Home Loans For Single Parents: A Complete Guide
Making sure their children grow up in a safe and healthy environment is a priority for many people – including single parents. If you’re a single parent looking to buy a home for your family, considerations like finding the best home loan option are well worth your time and attention.
While there are no “single parent home loans” designed specifically for single parents, plenty of resources are available to help you overcome common barriers like low income or poor credit. If you’re a single parent looking to make your dream of homeownership a reality, you can do it!
Let’s take a look at some ways to approach getting a home loan as a single parent – from how to get started to the types of loans that might work best.
Are There Home Loans For Single Mothers?
The short answer is yes, there are loans for single moms to obtain – but not a specific loan for single moms only. The home loans for single moms are also available to any single parent. It’s no surprise, though, that this question is often asked by women. More than 1/3 of home buyers – repeat or first-time, mother or not – are single women.
According to data from the National Association of REALTORS® (NAR) 2021 report, about 20% of first-time buyers and 18% of repeat buyers were single women, making them the second most common demographic behind married couples. Single women were almost twice as likely as single men to be first-time home buyers and over twice as likely to be repeat buyers.
Still, getting a home loan while single can potentially present a few challenges, whether you’re a father or a mother. Living on a single income can make saving for a home more difficult. This can make down payment and closing costs problematic, but down payment assistance programs can help. Finding the right programs and preparing your finances can help you buy the home you’ve been dreaming of.
Single Parent Home Loans
There are several home loan options available to single parents, each with its own benefits. These range from a lower down payment or credit score minimum to a better interest rate.
Research your options and see what loan may be best for you. It’s also a great idea to contact lenders to see what you may qualify for. Lenders may be able to offer assistance programs or discounts if you work with them directly.
FHA loans are backed by the Federal Housing Administration (FHA) and are often best for low-income borrowers. These loans come with a relatively low interest rate, a low down payment requirement (only 3.5% with a credit score of 580 or higher) and are available to those with a credit score as low as 500.
One downside to an FHA loan is the mortgage insurance premium (MIP), which you’ll owe for at least the first 11 years of loan payments. You can avoid paying MIP for the life of the loan by making at least a 10% down payment.
Low interest rates
Higher mortgage insurance rates
Only 3.5% required for a down payment if the borrower has a 580 or higher credit score
Mortgage insurance payments for at least 11 years and possibly the life of the loan
Availability with a credit score as low as 500
Loans with a 500 – 579 credit score require a 10% down payment
Lower income requirements
Home must meet FHA standards
If you’re an active member or veteran of the U.S. military, or an eligible surviving spouse, a VA loan could be your best option for homeownership. VA loans are backed by the Department of Veterans Affairs and don’t require a down payment or mortgage insurance. This means you can buy a home with little to no savings.
VA loans require a one-time funding fee of 2.15% of the total amount borrowed. The VA funding fee is waived for disabled veterans.
Low interest rates
Availability that’s limited to qualifying active-duty military members or veterans, or surviving spouses with 100% entitlement
No down payment
VA funding fee
A flexible credit score requirement
Availability for primary residences only
No mortgage insurance
Restrictions on type of property
Lower income requirements
Home must meet VA’s minimum property requirements
Backed by the U.S. Department of Agriculture, USDA loans encourage borrowers to purchase homes in rural areas. “Rural areas” may make you think about living in the middle of nowhere, but that’s not always the case. Many qualifying areas surround popular, urbanized cities.
USDA loans have no down payment requirement and relatively low interest rates. Consequently, these loans can be a great option for single mothers. USDA loans do have income caps, so check with your lender to see if your income meets qualifications.
You won’t pay mortgage insurance with USDA loans, but you’ll pay a guarantee fee upfront and annually for the life of the loan. The only way to remove this fee is by refinancing or selling the home.
Low interest rates
Availability only in qualifying “rural” areas
No down payment requirement
Income caps that prevent higher earners from qualifying
A guarantee fee that’s lower than PMI fees on conventional loans
A 620 minimum credit score is typically required
Lower income requirements
Guarantee fees remaining until the home is refinanced or sold
Conventional loans are best for salaried or consistent earners with good credit and some savings. Conventional loans can offer down payments as low as 3%, and they often close faster than FHA loans and offer higher loan limits.
Down payments as low as 3%
A 620 minimum credit score
Relatively high loan limits
Higher income requirements
Mortgage insurance becoming avoidable by putting 20% down or reaching 20% equity
Mortgage insurance requirement with any down payment of less than 20%
Which Home Loan Is Best For Single Parents?
The best low-income loans for single parents vary based on your situation and prospective property. An FHA, VA or USDA loan could be a great option. The best home loans for single parents with a credit score below 620 may be FHA or VA loans. For those who don’t have money saved for a down payment and are eligible, a VA or USDA loan is likely the answer.
Being mindful of the loan requirements above, it’s important to compare the best loans for single parents based on income and credit stipulations.
Single Parent First-Time Home Buyer Grants
Every year, the government sets aside funding through the U.S. Department of Housing and Urban Development (HUD) to support housing initiatives for citizens. HUD offers over 20 grants related to housing and homeownership. Apart from national programs, grants can also be available at the state and local government levels.
Although there are no grants specifically for single parents, there are several grants available for first-time home buyers or low-income buyers that may be useful.
