Low income home loans
People sometimes assume it’s not possible to buy a home when you’re on a low income. In fact, some people manage to do it even when their income is very low. If you get the right deal then it can work out cheaper than renting and make it easier for you to support yourself independently in the long term. All you need to do is compare the financial products designed for people in your situation and identify one that’s right for you.
Why a low income doesn’t need to stop you buying a home
When you apply for a low-income home loan, what the lender wants to know is that you will be capable of paying it back as agreed. Being on a low income could make this harder and mean the lender, facing extra risk, asks you to agree to things like taking out lenders' mortgage insurance or extending the loan over a longer term to make the monthly payments smaller. But income isn’t the only factor lenders consider. If you have good credit, you’ve shown that you can stick to payment plans in the past and you have low monthly outgoings, they may be very happy to have your custom.
Sources of income
Although your earnings are the main factor lenders use to work out what you can pay, they may also take into account other income sources, such as Centrelink benefits and government payments. If you receive a pension, have a small inheritance, receive royalties for creative work or have rental income coming in from another property, all those things can count. You will need to provide documentary proof of all your income and three to six months’ worth of bank statements so that the lender can be clear on exactly how much you have at your disposal.
In order to work out how much you can safely borrow, lenders will look at your day-to-day living costs. They will also factor in new costs you will have as a homeowner, such as insurance, maintenance and repair fees and the cost of buying the furniture you need. You can make a good impression and increase your chances of acceptance by showing that you have already anticipated these costs and worked out how to cover them.
Ways to make it easier
There are various other ways that you can improve your chances of being offered a loan despite having a low income. Borrowing less will reduce the risk the lender faces and make it easier to demonstrate that you know how to live within your means. Asking for a longer loan term means you will pay more overall but your monthly payments will be more manageable, and you may have the option of refinancing later if your income rises and you decide that you want to pay it off sooner. You will also be accepted more easily if you are able to put down a higher than average deposit or are making a joint application.