Home loans for low income earners
Low income earners find it harder to get home loans. But it's not impossible, depending on your budget and deposit size.
Key takeaways
- It's harder to get a loan as a low income earner but it's not impossible. Your success depends on factors like your spending, existing debts and how much you want to borrow.
- While there are no specific low income home loans, you can increase your chances of approval by improving your credit score, paying off debt and cutting your spending before you apply.
- Lenders may accept Centrelink payments as a form of income but it likely won't be enough by itself.
How much do I need to earn to qualify for a home loan?
The amount you can borrow depends heavily on your income. But it also depends on:
- Your deposit size.
- Your property's value (and how much you want to borrow).
- Your existing debts.
- Your credit score.
When you apply for a loan, lenders evaluate the amount you can borrow by looking into your capacity to repay. The amount of money you have in your bank account is a factor, as it shows that you can save money despite your expenses (daily expenses, utility bills, other loan repayments, etc.).
Start by using a borrowing power calculator to get a rough idea of how much you could borrow with your income.
What income sources qualify for a home loan?
Income from a full-time job is what lenders really want to see. Even if you're a low earner.
But lenders may accept different financial sources when evaluating loan applications. Aside from having a job, receiving rental income, or regular government payments, lenders also look into allowances such as Centrelink payments, child support payments and pensions. Provide proof of these sources to submit with your application form.
What income documents will lenders expect?
Traditional loan applications require several documents:
- Proof of your identity (passport, birth certificate, citizen’s certificate, driver’s licence, and in some cases, credit cards).
- Proof of your income (recent payslips, letters of employment, tax assessments).
- Your Australian Tax File Number.
- Proof of residence (utility bills, recent bank statement, rate notice, valid driver’s license with photo).
If you are self-employed, you need to provide both personal tax returns and business tax returns for the past two years, and your balance sheet and profit and loss accounts for the same period.
Contractors need to provide their most recent employee contract that includes their income details. If you are earning any other income, such as from rent or through government benefits, you will need to present proof of that too.
Tips when applying for a home loan with a low income
You can increase the chances of being approved for a home loan, even on a low income. Here are a few options to think about:
- Joint application. Consider applying for a loan with your partner or a co-signer. This combines two different income sources, raising your capability to repay the loan. It also takes into consideration the financial history of both borrowers, so be sure you both have good credit histories.
- Borrow less. The lower the amount you apply for, the bigger the chance of it being approved. This is because it's less of a risk to the lender, and the lower loan size means lower repayments that are more likely to fit within your budget.
- Lessen existing liabilities. Lenders look not just at your income, but also at your other financial activities. The few liabilities or less outgoing cash flow you have, the more of your income you can comfortably devote to home loan repayments.
- Save a larger deposit. Low income earners can get a better chance of approval if the amount of money they have deposited in a bank account is high. A larger deposit indicates less money is needed, which means a lower income can suffice. It also shows the lender that you have financial discipline and you can pay back your loan on time.
Read our essential tips on how to increase your borrowing capacity
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Hi I would like to know what is the lowest interest rate for low income earners, first home buyers, combine income of two single female, earning total of $114900
Hi there,
There isn’t really a single interest rate that we can give you here. Whether you can get a loan and at what rate depends on each lender’s criteria for lending to low income earners.
It would be a good idea to speak to a mortgage broker. They know which lenders borrow to different borrower types. They’ll meet with you free of charge and will be better placed to look at your earnings and financial situation to let you know what kind of interest rates you’ll find.
Have you looked at this first home buyer scheme? Getting a loan on a low income will be better helped by saving a higher deposit, but this scheme helps buyers with just a 5% deposit and is only available for borrowers earning less than a certain amount.
Rebecca
I would like some advice on the amount of money l van borrow for a mortgage please
Hi Rose,
Thank you for reaching out to Finder.
You have accessed the right page. If you want to get an estimated amount of how much you can borrow considering the income that you earn, you can make use of the borrowing power calculator you can find below the comparison table.
For the actual amount you can borrow from lenders, you have to speak with the lender directly. Lenders have different criteria in assessing the amount they are willing to approve you for.
If you want a more personalized advise on home loans, you can consider seeking the help of a mortgage broker.
Cheers,
Charisee
Is it possible to get a mtg for $50000 on a $200000 property while unemployed on Newstart benefit. If so, who would be best mortgagors company
Hi Heather,
Thanks for getting in touch.
Generally, it will be harder for you to qualify for a home loan if you are unemployed and if you’re receiving Centrelink benefits. When applying for a home loan, most lenders prefer that all applicants have been in their current job for at least 12 months, or in the same industry for 2 years, as this demonstrates that you have a stable source of income.
You might be interested to read our guide about home loans for Centrelink recipients where you can enquire with a mortgage broker to discuss your options. On the table provided, you’ll see which government benefits are accepted by most lenders, but please keep in mind that most benefits are only accepted as a secondary income source.
Ultimately, your ability to qualify for a home loan will depend on a range of factors; your income, assets, credit history, and any existing debts that you have (e.g. credit cards or personal loans). Also, most lenders will treat these types of applications on a case-by-case basis.
I hope this helps. Should you have further questions, please don’t hesitate to reach out again.
Have a wonderful day!
Cheers,
Joshua Infantado
I am 62 and can retire with the pension at 66 1/2, so 4 1/2 more years to work max I hope. I am renting only paying $210 per week, do not own a home, have had first home owners grant many years ago, and owe no money at all to anybody so over the years I will have gotten a good credit rating after paying cars etc off. I work part time and earn about $36000 pa. I have $25,500 saved at the moment and would like to get a home loan to buy a cottage in a country town to live in at retirement but rent out until then. What are my chances of doing this and how much could I borrow? Iam looking at the loan repayment to be easily affordable when I am retired.
Hi Julie,
Thank you for your comment.
There are some lenders who view pension as an income and it means that some lenders may consider you for a home loan. You may refer to our guide on how to get a home loan if you are on a pension. On the page, is a comparison table you can use to see which lender suits you.
When you are ready, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have. Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
Alternatively, you can speak to a mortgage broker who can take your personal circumstance into account and offer you a range of borrowing options.
Hope the guide would help you.
Regards,
Jhezelyn
Hi
I came across your website and would like to know more information.
We would like to purchase a home (either build or buy something already built) however our issue is a low deposit. I have already received the first home owners grant in 2002 before we were married.
If my husband applies for the first home owners grant, the worry is his low income. Can I be named on the loan to increase the income and therefore increase the chances of getting a better loan?
I am currently working full-time and my husband is working on a casual basis.
If you could offer us any help we would much appreciate it.
Hi Mahmoud,
Thanks for getting in touch.
While the eligibility requirements for the First Home Owner Grant (FHOG) are determined by the state in which the property is located, generally you are not eligible if one applicant has already received the grant and has owned residential property in Australia. You can find out which First Home Owners Grantsand learn more on the the eligibility criteria for each grants and schemes available to you.
You may find our handy guide for home loans for casual workers and learn how these home loans work. If you are applying for a home loan together, the lender will take into account your combined income, assets, credit history, and debts. In short, if you have a higher income and better job security, this will help. However, some lenders may still be skeptical about lending to you given your husband’s non-traditional income source.
You may also want to speak to a mortgage broker to help you understand your financial position and they can leverage their panel of networks to find a lender that’s more inclined to review your application.
All the best,
Belinda