Mortgages for Single Parents

mortgages for single parents

Single parents face a lot of challenges raising kids and paying the bills on their own. The financial struggle that often comes with these challenges make it seem impossible for single mothers or fathers to buy a house. Also, the lower end of the housing market suffers the most inventory shortage, leaving single parents with fewer options which makes it more difficult for them to find a home they can afford.

Mortgages for single mothers include specialized loan programs and assistance options, such as FHA loans and state-specific grants, designed to provide affordable financing and support for homeownership.

Managing the responsibility of working and raising family as a single parent can be overwhelming. However, there are various single parent home loan options and assistance programs available to help purchase or refinance home.

Contact us here to speak with one of our loan officers who can provide you with additional information.

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The Financial Struggles of Single Parents

Many single moms for example are going back to work after a divorce, while some have never been married. However, both face the same struggle of being the sole source of income while raising kids on their own. Because of these financial challenges, many single parents find it difficult to qualify for a mortgage.

Single fathers face similar challenges as they may also be taking on new responsibilities which combined with the weight of supporting the family financially can also be overwhelming.

Here are three common financial struggles most single parents face:

Single Source of Household Income

While some single mothers are fortunate enough to receive generous child support or alimony payments, there are many single mothers who are having trouble making ends meet. Relying on a single source of income to pay all the bills is hard enough for single parents to get by. This is one of the reasons why many single parents find it difficult to build a savings account or an emergency fund.

Poor Credit

The financial challenges of being a single parent can lead to debt. Having high amounts of debts and low income can sometimes lead to late payments. This can damage credit scores. Poor credit can make it more difficult to secure a low-interest loan or qualify for a home mortgage.

Child Care Expenses

Another common challenge of single parenthood is the need of getting child care and the expense that comes with it. The cost of getting care for small children while single parents work can be difficult and it can eat up a significant portion of their income.

Other challenges that single parents also face:

Debt-to-Income Ratio: Managing household expenses on one income can result in a higher debt-to-income ratio, which can affect mortgage approval.
Down Payment Savings: Saving for a down payment can be more difficult with only one income, impacting the ability to secure favorable mortgage terms.
Lender Requirements: Meeting strict lender requirements, such as providing extensive documentation and maintaining cash reserves, can be more challenging for single parents.
Employment Stability: Single parents may face employment instability, which can be a concern for lenders assessing long-term financial stability.
Limited Assistance Programs: While there are assistance programs for single parents, they may not be widely known or accessible, making it harder to find and utilize them.
Housing Affordability: Finding affordable housing in desirable areas with good schools and amenities can be more challenging for single parents on a limited budget.
Emotional and Time Constraints: Balancing the demands of parenting, work, and the home-buying process can be particularly stressful and time-consuming for single parents.

Single Parent Home Loans

While most lender’s qualifications can make it hard for single buyers to qualify for a loan with only one income, there are mortgage options available to help single parents buy a home and overcome challenges such as a low income, poor credit history, and low down payment.

Single parents can qualify for mortgages just like any other borrower. These are some of the more popular single parent home loan options available today. The types of mortgages referenced below are most common for single parents regardless of their finances or employment circumstances.

FHA Home Loans for Single Parents

FHA home loans are loans backed by the Federal Housing Authority (FHA) and are offered to first-time buyers or people who haven’t owned a home for three years. These loans have flexible income eligibility requirements and only requires a 3.5% down payment for borrowers with a minimum credit score of 580.

The low down payment makes it a good option for those who have low to moderate income. Further, FHA allows up to 100% down payment to come from a family member as gifted money, making it an ideal option for those who don’t have enough savings to cover the down payment.

With credit scores below 580, you can still qualify with a 10% down payment. Read our article about FHA Loan Qualification to learn more.

USDA Loans for Single Parents

USDA loans are mortgages backed by the United States Department of Agriculture (USDA) and are designed to help low- to average-income borrowers who have low credit or low income.

USDA loans have low-interest rates, zero down payments, and reduced mortgage insurance. This is a good option for single parents who want to buy a home in eligible rural and suburban locations.

Because borrowers can get 100% financing and the mortgage insurance premium is typically low, USDA is ideal single mothers or fathers who don’t have enough savings to cover the down payment and closing costs.

There is a maximum income requirement to be eligible for a USDA loan, however, most single parents usually fall below income limits since they are the only source of household income.

Read this article about USDA mortgages to learn more about this option.

VA Loans for Single Parents

VA loans are mortgages backed by the U.S. Department of Veterans Affairs (VA) and is offered to qualified veterans, service members, and eligible surviving military spouses. A single mother may be eligible to get a VA loan through her own military service or even as a widow.

VA loans require no mortgage insurance, zero down payments, low-interest rates, and limited closing costs, which makes it a good option for single parents who can’t afford a down payment.

If you are a veteran or the spouse of a veteran, you may want to consider a VA mortgage. Read our article about VA mortgages for more information.

Conventional Loans for Single Parents

While conventional loans often have higher lending standards, there are some single parents who can qualify for this type of loan. Some traditional loans require at least 5% down payment, but borrowers need to have a pretty good credit score and credit history to qualify.

There are some low down payment options available but lenders will typically require borrowers to pay for private mortgage insurance if their down payment is less than 20%.

Conventional mortgages are the most popular type nationally but since single parents often struggle financially or even with their credit, this may or may not be an option for you. Read our article on conventional mortgages to see if you qualify.

Self Employed Mortgages for Single Parents

For the single parents who are self employed, there are programs available if you cannot get approved for a traditional mortgage using the income on your tax returns.

The first option is a bank statement loan where you provide only bank statements to qualify for the mortgage. The lender will not ask for tax returns but instead will just look at your average monthly deposits.

