Low Income Home Loans For Single Mothers
Low income home loans for single mothers could be the stepping stone you need to get into the property market.
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The property market can be difficult to navigate even with a healthy pay packet. But luckily there are home loan products available for single mothers earning a low income, allowing them to break into the property market.
Find out everything you need to know about these loans and what you need to do to get one.
What are low income home loans for single mothers?
Low income home loans for single mothers are offered by lenders so that you can get a mortgage to help purchase a home for you and your family.
They are a great solution to get you into the property market and set yourself up for long term financial security.
Even if you are earning the minimum wage you will be eligible to get a home loan. Family tax benefit (A or B), Centrelink payments, child support and a number of other income streams will also be accepted by lenders.
In conjunction with these home loan products, there are government assistance schemes available to help you get into a new home.
How do single mothers on low income apply for a home loan?
Applying for a home loan as a single parent can be a confusing process. But to make things easier for you, it has been mapped out here:
Before applying
Before you apply for a home loan, you should be looking to do two things:
- Put yourself in the best position as a borrower.
Assess the lender market and the assistance program(s) relevant to you.
Pre-approval
After finding your lender you should apply to receive pre-approval. In the pre-approval or conditional approval process, your chosen lender will assess your ability to make repayments on your home loan.
To do this they will request the following documentation:
- Multiple forms of identification.
- Recent payslips or any proof of other income.
- Proof of genuine savings.
- A statement of any outstanding debts or credit.
Your lender will also assess your credit history and rating during the pre-approval process.
If your pre-approval request is denied, you will be able to reapply. It would be best to correct the issue that led to your denial before applying again.
Once granted, your pre-approval will last between three and six months.
Find your new home
The most important part of the entire home loan process is finding your new home. Be sure to search the entire market for a home that’s perfect for you and your children with your price range in mind.
Remember that your pre-approval will only last for three to six months. Don’t stress if finding a house takes longer than this as you will be able to re-apply.
Property valuation
After you have found your home, it will need to be assessed by your lender to ensure that it meets their lending criteria.
A property valuation can take anywhere between one and seven days depending on the method of valuation chosen by your lender.
Formal approval
Once the valuation has been completed you will then be subject to a formal approval from your lender.
Since you have already received pre-approval, it is likely you will receive formal approval quite soon after applying. However, if your financial situation has changed, your formal approval could be denied. This financial situation change could include:
- An income decrease.
- Losing your job or moving to another.
- You have taken on more debt.
- Your living expenses have grown.
Contract of sale and settlement
Once your formal approval has come through, you will be sent the contract of sale and home loan contract. It is very important to check through the contents of these documents closely to ensure you understand what it is you are agreeing to and signing.
It may be worth enlisting the help of a mortgage broker or legal representative as they will be able to explain these documents to you clearly and give you a better understanding of them.
Once these contracts have been signed, you will be able to negotiate a date of settlement with your vendor and before you know it, you and your children will be in your brand new home.
How to prepare yourself to secure a home loan as a single mother
Assess your income
You need to work out every single detail of your income. Income does not only have to be in the form of payment from an employer, it can also come through:
- Centrelink payments
- Inheritance
- Royalties
- Rental income from other properties
- Child support
Work out your living costs
It is important in the process of applying for a low income home loan that you understand exactly where every piece your income is going to.
After working all of this out, arguably the hardest part comes in finding ways to cut back on these costs. This may be difficult with children, but it could be a major difference in whether or not you receive the home loan you want.
Prepare a budget
This budget could be weekly, fortnightly or even monthly. It would allow you to have control over your income and how far you can stretch it.
If you are unsure about how to prepare a budget, there are many resources online that can help you.
Clean up your credit history
Lenders will have a close look at your credit history. A bad credit history means you will have less leverage with lenders and be classified as a high risk borrower.
If you have any outstanding debts, you should be definitely looking to clean those up as soon as possible.
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