Approval for home loans is challenging for most people. If you’re a single parent with a single income, it may appear daunting. However, being prepared and not rushing into a decision will help you get through the process with minimal stress. Spend some time doing your research and preparing your finances early to make the process as smooth as possible.
What do lenders accept as income for single-parent home loans?
The size of the loan you can get for a single-parent home loan depends on your income, expenses, and existing debts. Lenders may accept parenting payments like child support as income, provided it’s a regular and long-term arrangement. Financial institutions will also accept concessions received from the government like the Parenting Payment from Centrelink as income. You can consult a loan advisor or mortgage broker to better understand what lenders will accept as income.
Get to know what you want in a single-parent home loan
Buying a home is a significant financial decision, and taking on a home loan is a long-term commitment that you shouldn’t do without much consideration. When looking for a property, you may struggle to find one that matches all your requirements, and that’s within your budget. This could cause you to feel disheartened. To help you avoid this disappointment and get the property you want, you should determine your priorities beforehand, which will help you do a property search with realistic goals. Ask yourself if you want a home close to your children’s school or your office, or do you want a backyard and a bedroom for everyone, or you want a home that’s lower maintenance.
You can then use an online home loan calculator to get an estimate on the repayments you can afford based on your current income, expenses, and liabilities. It should also give you an idea of the maximum amount you’re likely to be able to borrow, which will help you narrow your search for a suitable property.
How to prepare to qualify for a home loan when you’re a single parent?
Raising children on a single income is difficult, and you may find it tough to save the money you need for a deposit and other expenses. But it is possible you just need to be patient, make a budget and stick to it, and you’ll get there eventually. Once you have this deposit, it will reduce the single parent low-income home loan amount you need to borrow and save you on Lenders Mortgage Insurance (LMI). LMI can cost you thousands of dollars and is imposed by lenders if the loan amount exceeds 80 per cent of the property value. You can also check the various home loan grants for single parents available from the government and if the lender will accept these as part of your deposit amount.
What are the common eligibility norms for such loans?
Home loan eligibility requirements differ between lenders, but there are a few consistent requirements across all lenders. These standard requirements include:
- You must be over 18 years.
- You should be an Australian citizen or permanent resident.
- You must have a regular monthly income.
Are first home buyer benefits available on home loans for single parents?
If you’re a single parent looking for a home who also happens to be a first home buyer, there are some great benefits for first-time buyers that you could be eligible for. Several benefits are available for single-parent home loan first-time buyers. These include:
- The first home owners grant is a one-time payment created to offset the effect GST would have on first-time buyers chances of getting a home. It’s a national scheme; however, every state and territory manages the scheme individually and have different requirements and grant details.
- The first home super saver scheme allows you to use voluntary repayments you make into your superannuation fund as part of your deposit for a home.
- The first home loan deposit scheme was launched on January 1, 2020, and assists eligible first-time buyers to buy a property with only 5 per cent deposit without paying LMI. The government will then guarantee the remaining 15 per cent to make a 20 per cent deposit. Although not specific to single parents, this single-parent home loan program can potentially save you up to $10,000 in LMI.
You don’t have to do it alone, find helpful advice
Going through the entire process, from searching for the property to finding home loans for single parents in Australia, can be overwhelming. If you know someone who has been through the process before, it may help to reach out to them for information and advice. Getting insider knowledge can be a great help, so don’t hesitate to seek advice from someone who has already done it. You’ll be surprised to know that most people are willing to help you and are happy to share their stories and experience. Learn from their experience to know more about single-parent home loans in Australia.
You can also seek advice from a mortgage broker who can offer expert advice, help you through the whole process and offer support every step of the way. Brokers will be able to advise which lenders may be best suited for you and any government grants or schemes you may be eligible for.