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.
What different scores mean
9+
Excellent
These home loans offer low costs, coupled with a host of features, giving the best overall value.
7+
Great
These home loans may have slightly higher interest rates or fewer features but overall, a competitive offering.
5+
Standard
Usually the home loans would offer above average rates. They may still include some competitive features.
0+
Basic
Higher costs and/or fewer features.
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?
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
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
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What is Finder Score?
The Finder Score crunches 7,000 home loans across 120+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best home loans for cashback, you can see how each home loan stacks up against other home loans with the same borrower type, rate type and repayment type. We also take into consideration the amount of cashback offered when calculating the Score so you can tell if it's really worth it.
Read the full Finder Score breakdown
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Ask a question
after i sell my home i will have around $680,000 as a deposit, i would like to borrow around $120,000 to buy another home. my wife and i are both unemployed and together we earn about $27000 from centrelink per year, can we still borrow money from a lender, we could easily pay back 1000 a month.
Hi Peter,
Thanks for the question.
While some lenders will use some or all of your Centrelink income when deciding whether or not to approve your home loan, your eligibility will depend on the lender’s requirements. You might want to contact a mortgage broker to see if there are any lenders who would likely approve your application or alternatively speak to a lender directly to find out what your chances would be.
I hope this helps,
Marc
Hi my name is April
My husband Jamie n I have a mortgage of 84000.00 and wish to refinance our home to do renovations we were wanting to know how much we can borrow!
Thank you
Hi April,
Thanks for the question.
You can get an estimate of the amount you can borrow by using our borrowing capacity calculator. For a more accurate estimation of how much you can borrow, please speak to a lender you are interested in to see what amount are they comfortable lending you.
Before applying for a loan, 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.
I hope this helps,
Marc
I am 65, have $25,000 deposit and looking at buying within $120-130,000 range in rural area, can I get a loan at my age and for what period would I be needing to take it
Hi Meg,
Thank you for your question.
Because each lender is different, the maximum age restrictions may differ depending on the lender. Lenders will also take into account your other financial factors such as your income, assets and debts when deciding whether to grant you a loan.
I would suggest contacting a mortgage broker or financial advisor to discuss your specific circumstances and they will be able to assist you in securing a loan.
Regards
Jodie
I am retaired persons my monthly pension only $ 16000.00 but I need home loan how it will be get.
Hi Deepak,
Thanks for your enquiry.
You can read more about home loans for pensioners and contact a mortgage broker to discuss your options.
Lenders have different eligibility criteria regarding loans for pensioners, but ultimately they will assess whether or not you can service your loan using your pension benefit.
Thanks,
Belinda
my husband is a joint tenant with his fathers house does that help with home loan application
Hi Irini,
Thanks for your question.
If your husband has a stable income, a good credit history and a large amount of assets then this generally helps with the home loan application.
Cheers,
Shirley
I am in receipt of a centre link payment and wish to get a loan of $16000 for a granny flat. Is there much of a chance as it will be my only out going monies.
Thank You
Hi Belinda,
Thanks for your question.
Your eligibility for a home loan will depend on a range of factors including the lender’s eligibility criteria, the type of government benefit that you’re receiving, your income, assets, liabilities, and your credit history. Additionally, your periodic repayment amounts will depend on the home loan product that you apply for including the loan amount and interest rate.
For this reason, it is advisable that you speak to a mortgage broker regarding your borrowing options. A broker will be able to review your financial position and draw upon their panel of lenders to find one that’s more likely to review your application.
Please ensure you compare your options and meet the criteria and kindly read through the relevant product disclosure statement and terms and conditions to ensure that you got everything covered before you apply for the loan.
Cheers,
Shirley