Getting a home loan on a single income is not impossible, but it does require that you put in some work to make it possible. Knowing what is needed by speaking to a mortgage broker can also help you know what your options are to make it on the property ladder without falling into a debt trap. These are a few handy tips that can help people with single incomes make owning a home possible.
Start saving for a deposit
You may have already thought of saving for a deposit, but the amount that you put away can make a difference. If you are planning on taking out a home loan on a single income you will need to prove to your lenders that you mean business by putting aside at least 20% of your deposit for your mortgage, which in turn can improve your borrowing power. Having a deposit less than this can attract Lender’s Mortgage Insurance (LMI) which will apply to loans that exceed 80% of the loan to value ratio. (LVR)
Consider inspection fees
Researching the costs that come with buying a house can help you better prepare your finances. For example, considering the costs of conveyancing, pest inspections and valuations are checks that your new property will need, and if not prepared for, it can set your budget back considerably. Other fees that need to be budgeted for is:
- Stamp duty. This varies from state to state but costs a considerable amount when it comes to purchasing a property. You can make use of a stamp duty calculator to see the cost.
- Legal and transfer fees. You may also have to pay a mortgage registration or transfer fee, taxes and rates.
- Ongoing fees and charges. There is also the ongoing cost of your loan repayment that needs to be considered along with; application fees, bank valuation fees, removalist fees, and possible renovations.
Check the home loan requirements
Checking the home loan requirements can prevent you from being overwhelmed and also prevent you from getting into a debt spiral. Check if you meet the income requirements on your home loan. It can be trickier if for single income families to get access to a home loan if they do not have a steady income. Ensuring that you have the right credit card requirements such as a good credit history.
Consider taking out a smaller loan amount
It might be difficult to increase your borrowing on a single income, even if you have a good credit score because of the low amount that you will be contributing. You can get a pre-approved home loan to see what your buying range is. This can also help you avoid overselling yourself when looking for a house.
Remember that you can compare your way to a low rate that is suitable for your finance. Keep in mind to always check the required criteria to avoid having your home loan application rejected too many times in a short space of time.