The short version
- The Family Home Guarantee lets eligible single parents buy with a 2% deposit and no lenders mortgage insurance.
- Many lenders count child support and Family Tax Benefit as income.
- Lenders allow for the cost of raising children, which lowers what you can borrow.
Are you a single parent looking for a home loan? Usually those who want a home loan need a deposit of at least 20% of the property's value to avoid lenders mortgage insurance (LMI). If you haven't got that deposit saved, you can expect to bear the additional cost of LMI, and that can cost thousands of dollars extra.
However, there is a way for single parents to buy a home with as little as a 2% deposit and still avoid LMI, with the Family Home Guarantee (FHG). This guarantee supports eligible single parents and legal guardians with at least one dependent child, and was announced in the 2021-2022 Federal Budget. It's now part of the government's 5% Deposit Scheme.
Here's what you need to know as a single parent applying for home loans.
Can a single parent get a home loan?
Yes, you can. Your choices of lender may be limited, but there are incentives offered by the Australian Government for single parents seeking home loans.
Before the FHG, single parents often had trouble getting loans if they didn't have a 20% deposit.
Home loan eligibility for single parents
To be eligible for a single parent home loan you must fulfill the following requirements in general.
- Be over 18 years old.
- Be an Australian citizen or permanent resident.
- Earn a regular income, preferably from employment in a permanent capacity.
- Lenders would prefer if you have a stable job. (Getting a home loan while in casual employment is not an impossibility.)
- Your disposable income is an important criteria when applying for a home loan as a single parent. This simply means how much you have left each month from your earnings after you have paid your living and other expenses and paid off debts falling due monthly. Lenders will look to verify this figure to ensure you can manage to make your home loan repayments. Read our guide to HEM living expenses for more details.
- A good credit history with no record of late payments or defaults.
The exact criteria may vary depending on each lender.
To use the Family Home Guarantee, you also need a taxable income of up to $125,000, a deposit of at least 2%, and a home under the price cap for where you're buying. You don't need to be a first home buyer, but you can't own any other property. Places are limited each year.
What do lenders count as my income?
- Lenders prefer to see a stable income from a permanent job. It is easily proven with salary slips and bank statements.
- Income from routine casual or part time jobs may be counted, especially if you have been in that role for over six months.
- Parenting related receipts. Some lenders accept cash inflows from maintenance, child support, and other parenting-related payments when assessing the income of single parents. However, you may need to show proof that you receive these regularly and that they will continue over the long term.
- Centrelink payments. Single parents get various types of support from Centrelink, but lenders only consider some of these when assessing whether you are eligible for a home loan.
More about Centrelink payments
Some lenders may accept these Centrelink benefits as part of your income:
- Family Tax Benefit Part A and Part B
- Parenting Payment, with some lenders
Be ready to face some strict criteria if you are counting on Centrelink payments to qualify for a home loan. Lenders would look at:
- The age of your children. Family Tax Benefit stops as children get older, so some lenders only count it for younger children, often under 11 to 13 years old.
- Your entire Centrelink statement.
Some benefits from Centrelink are not accepted due to their temporary or highly specific nature such as:
- Rent Assistance, which stops once you own a home
- One-off or short-term payments
You have a better chance of getting a home loan approved if you have a primary source of income that is supplemented by Centrelink payments.
Fewer lenders accept Centrelink income, so you may have a narrower choice of loans and rates.
Do single parents get LMI waivers?
It all depends on your financial situation, how much you have saved for a deposit, and whether you qualify for the FHG.
In general, when buying property you are required to pay LMI if the deposit is less than 20% LVR. LMI is meant to protect the lender against the possibility of you defaulting on the loan and can increase the cost of a loan by thousands of dollars.
You may still get a LMI waiver from lenders in these instances:
- If you have saved for a home loan deposit.
- If you have a guarantor to back your home loan application.
- If you qualify for the Family Home Guarantee (FHG).
But other than that, chances are slim that lenders would waive LMI because you may be in a higher risk category as a single parent.
Select lenders may offer LMI waivers on home loans for single parents in the following instances:
- If you apply with a guarantor, which can let you borrow up to 100% or more without paying LMI.
- If you qualify for the Family Home Guarantee, which lets you buy with a 2% deposit and no LMI.
Considerations
Make your home loan application strong
Have all the documentation, including proof of identity, your payslips, and bank statements, to speed up the approval process. This helps increase your chances of acceptance and shows lenders you are a methodical person.
Several applications in a short time show up on your credit report and can make lenders more cautious. Therefore, do your research and get all the advice you can before applying.
Changes in Fair Work Act workplace entitlements
This is important if you are in casual employment and may have trouble getting a home loan application approved. Since 26 August 2024, casual employees can tell their employer they want to become permanent (full time or part time) once they have worked for six months, or 12 months at a small business. Your employer must also give you the Casual Employment Information Statement (the CEIS), which can help show lenders your employment history.
Apply using a broker
You can apply directly with the bank or apply with the help of a broker (more about this here). An experienced mortgage broker who understands your unique circumstances can help you through the process and improve your chances of being approved. Mortgage brokers have access to deals from many lenders, don't cost you anything, and only get paid when your home loan is approved.