Good Neighbors Next Door
This HUD program encourages “good neighbors” to purchase homes in areas in need of revitalization. Available to law enforcement officers, teachers, firefighters and emergency responders, the Good Neighbors Next Door program can discount up to 50% off the home’s list price.
National Homebuyers Fund
This nonprofit organization provides grants for down payment and closing cost assistance. To date, the National Homebuyers Fund has provided over $417.8 million in down payment assistance. Buyers may be eligible for up to 5% of the home’s value in a grant.
Funds are available through different loan programs, including conventional and FHA loans. You don’t have to be a first-time home buyer.
Homeownership For Public Housing Residents
If you’re a public housing resident, you may qualify for HUD’s Homeownership for Public Housing Residents program where public housing authorities may sell their units to residents and other low-income families in the community. This program isn’t available in every state, so check with your local public housing agency (PHA) for details.
Government Grants is a private resource not backed by the government that links out to relevant housing grants. It helps users find and apply to grants related to:
- First-time home buyers
- Mobile homes/parks
- Rental housing projects
- Commercial property
- Apartment buildings
- Land development
- RV parks
- New construction
Homeowner Programs For Single Parents
Several programs may be able to help single parents become homeowners. These programs are available both through HUD and private nonprofits. Resources will also vary by region, so be sure to check with your local HUD authority to learn more about what’s available in your state or county. While there are no national programs for single parents to buy a house, local communities may offer resources meant specifically for single parents.
Homeownership Voucher Program
This program is available to low-income individuals who first participated in the HUD housing choice voucher program, also known as section 8 housing, which offers payment vouchers for rent. Under the homeownership voucher program, previously enrolled renters can swap their rental vouchers for ones that can be used to buy a home. Program participants can also receive monthly assistance to help cover housing costs.
Habitat For Humanity
Habitat for Humanity offers a program where applicants can receive an interest-free loan after offering “sweat equity.” Participants must help build homes for themselves or others before they can receive the benefit. Applicants must demonstrate a need for safe, affordable housing and show an ability to repay the interest-free loan.
Operation Hope provides a HUD-approved housing counseling program that empowers individuals to become homeowners. The program includes a home buyer workshop that walks participants through what it takes to buy a home. This includes information about loans, funding resources and coaching with a HUD-certified counselor.
Single Parent Down Payment Assistance
Down payment assistance (DPA) programs vary widely by region. Most DPA programs are offered at the local, state or county level. Many DPAs are offered through local nonprofit organizations that have programs specifically designed for their communities.
DPA programs can provide assistance through:
- Grants: Money that doesn’t need to be repaid.
- Loans: Second mortgages used to convert down payments into monthly payments.
- Deferred loans: Second mortgages (as above) that only need to be paid when you move, sell or refinance, depending on the terms.
- Forgivable loans: Second mortgages that are forgiven after a set time period, such as 5 years.
Because DPA programs vary so widely from region to region, it’s often best to contact your local HUD authority to see what programs are available. It’s also important to note that not all lenders accept all DPA programs. It’s best to contact lenders to learn about which programs they accept.
How To Prepare To Get A Mortgage As A Single Parent
Once you’ve found the right resources, it’s time to prepare for the housing application process.
Create A Budget
Creating a budget is one of the first steps to buying a home. If you’re used to having a double income, you may need to make some adjustments. When creating a budget, you’ll want to make plans for your:
- Down payment
- Monthly payment
- Closing costs
- Moving costs
It’s important to have realistic expectations for how much house you can afford. Lenders will qualify you for the maximum loan amount, even if it’s outside your comfort zone. Only borrow what you can reasonably pay back in your monthly payments. Remember, your monthly mortgage payment includes your principal loan balance, interest, property taxes and homeowners insurance.
Check Your Credit
One of the main ways lenders quantify whether you’re a good risk is by looking at your credit. By checking your credit and building it up, you can increase your chances of qualifying for the best mortgage rates.
Credit can be a particularly tricky issue if you’re just getting out of a relationship and everything you had was in joint credit accounts and loans. The good news is that your credit history is now all your own, which means you have a fresh start if you had joint accounts that your former spouse or partner wasn’t paying on.
Income Considerations: Child Support And Work
Part of applying for a home is income verification. If you’re in a low-income bracket, it’s worth considering how child support can affect your income in a lender’s eyes. If you receive child support payments from your child’s other parent, this may be used to supplement your qualifying income. The lender just needs to see the documentation that these payments will continue for some time into the future.
On the other hand, if you’re making child support payments that will be ending soon due to a change in your custody arrangements or because your children are getting older, these payments can actually be excluded from your debt-to-income ratio (DTI). This can help you qualify for a higher loan amount.
House Hunt For The Future
When it comes time to shop for a house, it’s important to think long-term. Even if home features don’t matter now, consider the ones that may matter in the future, such as:
- Number of bedrooms
- School districts
- Emergency services in the area
Once you find a home that fits your needs and your future, you can hold onto it for the time it takes to build equity.
The Bottom Line: There’s Housing Help For Single Parents
Buying a home as a single parent can feel daunting, but many resources are available to help single parents whose situation may be making it harder to become homeowners. There are plenty of home loans for single parents with poor credit, low income or little to no savings.
If you’re a single parent and interested in homeownership, get started with us today.