Contrary to popular belief, a rejected home loan application does not necessarily signal the ‘end of the road’ on your homebuying journey. Although an initial rejection can feel discouraging, there are free and easily accessible online tools and professional support services available that can boost your chances of approval on the next go-around.
Gavin Lomberg, CEO of ooba Home Loans, the country’s foremost home loan comparison service, explains, “If your application for a home loan was declined, it’s important to first determine the reasons for the rejection, by consulting with trusted professionals who can then best advise on how to rectify and strengthen your position moving forward.”
“In many cases, a home loan rejection simply highlights what needs attention, whether it’s your credit score, affordability or paperwork,” notes Lomberg.
He identifies two key reasons why the banks reject home loan applications as follows:
1. A low credit score
One of the most common reasons for a home loan rejection is a low credit score - a key indicator that can be easily checked using free tools such as ooba Home Loans’ Bond Indicator.
“Your credit score plays a significant role in your chances of home loan approval as it provides lenders with a clear snapshot of your financial behaviour and history, including your current debt obligations and your ability to repay credit on time and in full.”
Lomberg breaks down the credit score brackets in South Africa as follows:
- 781 to 850: Excellent.
- 661 to 780: Good.
- 610 to 660: Fair.
- 500 to 610: Poor.
- 300 to 499: Very poor.
He explains that the banks generally look for a minimum credit score of 610, and that it takes roughly three to six months to begin seeing improvements on a credit score once remedial steps are taken. “It is strongly advised that you apply only once you’ve reached the best credit score possible for your financial profile, in order to secure the best interest rate – and multiple offers - on a home loan.”
For those initially rejected due to a low credit score, Lomberg advises auditing your credit profile for overlooked liabilities or ‘hidden debt’, which may include forgotten retail accounts, old contracts or unpaid subscription services which may have quietly gone into arrears. “Hidden debt can drag down your score, but, once settled or corrected, significantly improve your chances of approval.”
He highlights other ways to improve one’s credit score as follows:
- Repay your debts in full and on time, every time.
- Check your credit reports for errors.
- Reduce your credit ratio (the percentage of your total credit limits in use) to below 30%.
- Limit requests for new credit.
- Encourage your spouse/partner to take the same measures.
2. Poor affordability
Another common reason for rejection is that when it comes time to buy, hopeful homebuyers may lose sight of their true affordability and select homes based on their emotions rather than the numbers behind it.
“Being prequalified for a home loan amount is vital in securing approval,” Lomberg says. “Rather than guessing what you can afford, use a free online prequalification tool to determine your realistic price range before viewing properties. A prequalification certificate can also give you an edge in a competitive market, as sellers are more inclined to take an offer seriously when it’s backed by confirmed affordability.”
However, for homebuyers who are realistic about what they can afford to repay but still fall short of minimum affordability requirements, Lomberg points to the government-funded First Home Finance Subsidy as a potential lifeline.
The First Home Finance Subsidy offers South African first-time homebuyers earning between R3,501 and R22,000 per month a once-off subsidy ranging between R38,911 – R169,264 to put towards their purchase.
“Prospective applicants can have their eligibility assessed and their application submitted by ooba Home Loans, which takes a lot of guesswork out of the process. Securing the Subsidy can also strengthen your home loan application, as banks factor in these additional funds when assessing affordability.”
Smart steps for self-employed buyers
Lomberg shares that one of the biggest stumbling blocks to approval for self-employed homebuyers isn’t necessarily income - it’s admin.
“While we’ve seen a marked increase in self-employed applicants in recent years, many are declined simply because their paperwork isn’t in order,” he explains.
“Self-employed buyers - particularly those who’ve been rejected before - need to be meticulous. Ensure that your tax affairs are fully up to date, keep clear and accurate financial records, separate personal and business expenses, check your credit score, and secure pre-approval before submitting an offer.”
Overcoming obstacles
He adds that once a homebuyer’s financial affairs are in order and they’re ready to apply, ooba Home Loans can step in to add real value by comparing offers from multiple banks to secure the most competitive deal.
“So often, prospective homebuyers approach only their own bank for a loan, assuming loyalty will count in their favour. But each bank applies different criteria and competes on rate and terms, including discounts linked to the prime lending rate. Shopping around can make a meaningful difference,” Lomberg explains, noting that in Q4 ‘25, ooba Home Loans was successful in securing home loan approvals for 49% of homebuyers who were initially declined by one bank.
“By taking proactive steps and seeking expert guidance, a declined application can become an approved bond and ultimately, the keys to your new home” concludes Lomberg.
