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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It's harder to get a loan as a low income earner but it's not impossible. While there are no specific low income home loans, you can increase your chances of loan approval by following the tips listed below.

How much do I need to earn to qualify for a home loan?

Home loan providers have their own criteria for lending, and these are usually kept a secret. Don't let that deter you from applying for a loan. Start by using a borrowing power calculator, like the one below, to get a rough idea of how much you could borrow with your income.

*Whilst every effort has been made to ensure the accuracy of this calculator, the results should only be used as an indication. They are neither a recommendation nor an eligibility test for any product and should not be construed as financial advice, investment advice or any other sort of advice.

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.).

Other costs that may come into play are legal or processing fees, pre-purchase inspection fees, maintenance and repair fees, and insurance. Don't forget to factor in possible rate increases over the time it will take to repay your loan.

The kind of loan you are applying for, and the terms in which it’s to be kept, are also factors. Low income loans for shorter periods may help get you approved for a higher amount. The best way to get the amount you need is to be prepared, and ensure that the loan you are aiming for will suit you.

Learn how to find cheap home loans that work for you

What income sources qualify for a home loan?How much income do I need for a home loan

Income is the biggest factor when it comes to home loans, but many lenders consider different kinds of 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, pensions (disability, retirement, overseas, veterans, etc.), and other money sources that augment your living. Provide proof of these sources to submit with your application form.

In some instances, lenders will approve applications for people who are not earning actively, but have a certain amount of money in the bank. This is usually when you’re applying for a loan from the same bank with which you have your savings and other accounts, but other lenders may accept this as well.

The terms and conditions of each lender vary so it’s best to compare each and pick the one that will work best for you.

What income documents will home loan lenders typically expect?

Applying for a home loan is simple. All you need to do is provide the documents the bank or lender requires, fill out an application and submit it. The lender will then evaluate your documents, and after a set number of working days (this varies for each lender), you’ll be informed if your loan has been approved or not.

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) and proof of your income (recent payslips, letters of employment, tax assessments). Lenders also require your Australian Tax File Number, and 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 would 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.

Most lenders require a regular income and a show of assets. Others require GST registration, or if self-employed, you must be working in the same industry for at least 12 months. Business Activity Statements (BAS) are also required.

Tips when applying for a home loan with a low income

tips

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. It’s important to note that before you apply for a home loan, you should come to a legal agreement first as to how the property is to be divided in case anything happens.
  • 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.
  • 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

Compare basic home loans in the table below

$
years
Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

UBank UHomeLoan Variable Rate P&IHome≥ 20% Deposit

UBank UHomeLoan Variable Rate
2.19%
2.19%
  • App: $0
  • Ongoing: $0 p.a.
$570
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.

Westpac Flexi First Option Home Loan P&IHome≥ 5% Deposit

Westpac Flexi First Option Home Loan
2.09%
2.52%
  • App: $0
  • Ongoing: $0 per month
$563
$3,000 refinance cashback
A flexible and competitive variable rate loan. Available to owner occupiers on principal and interest loans. $3,000 cashback for eligible refinancers. Apply by 30 November 2021. Terms and conditions apply.

St.George Basic Variable Rate Home Loan P&IHome≥ 20% Deposit

St.George Basic Variable Rate Home Loan
2.29%
2.31%
  • App: $0
  • Ongoing: $0 p.a.
$578
$3,000 refinance cashback
Get this low-rate variable loan with a 20% deposit and pay $0 application fee. Borrow from $150k (or $250k to be eligible for the cashback offer). Apply by 30 November 2021. Terms and conditions apply. Refinancers Only.

Suncorp Back to Basics Home Loan P&IHome≥ 20% Deposit

Suncorp Back to Basics Home Loan
2.44%
2.45%
  • App: $0
  • Ongoing: $0 p.a.
$590
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
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32 Responses

    Default Gravatar
    RoseSeptember 2, 2018

    I would like some advice on the amount of money l van borrow for a mortgage please

      Avatarfinder Customer Care
      CharisseSeptember 2, 2018Staff

      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

    Default Gravatar
    HeatherFebruary 6, 2018

    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

      Avatarfinder Customer Care
      JoshuaFebruary 14, 2018Staff

      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

    Default Gravatar
    JulieNovember 9, 2017

    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.

      Avatarfinder Customer Care
      JhezNovember 9, 2017Staff

      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

    Default Gravatar
    MahmoudApril 7, 2016

    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.

      Default Gravatar
      BelindaApril 8, 2016

      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

    Default Gravatar
    janineApril 1, 2016

    we are moving interstate, and have a large deposit of 300.000 , we need an extra 80.000 and my hubby will leave work as settlement has reached of our house sale and like to buy a house interstate for 380.000 will the banks lend us the money if my husband is out of work and our income will only be centrelink and newstart allowance.

      Default Gravatar
      BelindaApril 4, 2016

      Hi Janine,

      Thanks for reaching out.

      Generally, it will be harder for you to qualify for a home loan if your husband is currently out of work and if you’re currently 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 page about home loans for Centrelink recipients where you can enquire with a mortgage broker to discuss your options. In 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.

      We also have an article that explains how you can refinance and/or apply for a home loanonce you have started a new job.

      Ultimately, your ability to qualify for a home loan will depend on a range of factors; your joint 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 also suggest you to get in touch with a licensed mortgage 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.

      All the best,
      Belinda

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