Securing a home loan is one of the most exciting, and sometimes nerve-wracking, parts of the journey to homeownership. Whether you’re a first-time buyer or a seasoned homeowner, a home loan rejection can feel like a major setback. But the good news is that it doesn’t have to be the end of the road.
Understanding why applications get declined and how to fix the underlying issues can put you back on track faster than you might think. Here’s what to do if your bond application is turned down, and how to improve your chances of approval next time.
1. Understand why your application was rejected
The first step is to understand why your application was declined. Banks and bond originators evaluate each application based on strict affordability, risk, and credit criteria.
Common reasons for rejection include:
- High debt-to-income ratio (DTI)
- Low or unstable income
- Poor credit history, adverse listings, or low credit score
- Insufficient deposit
- Employment instability
- Errors or discrepancies in your documentation
You have the right to ask the lender or bond originator for an explanation. Once you know the cause, you can take targeted steps to correct it before reapplying.
2. Review and improve your debt-to-income ratio
Your debt-to-income (DTI) ratio shows lenders how much of your income goes toward paying debt each month. If you’re spending too much on existing loans, credit cards, or store accounts, banks may see you as overextended.
How to lower your DTI ratio:
- List all sources of income (salary, rental income, side jobs).
- Add up your monthly debt repayments (loans, credit cards, vehicle finance, etc.).
- Divide total debt payments by your income to calculate your DTI percentage.
- Aim to keep your DTI below 40% — ideally closer to 30%.
- Pay off smaller debts first or consolidate multiple high-interest debts into one manageable repayment.
Budgeting tools or apps can help you track spending, identify waste, and redirect funds toward reducing your debt burden.
3. Build and repair your credit history
Your credit score plays a critical role in any home loan application. A history of missed payments, defaults, or judgments can result in an automatic rejection, but the good news is that credit health can be improved over time.
Ways to strengthen your credit profile:
- Pay all bills on time. Consistent punctuality matters more than paying large amounts at once.
- Keep credit utilization low. Try to use less than 30% of your total available credit.
- Avoid ‘shopping around’ for unnecessary new accounts. Each application triggers a credit inquiry, too many enquiries in a short period of time, can lower your score temporarily.
Each new account once opened, especially large facilities such as personal loans, vehicles etc, will initially lower your score and your repayment behaviour starts improving the score. - Check your credit report regularly. You can obtain one free report annually from credit bureaus such as Experian, TransUnion, or Compuscan.
- Correct any errors immediately — even small inaccuracies can affect your score.
If you have no credit history, consider approaching your bank for a credit card, as they already have a risk profile for you or opening a small account (like a cellphone contract or store card) and making regular, on-time payments to build a positive track record.
4. Demonstrate employment and income stability
Lenders want reassurance that you have a steady and reliable income stream to cover your bond repayments over time. Frequent job changes or inconsistent income, especially for self-employed individuals, can raise red flags.
To strengthen your employment profile:
- Stay in your current job or industry for at least 24 months if possible.
- If you’re self-employed, keep accurate financial records, including tax returns and business statements for at least two years.
- Provide supporting documentation like payslips, contracts, or invoices to prove consistent earnings.
If you’re on probation or contract employment, consider waiting until your position becomes permanent before applying again.
5. Save for a meaningful deposit
While some lenders still offer 100% home loans in rare cases, most require a deposit of 10–20% of the property price. Having a deposit signals financial discipline and lowers the bank’s risk, which often translates into better interest rates.
Smart ways to save for your deposit:
- Open a dedicated savings account specifically for your home deposit.
- Set up an automatic debit order so savings happen effortlessly.
- Cut non-essential spending — think takeaways, subscriptions, and impulse buys.
- Consider investing your savings in low-risk options like money market funds for modest growth.
- Keep in mind you’ll also need funds for transfer duties, attorney fees, and bond registration costs.
If you’re a first-time homebuyer, explore government programs such as the First Home Finance subsidy (formerly FLISP), which helps lower-income buyers bridge the deposit gap.
6. Learn from the rejection before reapplying
A home loan rejection doesn’t permanently damage your financial prospects, but reapplying too quickly without addressing the issues can make things worse. Multiple applications in a short time frame can negatively affect your credit profile.
Here’s what to do instead:
- Take time to analyze the rejection reasons provided by the lender.
- Focus on improving weak areas such as reducing debt, building credit, or increasing your deposit.
- Allow a few months of consistent improvement before submitting a new application.
- Track your progress using a budgeting or credit-monitoring app to stay motivated.
Patience and preparation can turn a rejection into a valuable learning experience that ultimately strengthens your financial foundation.
7. Get pre-approved before you start house hunting
One of the most effective ways to avoid disappointment later is to get pre-approved before making an offer on a property. This step gives you and potential sellers confidence that your finances are in order.
Benefits of pre-approval:
- You’ll know exactly what price range you can afford.
- It identifies any red flags in your financial profile early on.
- Sellers take pre-approved buyers more seriously, especially in competitive markets.
- It speeds up the final bond approval once you’ve found your dream home.
Working with a bond originator can simplify this process by submitting one application to multiple banks, helping you secure the most competitive rate and terms available.
8. Stay financially prepared for the future
Even after improving your finances, it’s wise to keep building resilience. Create an emergency fund to cover at least three to six months of expenses, keep monitoring your credit, and maintain consistent repayment habits across all accounts.
Remember, lenders aren’t just looking for applicants who can afford a bond today, but for those who demonstrate the ability to manage debt responsibly over the long term.
The bottom line
Getting a home loan rejection can be discouraging, but it’s not the end of your homeownership journey. By taking time to understand the reasons behind the decline, improving key financial metrics, and seeking pre-approval before reapplying, you can turn that “no” into a confident “yes.”
Every step you take to strengthen your financial health brings you closer to opening the door to your new home, and that’s a goal worth working toward.
