend on your deposit size and lender, so treat this as a guide only. Our first lender assessed only their base salary, and the result fell short of the amount they wanted.
The solution was to gather overtime evidence, including payslips and bank statements showing the extra pay over an extended period, and to compare lenders that count overtime at a higher share. One lender accepted a larger part of the overtime, and that lifted the amount the buyer could apply for.
The trade-off is that overtime can change if hours are cut. A larger loan built on that income is harder to carry if the extra shifts stop, so the buyer also checked how repayments would feel on base salary alone.
Changing Jobs Before You Apply
Changing jobs shortly before applying can complicate your application, because lenders like to see stability. Some lenders ask for a minimum time in a role or are cautious about probation periods, while others are more flexible.
If a move is coming up, speak to us first. A new role in the same industry with a higher salary is often viewed differently from a move into a new field, and timing your application can make a real difference. If you are buying your first place, our first home buyers page explains how we support people at that stage.
Do Credit Cards and Debts Reduce What You Can Borrow?
Yes. Lenders generally count the limit on your credit cards, not just the balance, and your other debts reduce the amount you can borrow even if your income stays the same.
If you do not use a card, closing it or lowering the limit before you apply may lift your borrowing power. The trade-off is that you lose that line of credit, so keep one only if you would need it for emergencies. A personal loan or car loan repayment also reduces what a lender thinks you can afford for a home loan.
Why Pre-Approval Helps When Your Income Is Not Straightforward
A home loan pre-approval gives you an indication of how much a lender may let you borrow before you find a property. It is useful if your income includes overtime, bonuses, commissions or business earnings, because you learn how a lender treats them before you make an offer.
Pre-approval is not a final approval. The lender will still review the property and recheck your circumstances, and changes in income, debts or spending can alter the outcome. If you already own a home, a refinancing review can also show whether a different lender would treat your income more favourably.
If you want to know how a lender would read your income and employment, call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Do lenders treat overtime as income for a home loan?
It depends on the lender. Some count overtime at a high share once you can show a consistent history, a few count it in full for certain industries or roles, and others count only part of it or none.
How can self-employed people prepare a home loan application?
Lenders generally want to see a steady earning history. Speak to your accountant before applying, because deductions that lower taxable income can also lower the income a lender can use.
Can credit card limits affect how much I can borrow?
Yes. Lenders generally count the card limit rather than just the balance. Lowering or closing an unused card before you apply may lift your borrowing power.
Does changing jobs affect a home loan application?
It can. Some lenders look closely at time in a role or probation periods, so it helps to talk to a broker before you change jobs or apply.
