Life as a single parent can no doubt present some challenging circumstances. One of the main issues facing many single parents is securing suitable housing for themselves and their children.
Securing a home loan as a single parent in Perth may seem challenging, but with the right strategies and knowledge, homeownership is a definite possibility. Here’s a comprehensive guide of things to consider if you’re looking to purchase a home for you and your family as a single parent in Perth.
1. Understand Your Financial Position
Begin by evaluating your income, expenses, and existing debts. This assessment will help determine your borrowing capacity and identify areas where you can improve your financial standing. There are also some less obvious factors that can also influence how much a lender is willing to lend including the frequency and type of your employment contract(s) (meaning whether you are casual, contract, employed part time or full time, or even self employed), income from any investment properties, the type of debt you have, the estimation of your living expenses and credit anomalies.
2. Explore Government Support Schemes
The Australian Government offers programs to assist single parents in purchasing homes:
Family Home Guarantee (FHG)
This scheme enables eligible single parents with at least one dependent child to purchase a home with a deposit as low as 2%, without the need for Lenders Mortgage Insurance (LMI). Both first-time buyers and previous homeowners can apply.
Family Home Guarantee is an Australian government initiative that aims to support eligible single parents and single legal guardians to purchase a family home.
Family Home Guarantee is administered by the Housing Australia, on behalf of the Australian government. It guarantees to us, as a participating lender, up to 18 per cent of the value of the property.
Am I eligible for the Family Home Guarantee?
- You must be an Australian citizen or permanent resident at least 18 years of age, and a single parent or single legal guardian with at least one dependant.
- You must meet the lender’s lending criteria and be able to afford to repay the loan.
- You must meet the income eligibility requirements – your taxable income cannot exceed $125,000 for the previous financial year (child support payments are not included as income for the purposes of the income cap).
- As the single parent or single legal guardian, your name must be the only name listed on the loan and the title.
- You must be able to provide a deposit of at least 2% of the value of the property. If you have a deposit greater than 20% your home loan cannot be covered by the Scheme.
- You must intend to be the owner/occupier of the purchased property.
- You can either be a first home buyers or previous owner-occupiers who do not currently own a home.
- There are property price thresholds that will apply in capital cities, large regional centres and regional areas. Use Housing Australia’s property price threshold tool to work out the maximum property purchase price in the area you’re interested in under the Scheme.
- The property you wish to purchase must meet the property eligibility requirements under the Scheme.
First Home Owner Grant (FHOG)
In Western Australia, first-time homebuyers may receive a grant to assist with purchasing or building a new home. Eligibility criteria and grant amounts can vary, so it’s essential to check the latest details.You can get more information about the First Home Owner Grant here or give us a call to talk through your situation and eligibility.
3. Consider a Keystart Loan
Keystart is unique in the home loan market with loans designed to help you get into your home faster by lowering the entry costs. Unlike other lenders, Keystart is a transitional lender. This means that they encourage you to refinance with another lender, when you are ready to do so when you have built up enough equity in your home, because you have paid off some of the loan or your home has increased in value.
Perhaps other things have changed regarding your situation that mean you may now meet the criteria of other lenders and could save money on your interest repayments and have more flexible terms. Keystart could be a suitable option for single parents looking for a home loan in Perth.
You can read more about refinancing Keystart loans here or call us to check your eligibility. We can help to walk you through the process of applying for a Keystart loan if it’s something you would like to pursue.
4. Save for a Deposit
While some schemes allow for minimal deposits, aiming for a larger deposit can reduce your loan-to-value ratio (LVR), potentially leading to better loan terms and lower interest rates. Additionally, a deposit of 20% or more can help you avoid LMI.
5. Improve Your Credit Score
A strong credit history enhances your loan approval chances:
Timely Payments: Ensure all bills and debts are paid on time
Debt Management: Keep credit card balances low and avoid unnecessary debt
Credit Report Monitoring: Regularly check your credit report for inaccuracies and address any issues promptly
You can read all about your credit score here including why it’s relevant to getting a home loan, how it is calculated and how you can check your credit score here
6. Get Pre-Approved for a home loan
Obtaining loan pre-approval provides a clear understanding of your borrowing capacity and demonstrates to sellers that you’re a serious buyer. This process involves submitting financial information to a lender, who will assess how much they’re willing to lend you. This also helps to avoid costly mistakes when purchasing a property or even missing out on having an offer accepted in a competitive property market. Contact us about getting pre-approved for a home loan here.
7. Consider Alternative Strategies
If traditional pathways seem challenging or unachievable for your current situation you could consider some alternative pathways to homeownership including:
Co-Ownership: Partnering with family or friends to purchase a property. Ensure legal agreements are in place to outline each party’s responsibilities and share. You could consider asking your family members that own property if they are willing to act as a guarantor for your loan. Read more about Guarantor Loans here.
Rentvesting: Buying an investment property in a more affordable area while renting in your preferred location. This strategy allows you to enter the property market and build equity over time. It may also be suitable if you have children that are already established in local schools and community activities. Wondering whether it’s better to just keep renting? Read here about whether it’s better to buy or rent in Perth.
8. Consult Professionals
Engage with mortgage brokers or financial advisors who can provide personalised advice and guide you through the process. They can help identify suitable loan products and ensure you meet all necessary requirements. Read more here about why to use a mortgage broker instead of going it alone.
9. Stay Informed and Patient
The property market and lending criteria can change. Stay updated on the latest information, be patient, and remain persistent in your homeownership journey. With careful planning and the right support, achieving your dream of owning a home as a single parent in Perth is attainable.
Embarking on the path to homeownership as a single parent requires diligence and informed decision-making. By leveraging available resources and support systems, you can navigate the process successfully and secure a stable home for your family.
We are here to help, so please feel free to book a confidential and obligation free chat at a time that suits you.
All lending subject to status and lenders criteria. Terms & conditions apply. This document contains general information only. Your own personal circumstances have not been considered and you should seek independent financial advice prior to making any decision on a financial product.
