Buying a Home on a Single Income
Buying a home on a single income
As far as a bank is concerned, two incomes are better than one. But that’s not always a viable for option for those wishing to get into the property market. Can it be done? Yes! However, there are a few things you will need to consider. Here are some tips on buying your own home on a single income.
Get a broker
Whether you are single or not, getting an independent mortgage broker to do the groundwork for you is essential. They can find the lender/s who will work in your situation and ensure that any specific requirements that you need are met.
Reduce that credit card limit
Your credit card may have never even been used, but your credit card LIMIT will be placed against your application as a loan. Perhaps you’re keeping your limit at $10,000 ‘just in case’ but lenders will assess you as though you are $10,000 in debt. You can make your application more appealing to lenders by reducing your credit card limit to just $2,000 or $3,000.
Bigger is better
The amount of your deposit can greatly impact your ability to get credit. The ideal deposit is 20%, as it means you aren’t required to get mortgage insurance, but this amount isn’t always achievable within the timeframe you’ve set. The closer you are to that ‘golden’ 20% the better position you will be in to borrow.
Comfort is key
Lenders will tell you the maximum amount you can borrow, but this doesn’t mean you actually need to borrow that amount. Figure out your budget and necessary expenses; if you can’t afford your electricity bill with the new loan, then you have borrowed too much. Only borrow what you can comfortably pay back.
Protect your income
A mortgage broker/lender will ask for information about the insurance you currently have in place. As you’re reliant on one income only, it’s essential you invest in income protection insurance to ensure you can continue to service your loan should you find yourself out of work.
Get a guarantor
This isn’t an option available to everyone but having someone to vouch for you will help you get your loan approved. Going guarantor for someone is a big decision with serious repercussions for your guarantor should you default on your loan. According to data from ANZ Banking Group, the number of parents guaranteeing their children’s home loans has increased fourfold (from 5% to 20%) in the past five years (2013 – 2018).
Stick it out
The longer amount of time you have been in your job, the better your application will look to a potential lender. If you have been in and out of jobs, maybe wait until you have locked down a steady position and have been working there for at least 6 months.
- Buying a home on one income
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