What Do Lenders Actually Check? How Borrowing Power Works in 2026
Lenders test your loan at 3% above the real rate. Here is what they check, why it limits your borrowing power, and how to improve it.
The short version
- Lenders do not just look at your deposit. They check whether you can comfortably afford the repayments, now and if rates rise.
- They test your loan at your actual rate plus 3 percentage points. APRA, the banking regulator, kept that buffer in place in May 2026.
- Credit card limits, other debts and your spending all reduce how much you can borrow.
- A little preparation can lift your borrowing power before you apply.
Many first home buyers start by asking, “how much can I borrow?” It is a fair question, but the answer is not just about your wage. Lenders look at your whole financial picture. Knowing what they check puts you in control.
The six things lenders look at
| What they check | Why it matters |
|---|---|
| Income | Your wage, plus other income such as rent or bonuses. Casual and self-employed income is often assessed more carefully. |
| Living expenses | What you spend each month. Lenders compare it to your bank statements and to their own benchmarks. |
| Debts and credit limits | Car loans, personal loans, buy-now-pay-later and credit cards. For cards, lenders usually count the limit, not just what you owe. |
| Your deposit | How much you have, and how long you have been saving it. Steady saving shows good habits. |
| Credit history | Missed payments or lots of recent credit applications can count against you. |
| Employment | How long you have been in your job, and whether you are on probation. |
The 3% buffer, in simple terms
Lenders must make sure you could still pay your loan if rates rose. So they test your repayments at a higher rate than the one you will actually pay. That rate is your loan’s rate plus 3 percentage points.
For example, if a loan has a rate of 6%, the lender tests whether you could afford it at 9%. That is why two people on the same income can be approved for very different amounts, and why borrowing power often drops when rates rise.
The rate example is illustrative only and is not a quote. Actual rates depend on the lender, the loan and your situation.
The debt-to-income limit
APRA also kept a limit on very high borrowing. Lenders can only write a small share of their new loans (no more than 20%) where the total debt is six or more times the borrower’s income. Most first home buyers are not near this limit, but it can affect larger loans.
Six things you can do before you apply
- Reduce your credit card limits. Cancel cards you do not use. An unused $15,000 limit can still reduce what you can borrow.
- Pay down small debts, especially buy-now-pay-later and car loans.
- Know your spending. Look at three months of statements and tidy up anything you would not want a lender to see.
- Save steadily in a regular account, so your savings history is clear.
- Check your credit report for mistakes, and avoid applying for new credit.
- Do not change jobs right before applying, unless you have to.
Get the Pre-Approval Ready Pack
A checklist of every document and number a lender will ask for, so you can apply with confidence.
Send me the checklistWe will email it straight to you.Your next steps
- Work through the six actions above.
- Gather your documents: payslips, bank statements, ID and details of any debts.
- Talk to a broker before you apply with a lender, so you avoid a declined application and unnecessary enquiries on your credit file.
Sources and when we checked
Figures checked on 16 October 2026. Sources: APRA (macroprudential settings, 28 May 2026, including the 3 percentage point serviceability buffer and debt-to-income limit); Reserve Bank of Australia (cash rate decision, 29 September 2026); Canstar (estimate of repayment impact). The rate example is illustrative. Rules, rates and thresholds can change, so confirm with the official sources or a broker before you act. This article is general information only and is not personal advice.
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This article is general information only and does not take into account your personal financial situation, needs or objectives. Consider whether it is appropriate for you before acting on it. Figures and rules can change, so always check the latest details with the relevant authority.
Richard Morris is a Credit Representative (CRN 570376) of Strategic Mortgages Perth (ACR 570592), authorised under Connective Broker Services Pty Ltd (Australian Credit Licence 389328). This is not tax or legal advice. Please speak to your accountant or solicitor about your own situation.