Single income home loans: 6 steps to success

1. Work out your borrowing power

Your chances of approval depend in large part on how much money you want to borrow. This is determined by:

• Your income. Generally, banks want to see you spend no more than 30% of your income on a home loan.
• Your expenses. Lenders look through your bank statements carefully to see how you spend.
• Your deposit size. The bigger your deposit, the more likely it will be that a bank will approve your loan.
• The value of the property. The value of the property you're buying needs to be in line with your income.

Use a borrowing power calculator to estimate how much a lender will give you.

2. Save a 20% home loan deposit

The bigger the home loan deposit you can save, the easier the home loan approval process becomes. While saving a 20% deposit can be a tall order, it does strengthen your application as a single income applicant.

It also removes the added cost of lenders mortgage insurance, which you have to pay when your deposit is below 20%.

It's not essential, as low deposit home loans are available for borrowers with deposits as low as 5%. But approval does get a lot harder, especially on a single income.

Check out our complete deposit saving guide

3. Get your debt and spending under control

In the months leading up to submitting your home loan application, get your spending under control. Review how much you're spending each month, identify areas where you can cut back (if any), set a budget and stick to it.

This will make your lender happy and shows you're a reliable borrower, whether you're on a single income or not.

If you have urgent debts, such as personal loan or credit card debt, you should focus on paying them down before anything else.

Read Finder's expert money saving tips

4. Choose your property carefully

The property you wish to buy is your lender's security in the event you can't repay your loan. This means your lender cares about the property you're buying.

Your lender will have the property valued to make sure you're not paying too much for the property. And if the property is in a poor condition or in an undesirable location the lender may reject your application or limit how much they can lend you.

Some lenders also have postcode restrictions for apartments, meaning they are more cautious about lending to people buying apartments in areas with a high saturation of such buildings.

5. Check what support is available

You might be buying a property on one income but you're not alone. There is help available in the form of government grants and concessions.

The Family Home Guarantee

There is one federal government policy aimed directly at single income borrowers with children: the Family Home Guarantee.

Under this scheme eligible single parents can get a home loan with just a 2% deposit and borrow the rest. The scheme lets the borrower avoid lenders mortgage insurance (LMI), a hefty charge for borrowers with smaller deposits.

This can lower your costs. But keep in mind that borrowing 98% of a property's value is a risky proposition as you'll have larger loan repayments and you won't have much equity at the start.

And if you're not a single parent, there are similar schemes like the First Home Guarantee Scheme that let you buy with a 5% deposit and avoid LMI.

Other grants and support options

• First home owner grants. If you're a first home buyer you may qualify for a first home owner grant in your state or territory. You can even use the grant to form part of your deposit.
• Stamp duty concessions. Also for first home buyers, you may qualify for a stamp duty concession. This could reduce your stamp duty costs significantly.
• Parental guarantor. If you have parents who own their own property and are willing to help, they could guarantee part of your deposit. They don't have to pay anything, but they agree to pay some of the mortgage if you can't. This makes your application stronger and means you can potentially buy a property with a smaller deposit while on one income.

6. Speak to a mortgage broker

Before applying anywhere as a single income home loan applicant, consider speaking to a mortgage broker.

Brokers are experts at helping borrowers find home loans they can qualify for and then guiding them through the application process. If you don't feel confident and want some help with the process a broker is a good starting point.

They might even be able to help you boost your borrowing capacity and get a slightly larger home loan.

Written by

Richard Whitten

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 688 Finder guides across topics including:

• Home loans
• Credit cards
• Personal finance
• Money-saving tips