Getting approved for a home loan on a single income is definitely an option, though your success depends on how much you earn and your current cost of living. You'll need to carefully work out how much you can borrow and repay comfortably and make sure that your spending is under control before you apply.
Follow our tips below and you'll find yourself in a much better position.
Work out your borrowing power
Your chances of approval depend in large part on how much money you want to borrow. From a lender's point of view, a realistic borrowing amount takes into things like:
Your income - generally, banks want to see you spend no more than 30% of your income on a home loan
Your expenses - lenders will 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 you're buying - the property value needs to be in line with your income
The bigger the home loan deposit you can save, the easier the home loan approval process becomes. If you had a 60% deposit, lenders wouldn't think twice about lending to a borrower on a single income. Of course, that's not very realistic for the average borrower.
Saving a 20% deposit, however, is more realistic and a good way to strengthen your application as a single income applicant. 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.
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 makes you a more 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. These debts will weigh against you in any mortgage application.
The property you wish to buy is your lender's security in the event you can't repay your loan. It minimises the lender's risk because they can take the property (in a worst case scenario).
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.
Check what help is available
You might be buying a property on one income but you're not alone. There may be help available in the form of government grants and concessions.
Depending on your circumstances you may be able to get help from your family in the form of a guarantee.
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. It's not without risks and it's not an option for everyone though.
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.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
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I have split up from my partner and now need to find a home for myself and my son. I only work part time, I may be able to borrow from a family member for a deposit, but is it likely that anyone would give me a home loan on a such a low wage? Thanks
There are lenders out there that would be willing to offer you a home loan and there are multiple ways that you can learn about this, as well as the information on this page, we also have low-income home loans and also guarantor home loans, if you are able to get a family member co-guarantor on your loan.
You might also find it helpful to speak to a mortgage broker as they can take all your circumstances into consideration and offer you advice on the options that are best for your specific needs.
If you apply with your husband as a joint application, his credit history will have an impact on the application.
In this unique situation, it may be best to speak to a mortgage broker or approach a bad credit lender to see if they will consider your husband’s income. They will be able to help you further in narrowing down a suitable home loan option for you.
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I have split up from my partner and now need to find a home for myself and my son. I only work part time, I may be able to borrow from a family member for a deposit, but is it likely that anyone would give me a home loan on a such a low wage? Thanks
Hi Jane,
Thank you for your inquiry.
There are lenders out there that would be willing to offer you a home loan and there are multiple ways that you can learn about this, as well as the information on this page, we also have low-income home loans and also guarantor home loans, if you are able to get a family member co-guarantor on your loan.
You might also find it helpful to speak to a mortgage broker as they can take all your circumstances into consideration and offer you advice on the options that are best for your specific needs.
I hope this helps.
Regards
Jodie
My husband is bankrupt and I wanted to go for a home loan. am I able to take into account his wages or not?
Hi Cara,
Thanks for your question.
If you apply with your husband as a joint application, his credit history will have an impact on the application.
In this unique situation, it may be best to speak to a mortgage broker or approach a bad credit lender to see if they will consider your husband’s income. They will be able to help you further in narrowing down a suitable home loan option for you.
Cheers,
Shirley