There’s no doubt that being a single mom is challenging. There’s also no doubt that qualifying for a mortgage can be difficult even under normal circumstances.
The National Association of Realtors found that single female buyers account for 9% of all home purchases. This figure is down from 20% in 2010. And the median purchase price for single female buyers was $189,000, which is the lowest of all median home purchases.
For many single mothers, trying to qualify for a mortgage with only one income can feel next to impossible. But as a parent, it’s normal to want to provide a comfortable home for your children.
And thankfully, there are loans and financial assistance programs available that can help you do just that. Let’s look at some of the best mortgage programs available for single moms.
Challenges Single Moms Face in Buying a Home
One of the most difficult challenges that many single mothers face is a lack of income. They are responsible for providing for themselves and their children on one income, and they don’t always receive child support.
It can be challenging because mortgage companies want to see that you have a certain amount of disposable income before they’re willing to lend to you. You need to prove that you can make your monthly mortgage payments, have a low debt-to-income ratio, and a strong credit history.
Plus, most lenders require down payments between 10% and 20%. Most people struggle to come up with this kind of cash, so it can be especially challenging for a single mother.
What are the best mortgage programs for single moms?
If you’re a single mom looking to purchase a home, there are options available to you. Listed below are the four best mortgage assistance programs for single moms.
Down Payment Assistance Programs
If you’re struggling to come up with a down payment, you might consider looking into a down payment assistance program. These programs are available across the U.S., depending on your economic situation and the state you live in.
For instance, the Baltimore City Special Program gives eligible homebuyers $7,500 to assist with their down payments and closing costs. This program is designed to make buying a home feasible for more working families.
Maine’s First Home Loan Program allows borrowers to buy a home with little to no down payment when combined with other federal loan programs. The state also offers its Advantage program, which provides $3,500 toward closing costs.
Your state likely offers a similar payment assistance program, and with a bit of digging, you could receive assistance on your down payment.
FHA loans are a popular option for single parents struggling to come up with a down payment. You can apply for this type of home loan through a bank or online mortgage lender, and the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD) guarantee the home loan.
For that reason, FHA loans are less risky for lenders, and they are willing to lower their standard requirements. For one thing, FHA loans only require a 3.5% down payment, which makes it much easier to save up for. However, you will have to pay the mortgage insurance premium (MIP) with an FHA loan, which is similar to private mortgage insurance (PMI) for conventional loans.
The credit score requirements are also less stringent on FHA loans. Lenders typically require a credit score of at least 580, but some lenders may be willing to go as low as 500.
And FHA loans are relatively easy to qualify for. They are popular among first-time homebuyers, but you can apply for one even if you’ve taken out a mortgage before.
If you’re hoping to buy a home with no down payment, you might consider taking out a USDA loan. The United States Department of Agriculture (USDA) offers these home loans designed to help low to moderate-income home buyers find affordable housing in rural areas.
Don’t let the term “rural” throw you off because the USDA will approve homes in certain suburban areas as well. You can check the USDA’s property eligibility requirements to find a suitable area in your state.
The USDA does have certain guidelines you’ll need to meet to qualify for a home loan. First, you’ll have to meet the income limits. The income limits are determined by the size of your family and your location.
And there are certain requirements your prospective home will need to meet to qualify. For starters, the home must be your primary place of residence. In addition, you cannot take out a USDA loan on a rental property.
The home must have access to a street or road, and it must have adequate utilities. New construction homes, condos, and modular homes are all eligible for purchase.
If you’ve previously served in the military or you’re the widow of someone who served, you may be eligible for a VA loan. If you qualify, a VA loan is one of the most affordable ways to purchase a house.
These home loans are available with no down payment and low-interest rates, and the government backs 100% of the mortgage loan. Plus, you don’t have to pay for private mortgage insurance (PMI) with a VA loan.
To qualify, you must meet the minimum service requirements. And your home needs to be inspected and appraised by a licensed home inspector.
