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Can casual employees get a home loan?

Working a casual gig but keen to get a home loan? Here’s what you need to know.

Getting a home loan without a full-time job may seem tougher, it is certainly doable and worth doing all the usual due diligence and comparisons to ensure you get the best deal available to you. The first step to being approved for a home loan as a casual employee is understanding how your home loan will be assessed.

While having any saleable assets is an obvious plus (lowering the financial shortfall and therefore risk to the lender should you become unable to service your loan) it is still very possible to get a home loan without any. On a similar note, any outstanding loans from students and HECS debt, car or personal loans or credit card debts will help create an overall picture of the lenders financial risk.

A potential lender is also likely to take a closer look at your outgoings – with responsible lending now mandated at a Government level, lenders are obligated to take a closer look at how we spend and save, right down to if our bills are paid on time to ensure they are not selling a product that is not suited to the consumer.

That said, the key player in determining both how much you can borrow and at what interest rate is your income. As with permanent full time and part time employees, this requires copies of pay slips, though obviously these will be assessed slightly differently for casual employees.

How can I buy a house without having had my job for two or more years?

Each lender has their own method of calculating the income of loan applicants with a casual job, most will ask for your last two years group certificates – they’ll use the lower of the two.

If you haven’t been employed casually for two years, you may be out of luck with some lenders, but certainly not all. Some will instead use the Year To Date (YTD) gross income shown on your payslip and use it to calculate your likely annual income.

Given the fluctuating nature of casual work – by definition hours are not set or guaranteed they’ll use this information to make the most accurate assessment of your likely income while you’re servicing your loan.

How long do I have to be employed to get a home loan?

Most lenders require a casual employee to be in their job for at least 12 months, however, it’s not a deal breaker. Lenders will want to see at a minimum:

You’ve already completed one month in a job if you’re a permanent casual who works the same number of hours each week.
You’ve been in your job a minimum of three months if you work irregular hours as a casual.

What constitutes casual employment?

Casual employment comes in all shapes and sizes, and your employment status does form part of the assessment of your loan. FairWork explains you’ll be considered a casual employee if your job carries no firm commitment in advance from your employer about how long you will be employed for, or the days (or hours) you will work. Likewise, a casual employee is not committed to all work an employer might offer. Casual employees:

usually works irregular hours
do not get paid sick or annual leave
can end employment without notice, unless notice is required by a registered agreement, award or employment contract.

As a casual employee, you are entitled to casual loading – a higher pay rate than equivalent full-time or part-time employees, to cover benefits full or part time employees can access.

Some casual employees work for one employer for a long period and become ‘long term casuals’. While you can claim some extra benefits including parental leave after at least 12 months of being engaged regularly by an employer on a casual basis, you will still not be entitled to paid leave or notice of termination, even if you work regularly for a long time.

Lenders who offer home loans to casual employees understand there are great variations between applicant circumstances, so putting together a strong application with as much supporting documentation as possible is key.

How do I apply for a home loan if I have a casual job?

It’s important to understand that every time you apply for any type of loan, this goes in your credit report and forms part of the lenders risk assessment (your credit score is also made up of factors including the amount of money you’ve borrowed and whether you make repayments on time.) In short, don’t apply to several lenders as a way of ‘shopping around’ for the best deal.

If you’ve already made a few applications and couldn’t figure out why you’ve been declined, this could be the culprit. If this is the case, you’ll need to hold off for at least a few months before making any other applications.

A mortgage broker can help

Aside from simplifying the home buying process, a mortgage broker can help from the very beginning of the process. They can:

Explain the various packages and lenders that may be available to a casual employee and save you time comparing the various products where the differences can be quite small, but every cent matters.
Help you put together the paperwork you’ll need to streamline your application (lenders like organised loanees) and act as a lender liaison between yourself and the bank.
Bring specialised knowledge to the table – securing a loan as a casual employee can mean a narrower field of lenders and products.

How can I improve my chances of getting a home loan as a casual employee?

You can broaden the playing field (the more lenders interested in loaning you money, the more selective you can be) and improve the terms of your loan as a casual employee in a number of ways.

Save up a sizable deposit – getting as close as you can to a 20% deposit has several benefits; it shows your lender you can save, and it lowers their risk – which brings a big bonus, you can avoid paying LMI and lower your interest rate.
Grab a guarantor – if possible, coming to the table with a more qualified borrower (for example, parents with solid established credit histories and assets) can improve your options. Be aware it is a big ask as it does make them legally liable if you default, so practice your pitch and be prepared to share your financials and plan before they sign off.
Joint mortgages can increase your lendability as the lender will apply their assessment calculations to both parties.
Make a smart purchase and look for properties in lower-risk areas – they may not be in the sexiest locations but consider them a step up the property ladder.
Check out your credit report carefully. You have the right to access your credit score and credit report for free and apply to have any incorrect information amended. If your credit score isn’t looking too healthy (Depending on the credit reporting agency, your score will be between zero and either 1,000 or 1,200 – the higher, the lower risk you are), you may want to hit pause and improve your credit score.

How much could I borrow without a full-time job?

Generally speaking, you can borrow up to 90% of the property value, or more if you have a guarantor or sizable deposit. While COVID-19 has bought more stringent lending into play – you may need to set your sights on a property you need to borrow a lower percentage or lower loan amount on for now, this is likely to recover.

Overall, the amount you can borrow depends on a range of factors such as your salary, living expenses, whether you are applying for a joint loan, interest rates, and many other factors. One way of estimating how much you could borrow is to use our Borrowing Power Calculator.

While being a casual employee may make securing a home loan seem tricky, with the right paperwork and some solid research, it is not mission impossible.