How to Understand Income and Employment for Home Loans

When you're ready to achieve home ownership, understanding how lenders assess your income and employment is crucial to your home loan application success. For first home buyers, this can feel overwhelming, but knowing what lenders want to see can help you prepare and improve your borrowing capacity.

Let's break down what you need to know about income and employment when applying for your first home loan.

Why Income and Employment Matter

Lenders need confidence that you can afford your loan repayments over the long term. Your income and employment stability are the primary indicators of your ability to service a loan amount. When you apply for a home loan, lenders will assess:

• Your current income level
• How stable your employment is
• Your employment history
• The type of employment you have
• Any additional income sources

These factors directly affect your borrowing capacity and the home loan rates you'll be offered. The more stable and verifiable your income, the more confident lenders become in your ability to manage repayments.

Types of Employment Lenders Consider

Full-Time Employment

Full-time employees typically find it easier to secure home loan pre-approval because lenders view this employment type as stable. If you've been in your role for at least six months (ideally two years or more), lenders will assess your base salary plus any regular allowances or bonuses.

Part-Time and Casual Employment

Part-time and casual workers can absolutely secure home loans, though lenders may require a longer employment history - usually two years in the same role or industry. Your income will be averaged over this period, so consistency matters.

Self-Employed and Contract Workers

If you're self-employed or working on contract, lenders typically want to see two years of tax returns and financial statements. Some lenders offer low-doc loans for those who can't provide standard documentation, though these may come with different interest rate conditions.

Probation Periods

Being on probation doesn't automatically disqualify you from securing a home loan. Many lenders will consider applications from borrowers still in their probation period, particularly if you have a strong employment history in the same industry.

What Income Can You Use?

When calculating home loan repayments and determining how much you can borrow, lenders consider various income sources:

1. Base salary or wages - Your primary income source
2. Overtime and bonuses - Usually averaged over two years if regular
3. Rental income - From investment properties (typically 80% is counted)
4. Government benefits - Including Family Tax Benefit and parenting payments
5. Self-employment income - Based on tax returns and business financials
6. Commission income - Averaged over time if you're in sales or similar roles

Having multiple income sources can actually strengthen your application and improve borrowing capacity, provided you can document them properly.

Documentation You'll Need

When you're ready to apply for a home loan, having your documentation organised will help your home loan application move smoothly. Here's what you'll typically need:

For Employees:

• Recent payslips (usually the last two months)
• PAYG payment summaries or tax returns
• Employment contract or letter from your employer
• Bank statements showing salary deposits

For Self-Employed:

• Two years of tax returns with Notice of Assessments
• Business financial statements
• ABN registration details
• Bank statements (business and personal)

Additional Documentation:

• Identification (driver's licence and passport)
• Details of existing debts and credit commitments
• Evidence of savings and deposit funds
• If applicable, separation documents or child support agreements

How Employment Changes Affect Your Application

Changing jobs during your home loan application can impact the process. If you're planning a career move, consider these points:

• Changing jobs before home loan pre-approval may delay your application
• Moving to a higher-paying role in the same industry is generally viewed positively
• Switching industries or moving from permanent to contract work requires more explanation
• Some lenders are more flexible with job changes than others

If you're considering a job change, speak with a mortgage broker who can access home loan options from banks and lenders across Australia and advise on timing.

How to Strengthen Your Application

If you're concerned about your employment situation, here are practical steps to improve your position:

Build Employment Stability

Staying in your current role for at least six months before applying can make a significant difference. If you've been job-hopping, allowing time to demonstrate stability helps.

Increase Your Deposit

A larger deposit reduces your loan to value ratio (LVR) and can offset concerns about employment. It may also help you avoid Lenders Mortgage Insurance (LMI), which is typically required when borrowing more than 80% of the property value.

Reduce Existing Debts

Paying down credit cards, personal loans, or car loans before applying will improve your borrowing capacity. Lenders assess your ability to service all debts, not just your new home loan.

Consider a Co-Borrower

Applying with a partner, spouse, or family member who has stable income can strengthen your application and increase the loan amount you can access.

Explore Home Loan Features

Understanding different home loan features and home loan products can help you find options suited to your situation. Consider:

• Variable rate home loans that offer flexibility and often include features like offset accounts
• Fixed rate home loans that provide certainty over repayments for a set period
• Split loan options that combine fixed and variable portions
• Principal and interest versus interest only repayment structures
• Linked offset accounts that can help build equity faster

Working with Mobile Mortgage Solutions

As first home buyers, understanding how lenders assess income and employment puts you in a stronger position. At Mobile Mortgage Solutions, we help you compare rates and access a wide range of home loan products tailored to your employment situation.

Whether you're a full-time employee, self-employed, or working casually, we can help you understand your borrowing capacity and find home loan packages that suit your circumstances. We work with multiple lenders, which means we can find options even if your employment situation is less conventional.

Different lenders have different lending policies, and what one lender declines, another might approve. This is where having a mortgage broker becomes valuable - we know which lenders are more flexible with certain employment types and can present your application in the most favourable way.

If you're considering refinancing your current home loan or exploring investment loans for your future, understanding how your employment affects these applications is equally important.

Securing your first home loan and working toward financial stability starts with understanding what lenders need to see. With the right preparation and support, you can confidently move forward to invest in property and secure your future.

Call one of our team or book an appointment at a time that works for you to discuss your employment situation and explore your home loan options. We're here to help you understand the home loan features, home loan benefits, and home loan interest rate options available to you based on your unique circumstances.