How to get a home loan with a single income

Buying property as a single person – is it harder, what are the differences, and what can you do to get your home loan approved? Here’s what you need to know.

High property prices and rising interest rates can make buying a home on a single income seem like a pipedream. But buying solo does have its advantages – after all, you have 100% control over what and where you buy. And by using a variety of different strategies it may be possible to get into the market on just one income.

How to get a single income home loan

Yes, you can buy a home solo as long as you tick all the boxes for a home loan. Getting a home loan as a single person is, in many ways, no different to buying as a couple. Being approved for a loan hinges on a number of factors including your income, assets, and credit score or credit history.

It’s on the issue of income that home-buying couples can have an advantage, with two incomes available to boost their borrowing power. But don’t give up on your plans of buying on a solo income, because a range of steps may help you land that all-important home loan approval.

Ways to improve your chances of home loan approval

We explain some of the steps that can help you get the tick of approval from a lender.

Get to know your borrowing power

An important starting point to buying property on a single income is to have an understanding of your borrowing power. This is the amount you may be eligible to borrow for a home loan, and it can help you develop a home-buying budget. When working out your borrowing power, lenders typically consider factors including your income, regular expenses, how much existing debt you have, the number of dependents you have, as well as the interest rate that would apply to your loan. The aim is to work out the level of regular repayments you would be able to afford comfortably and, therefore, what loan amount would be appropriate.

Head to Canstar’s Home Loan Borrowing Calculator for an idea of your borrowing capacity.

Consider boosting your income

If your borrowing power is a little on the lean side, think about ways to give your income an uptick. If it’s been a while since your last pay rise, it could be worth giving the boss a nudge to organise a pay review. Or you might like to take matters into your own hands with a side gig to earn extra income. The Australian Bureau of Statistics (ABS) says over 1 million people have a second job or you could turn a hobby into hard coin by starting a side hustle.

‘Power’ save

Every extra dollar saved builds your deposit, meaning you have to borrow less, and this can enhance your likelihood of scoring home loan approval. If you’re struggling to grow a deposit, consider moving back home with family to skip paying rent and ‘power save’ for a set period with a few effective savings shortcuts. Or take a close look at your regular spending patterns, and aim to trim costs that aren’t really essential.

Shop around widely between lenders

Lenders each have their own criteria around income requirements, borrowing capacity and the size of the deposit you’ll need, so shopping around between lenders is especially critical when you’re looking for a home loan as a single income earner.

There can be big variations in the loan interest rate between lenders too, which can help make your home loan more affordable.

If you’re pressed for time, you may want to consider using a mortgage broker for help finding a home loan.

Government support for single income home buyers

A variety of government support schemes are available. While they aren’t all pitched at single income home buyers, they might help you get into the property market if you meet the eligibility criteria.

1. The First Home Guarantee

The First Home Guarantee (FHBG), formerly the First Home Loan Deposit Scheme (FHLDS), lets eligible first home buyers buy a home with just 5% deposit and zero lenders mortgage insurance (LMI).  Until 30 June 2023, 35,000 places are up for grabs through the FHBG, though terms and conditions apply.

2. Family Home Guarantee

If you are a single parent looking to buy a home – and it doesn’t have to be a first home – the Family Home Guarantee (FHG) helps eligible solo parents with at least one dependent child purchase a family home, with a deposit as little as 2%, and zero LMI.

In the 2022-23 financial year, 5,000 places are available under the FHG. Income and property price limits apply.

3. First Home Loan Super Saver Scheme

You can put money aside into your super through the First Home Super Saver Scheme (FHSS Scheme) to support your goal of buying a home on a single income. You can make before-tax contributions, such as through salary sacrificing, or after-tax contributions (e.g. from your take-home pay) up to $15,000 per financial year, subject to your normal super contribution caps. The maximum you can access through the scheme is $50,000 plus investment earnings that relate to your FHSS Scheme contributions. Terms and conditions apply.

Strategies to buy a home on a single income

Buying a home on a single income can also call for a bit of ‘outside the box’ thinking. Here are some suggestions.

Consider an apartment, rather than a house

Across Australia’s state and territory capitals, apartments tend to be more affordable than houses. This affordability can give single income home buyers a more reasonably priced entry point to the property market. Choosing a unit, apartment or townhouse may also mean less maintenance, which could help make your property easier to manage on your own. Keep in mind though that there are pros and cons with investing in an apartment instead of a house.

Think about regional locations

You may be able to cut several hundreds of thousands of dollars from your budget by buying a home in a regional area. Reducing the price you pay for a property could help you get the green light from a home loan lender, depending on your borrowing power.

Sure, regional living isn’t for everyone. But the latest ABS figures show that around 41% of Australians regularly work from home. So it may not be as necessary to buy a home close to your formal workplace, depending on your personal work arrangements in future.

The bottom line is that earning a single income doesn’t have to exclude you from buying property. It may take a little more effort, and perhaps involve some compromise, but getting a home loan on a single income is possible.

Cover image source: Antonio Guillem/Shutterstock.com