How to get a home loan with a single income

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. 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.

Ways to improve your chances of home loan approval

Below are some of the steps that can help you get the tick of approval from a lender for a home loan.

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 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 build 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.

• The Australian Government 5% Deposit Scheme, formerly the First Home Guarantee and 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). And if you are a single parent looking to buy a home – and it doesn’t have to be a first home – the scheme can help eligible solo parents with at least one dependent child purchase a family home, with a deposit as little as 2%, and zero LMI.
• 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.

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 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.

If you regularly work from home, it may not be as necessary to buy a home close to your formal workplace, depending on your personal work arrangements.

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. Can a single person buy a house? Yes.