Things to Consider First
If you’re just getting started with the home buying process, it can feel pretty overwhelming. So, here are a few things to help you stay focused and on track:
- Determine how much you can afford: It’s important to sit down and figure out what kind of mortgage payment you can realistically afford. Stretching yourself too thin financially will cause problems for our family down the road.
- Look for low down payment loans: Once you’ve determined what you can afford, spend some time looking for affordable, low down payment loans. Figure out which home buying program will be the best fit for you and what you’ll need to do to apply.
- Set a realistic savings goal: You’ll likely end up having to pay at least a small down payment. Start setting aside some money in a high-interest savings account, so you’ll earn extra in interest.
See also: Best Home Loans for Low-Income Borrowers
Home Loans for Single Mothers FAQs
Can I buy a home as a single mom?
Yes, you can purchase a home as a single mom. However, it can be more difficult to qualify for traditional home loans when you are a single parent.
You may need to look into government-backed loans such as FHA loans or USDA loans, which may have more flexible qualification requirements. Alternatively, you could look into owner-financing or rent-to-own options.
What types of home loans are available for single moms?
Single moms may be eligible for several types of home loans, including FHA loans, USDA loans, VA loans, and conventional loans.
How much money can single mothers borrow when applying for a home loan?
The amount of money that single mothers can borrow when applying for a home loan depends on several factors. These include income, credit score, debt-to-income ratio, and down payment.
Lenders will look at your income to determine how much they are willing to lend, and your credit score will determine the interest rate you receive. It is also important to have a sufficient down payment, typically at least 3-5% of the home’s value.
Additionally, lenders will want to see that your debt-to-income ratio is less than 43%, meaning that your monthly debt payments are less than 43% of your monthly income. With good credit and a sufficient down payment, single mothers may be able to borrow up to 97% of the home’s value.
What is the minimum credit score required to get a home loan for single mothers?
The minimum credit score required to get a home loan for single mothers can vary depending on the type of loan and the mortgage lender.
Generally speaking, FHA loans tend to have the lowest credit score requirements, with a minimum score of 500. This can be helpful for single mothers who may not have the best credit.
Other types of loans, such as conventional loans, may have credit score requirements of 620 or higher. It is important to check with the lender to find out the exact credit score requirements for the type of loan you are applying for.
Are there any special programs available for single mothers looking to purchase a home?
Yes, there are several special programs available to single mothers looking to purchase a home. Single mothers facing financial challenges may qualify for state and local assistance programs and HUD’s Good Neighbor Next Door program.
Are there any special tax benefits for single mothers who purchase a home?
Yes, there are several tax benefits available to single mothers who purchase a home, such as the mortgage interest deduction and the homeowner’s tax credit.
How can a single parent save for a house?
- Set a budget and stick to it: Make sure to create a budget and stick to it. Track your income and expenses and cut out unnecessary costs.
- Set realistic goals: Set realistic goals for what you can afford and how much you will need to save each month.
- Automate your savings: Set up an automatic transfer from your checking account to savings each month.
- Reduce interest-bearing debt: Pay off as much debt as possible.
- Use tax-advantaged savings accounts: Consider using tax-advantaged savings accounts, such as an IRA or 401k, to save for a house.
- Take advantage of grants and assistance programs: Research grants and assistance programs available to single parents and take advantage of any that you may qualify for.
- Make extra money: Look for ways to make extra money, such as a part-time job, freelance work, or selling items online.
- Live below your means: Live below your means and make sacrifices if necessary.
- Talk to a financial advisor: Speak to a financial advisor or real estate agent to get advice on the best way to save for a house.
Does child support count as income for a mortgage?
Yes, child support may be counted as income when applying for a mortgage. Lenders will usually require proof of the payments, such as a tax return or court order.
None of the home buying programs outlined above are specific to single mothers. However, hopefully, you can see that it’s possible to find an affordable mortgage with a low down payment. Purchasing a home as a single mother can be challenging, but it’s also very doable. Make sure you compare your options and find the program that works best for your family.