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.

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Richard Whitten

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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.

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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

Sources

Richard Whitten's headshot
Senior Money Editor

Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise
Richard has written 687 Finder guides across topics including:
  • Home loans
  • Credit cards
  • Personal finance
  • Money-saving tips
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34 Responses

    Default Gravatar
    BelindaMarch 25, 2015

    I am in receipt of a centre link payment and wish to get a loan of $16000 for a granny flat. Is there much of a chance as it will be my only out going monies.
    Thank You

      Shirley Liu's headshotFinder
      ShirleyMarch 25, 2015Finder

      Hi Belinda,

      Thanks for your question.

      Your eligibility for a home loan will depend on a range of factors including the lender’s eligibility criteria, the type of government benefit that you’re receiving, your income, assets, liabilities, and your credit history. Additionally, your periodic repayment amounts will depend on the home loan product that you apply for including the loan amount and interest rate.

      For this reason, it is advisable that you speak to a mortgage broker regarding your borrowing options. A broker will be able to review your financial position and draw upon their panel of lenders to find one that’s more likely to review your application.

      Please ensure you compare your options and meet the criteria and kindly read through the relevant product disclosure statement and terms and conditions to ensure that you got everything covered before you apply for the loan.

      Cheers,
      Shirley

    Default Gravatar
    MankMarch 16, 2015

    Hi,
    I got deposit $100K and I need to borrow 400K , My individual earning last year earning was $40K , Is there any possibility for me to borrow for first home construction ?
    Regards

    Thanks for the reply

    What about if I add my wife income , so altogether it comes 60K before tax and my company made profit 17K tax ?
    Does that help ?
    Note : that’s all before tax

      Shirley Liu's headshotFinder
      ShirleyMarch 17, 2015Finder

      Hi Mank,

      Thanks for your question.

      Please use our borrowing power calculator to see where you stand.

      After using the calculator and you find that none of the loans listed above are suitable for your situation, there is always the option of speaking to a home loan broker. A broker can 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.

      Cheers,
      Shirley

    Default Gravatar
    nolaFebruary 26, 2015

    I want to buy a property $140.000. I am on a disability pension. I am an emergency teacher. I do not have a deposit

    Can you please help me?

      Shirley Liu's headshotFinder
      ShirleyFebruary 26, 2015Finder

      Hi Nola,

      Thanks for your question.

      It may not be possible to get a home loan without a deposit, unless you have a guarantor who is willing to offer their property as security.

      If you find that none of these loans are suitable for your situation, there is always the option of speaking to a home loan broker. They can help you understand your financial position and they can leverage their panel of networks to find a lender that is more inclined to review your application.

      Cheers,
      Shirley

    Default Gravatar
    AntoNovember 3, 2014

    We are 2 pensioners (mother and son) and been looking for a home loan for a while now. The main hindrance is my mothers are (78), I’m 46. We’ve tried a mortgage broker with no luck. We only get a long based on my income alone. So we can only borrow $110K – not enough. We need double this. Any advice?

      Shirley Liu's headshotFinder
      ShirleyNovember 4, 2014Finder

      Hi Anto,

      Thanks for your question. There are a few options you may want to consider:

      1) Saving up for a larger deposit, though this may take some time.

      2) Speak to a different mortgage broker who specializes in pensioner home loan.

      3) Do some research and see if there’s any Government assistance possible. Getting in touch with Centrelink, in this case, could help.

      Cheers,
      Shirley

    Default Gravatar
    DelaniSeptember 23, 2014

    I am on new start allowance, and, having a deposit of $130,000 could I obtain a loan of $ 120,000 to purchase a property.

      Marc Terrano's headshotFinder
      MarcSeptember 24, 2014Finder

      Hi Delani,

      Thanks for the question.

      There’s no clear answer to this, as it will depend on the lender you decide to go with and other factors including your credit file. One way to increase your chances of getting a home loan on a pension is to seek the services of a mortgage broker. They’ll know which lenders are best to apply with when taking into account your situation.

      I hope this helps,
      Marc.

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