The next option is a stated income loan where you simply “state” your income without having to prove what you are earning. This option does not require tax returns or bank statements. The down payment will be higher than a traditional mortgage. Read stated income loans.

Single Mom First Time Home Buyer

There are multiple programs available for single mothers who are first time home buyers. Some of these programs are the same as what you may find for others who are not single mothers.

The most popular mortgage program for single mothers is going to be the FHA loan. As referenced above, the benefits of the program are the low down payment and flexible credit score requirements.

If you are receiving alimony or child support, that income can be used to qualify for the mortgage if the payments are going to continue for the next two years.

Assistance Programs for Single Parents

Most single parents find it difficult to put up a down payment because they only have one source of income and they pay all the bills on their own. Fortunately, there are assistance programs available to help single parents save for down payment or qualify for a mortgage.

Individual Development Accounts

An individual development account (IDA) is a type of savings account designed to help low-income individuals to save money to start a business, pay for education, or buy a home.

IDAs match the money saved in the account, often at a 2:1 or 1:1 ratio (varies depending on the state and program). Single mothers can use IDAs to help them save for the down payment and closing costs.

Mortgage Credit Certificates

Mortgage Credit Certificates (MCCs) convert a portion of the mortgage interest paid by the borrower into a non-refundable tax credit. MCCs allow first-time, low to moderate-income home buyers to qualify for a home loan by reducing their tax liabilities.

MCCs are tax credits for a portion of the mortgage interest borrowers pay each year, which helps offset some of the mortgage interest expense. By reducing tax liability, single parents can withhold less tax from their paycheck to have extra funds to pay the mortgage.

Local & State Programs

There are other local and state assistance programs available for single parents with low to moderate income across the United States, such as:

Permanently Affordable: This program is available in Boulder, CO. It allows eligible home buyers to buy a home at a much lower price compared to the market rate.
First Home Loan Program: This program is available in Maine. It provides low fixed interest-rate mortgages with little or no down payment, and comes with payment protection for unemployment. It also offers down payment and closing cost assistance through their Advantage program.
First-time Home Buyer Program in Pinellas County, FL: It provides down payment and closing cost assistance through a $7,500, interest-free loan that is deferred until you sell, refinance, or pay off the mortgage.
First-time Home Buyer Program in Baltimore City, MD: It assists first-time home buyers with down payment and closing costs by providing a $5,000 five-year forgivable loan.

The loan options and assistance programs mentioned are not specifically directed for single parents and they are available for all individuals with low to moderate income. These are also just a few examples as their are many more programs in the state that you live in as well.

If you are a low-income single parent who is struggling to own a home, check the loan programs or subsidies offered in your state to help assist qualify for a loan or save for a down payment. These programs and benefits are often marketed under first-time home buyer, low-income buyer, and rural area home buyer categories.

Lender Assistance Programs for Single Parents

Some lenders offer down payment assistance to single parents as part of their loan package. In some instances it is a small second mortgage and at times the remaining down payment can be forgiven if the loan is paid on time for at least 5 years.

If you would like to discuss these options, complete this short quote form and a loan officer will contact you.

Mortgages for Recently Divorced Parents

One of the most difficult challenges for a single parent is to qualify for a mortgage immediately after a divorce. In this situation, you inevitably have one parent who may be going back to work after spending time raising the kids, and the other parent likely saddled with alimony and possibly child support payments.

For both parents, qualifying for a mortgage is going to be difficult due to the short job history and the additional monthly debt. There are some unique mortgage programs for recently divorced parents which may help if you find yourself in this situation.

We suggest reading our article on divorce mortgage options for more information.

Application and Approval Process for Single Parents

Prior to completing the mortgage application, it is recommended to check into your credit scores and activity so there are no surprises when you first speak with a loan officer.

The application can be completed in less than an hour online. Make sure you complete the application in full. If you leave off any of the required information, it will delay your approval. The only section you can leave blank is the property information if you have not selected a home yet.

Your loan officer will ask for various documents for your loan approval. Therefore, it would be a good idea to begin collecting the following:

Last 30 days pay stubs
Last two months bank statements
Last two years W2s
Last two years tax returns

Once you find a home, you will be asked to provide a copy of the sales contract. Then, the loan can be submitted to the underwriter. If you get an underwriting approval, you can then have the home appraised.

The appraisal is the only thing you would pay for upfront. If you get a home inspection, you will need to pay the inspector prior to closing also. If the home appraises for the purchase price or higher, then you are very close to home ownership.

Next, you will have to provide the homeowner’s insurance declaration page showing that your new home has coverage.

The underwriter will verify all of the documentation including the title search and coverage. Then the closing can be scheduled.

Summary

If you are a single parent and would like to purchase a home, there are many creative single parent home loan options for you. We suggest contact us early in the process to see whether there are any credit or down payment issues that need to be dealt with. Our lenders can develop a plan to get you on the road to home ownership.

Frequently Asked Questions about Getting a Mortgage as a Single Parent

Is there any financial assistance or grants available for single parents to obtain a mortgage?
There are grants and financial assistance or down payment assistance programs that can help single parents.

Are there specific lenders or programs that specialize in providing mortgages to single parents?
There are lenders who provide more help for single parents. The first step is to contact us so we can discuss your scenario.

How can I improve my chances of getting approved for a mortgage as a single parent?
The best way to improve your chances in getting approved for a mortgage is to improve your credit, have stable income and employment, and have the minimum down payment required.

Can child support or alimony be considered as income when applying for a mortgage as a single parent?
Child support and alimony can be used as income when applying for a mortgage but you must be scheduled to receive that income for at least two years after closing on your mortgage. If you are the one paying alimony and child support, those payments will be used as debt reducing the amount you may qualify for.