For many Australians, getting approved for a home loan Australia feels daunting—especially for those on a low income. However, the good news is that there are many government-backed programs, lender strategies, and practical steps that can help turn the dream of homeownership into a reality. Whether you’re a first-time buyer or someone with modest means, this guide will help you navigate the path.
Understand Your Financial Position
Before applying for a mortgage, it’s important to understand your current financial standing. Lenders assess several factors such as your income, existing debts, credit history, and savings. To improve your chances of approval, you must first have a clear picture of your finances.
Start by calculating your total monthly income and expenses. Then, work out how much you can realistically afford to borrow without compromising your lifestyle. Fortunately, there are several online tools such as the MoneySmart Budget Planner by the Australian Securities and Investments Commission (ASIC) to help with this.
Build a Strong Credit History
A good credit report is essential for mortgage approval, especially if your income is on the lower side. Lenders will check your credit history to determine how well you’ve managed past debts. A strong credit history suggests that you are financially responsible and capable of repaying your loan.
To improve your credit score:
- Pay your bills and debts on time
- Avoid applying for multiple loans or credit cards in a short period
- Check your credit file for errors and get them corrected
You can get a free copy of your credit report annually from My Credit File.
Government Assistance Programs
Fortunately, several Australian government schemes can support low-income earners in achieving home ownership.
First Home Guarantee (Formerly First Home Loan Deposit Scheme)
This program allows eligible first home buyers to purchase a property with as little as a 5% deposit, without needing to pay Lenders Mortgage Insurance (LMI). The remaining 15% of the deposit is guaranteed by the Australian Government. Saving for a deposit is one of the biggest barriers when applying for a home loan Australia lenders will approve.
You can check your eligibility and learn more about the scheme on the National Housing Finance and Investment Corporation website.
Family Home Guarantee
Specifically designed for single parents with at least one dependent child, this scheme allows home buyers to secure a loan with as little as a 2% deposit. Like the First Home Guarantee, the government guarantees the remaining portion. Many borrowers think they can’t qualify, but you can still get a home loan Australia with the right strategy and support.
More details and eligibility criteria are available on the NHFIC Family Home Guarantee page.
First Home Owner Grant (FHOG)
Depending on your state or territory, you may be eligible for a one-off grant if you are buying or building a new home as your first property. For example:
Each state has different rules, so ensure you visit your local government’s website for full details.
Save for a Deposit – Even a Small One
Saving for a deposit is perhaps the most crucial part of buying a home. Generally, lenders prefer a 20% deposit; however, many schemes now allow you to buy with just 5% or even 2%. Regardless, the more you save, the better your financial position will appear to lenders.
To build your deposit faster:
- Set up automatic transfers into a high-interest savings account
- Cut unnecessary expenses
- Take advantage of government co-contribution if eligible under the First Home Super Saver Scheme
This scheme allows first home buyers to save money for a house deposit inside their super fund, potentially reducing tax and increasing savings.
Explore Low-Doc and Non-Traditional Loans
Although mainstream lenders have strict criteria, some lenders offer low-documentation (low-doc) home loans. These are especially useful for individuals with non-standard income sources, such as freelancers, casual workers, or small business owners.
However, it’s essential to proceed cautiously. These loans often come with higher interest rates and fees. Furthermore, some may still require a larger deposit. Therefore, compare all available loan products and use resources such as the Moneysmart home loan guide to avoid predatory lending.
Show Stability – Even If Income Is Low
Lenders not only consider the amount of income but also its stability. If you can demonstrate long-term employment, consistent savings habits, or regular rental payments, this can significantly boost your credibility—even if your income isn’t high.
For example:
- Consistent rental payments over 12 months can be used as alternative evidence of serviceability.
- Regular income, even if modest, is more appealing than sporadic or fluctuating payments.
To show stability, prepare:
- At least 3–6 months of payslips or bank statements
- A letter from your employer if you’re in part-time or casual work
- A Centrelink income statement, if applicable (you can get one via myGov)
Reduce Your Debt-to-Income Ratio (DTI)
Despite financial challenges, how to get approved for a home loan in Australia – even with low income comes down to smart planning, responsible financial behaviour, and leveraging government programs. Many Australians have already taken this path successfully.
How to Improve Your DTI:
- Pay off credit cards or reduce credit limits
- Avoid “Buy Now, Pay Later” services before applying
- Refinance or consolidate existing loans
The Australian Prudential Regulation Authority (APRA) advises lenders to assess loans more carefully when the DTI ratio exceeds six.
Get a Guarantor if Possible
If you’re struggling to get approval based on your income alone, a guarantor loan can be a game-changer. A guarantor—often a parent or close family member—uses their property or savings as security for your loan.
This reduces the risk for lenders and may allow you to borrow more or avoid paying LMI. That said, it’s a significant financial responsibility for the guarantor, so be sure to seek independent legal advice. The NSW Government offers a good explainer on the risks and responsibilities involved.
Consider Co-Buying or Shared Equity Schemes
Another viable strategy for low-income earners is co-buying a home with a friend or family member. This can increase your combined borrowing power while splitting costs like the deposit, mortgage repayments, and maintenance.
Additionally, some states offer shared equity schemes. These programs help eligible buyers by co-purchasing a percentage of the property with a government or non-profit organisation.
For example:
- HomesVic Shared Equity Scheme (Victoria)
Make sure to enter a clear legal agreement outlining responsibilities if you’re co-buying with another person.
Strengthen Your Home Loan Application
While many people focus on their deposit or income, how you present your application can also make a big difference. Lenders want to see that you are a low-risk, responsible borrower—even on a low income.
Tips for a Strong Application:
- Write a personal statement explaining your financial position, stability, and long-term goals.
- Highlight any recent promotions, stable income, or reduced expenses.
- Be transparent. Lenders appreciate honesty over hidden liabilities.
Moreover, attaching supporting documents like a rental history ledger or a Centrelink income summary can demonstrate your financial discipline. Before applying for a home loan Australia, it’s wise to reduce your debts and improve your credit rating
Choose the Right Lender
Not all lenders are created equal. While major banks often have strict lending criteria, credit unions and smaller lenders might offer more flexible options for low-income borrowers.
Use government-supported tools like the Loan Comparison Calculator to compare interest rates, fees, and features. Additionally, speaking to a mortgage broker (licensed with ASIC) can help you explore multiple loan products based on your financial profile.
Be Patient – But Stay Committed
Getting approved for a home loan with a low income isn’t always fast. However, with diligence, patience, and a strategic approach, your chances improve significantly over time.
Continue building your savings, improving your credit, and learning about new programs. Also, revisit your homeownership goals regularly. You might need to adjust your expectations—such as starting with a smaller property or buying in a more affordable location—but staying committed pays off in the long run.
Key Takeaways
- You can get a home loan in Australia even with low income, especially if you make smart use of government support programs like the First Home Guarantee and Family Home Guarantee.
- Boost your chances by saving consistently, reducing your debts, and presenting a solid application.
- Explore alternatives like guarantors, shared equity schemes, or co-purchasing.
- Most importantly, make use of free tools and trusted resources like Moneysmart and myGov to keep your journey informed and transparent.
If you’ve ever wondered how to get approved for a Home Loan in Australia – even with low income, rest assured that it’s absolutely possible. With the right tools, programs, and mindset, your dream of owning a home can become a reality.