Owning a home can be an effective way to build long-term wealth while also stabilizing your current expenses. But as a single parent, you may feel overwhelmed at the idea of making such a large purchase, especially on one income.
While there are no 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!
Key Takeaways:
- Certain mortgages make it easier to qualify with a low income, bad credit or a small down payment.
- Grants, first-time home buyer programs and down payment assistance can also make it easier to buy a home as a single parent.
- Prepare your finances in advance so you feel good about your decision both today and in the future.
Single-Parent Home Loans
Explore common mortgages that could help you qualify to buy a home.
- FHA loans come with relatively low interest rates and low down payment requirements (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 FHA loans is mortgage insurance premiums (MIPs), 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.
- VA loans are for active military members, veterans or eligible surviving spouses. They don’t require a down payment or mortgage insurance, but there is a funding fee of 1.25% – 3.3%.
- USDA loans encourage borrowers to purchase homes in rural areas, and most addresses outside of major urban areas qualify. These loans come with low interest rates and no down payment requirements, but you will need to be under USDA income caps. You’ll also have to pay a guarantee fee both up front and annually for the life of the loan.
- 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. For more flexible income and credit requirements, Freddie Mac HomePossible and Fannie Mae HomeReady loans are other conventional loan options with just a 3% down payment required.
Which Home Loan Is Best For Single Parents?
The best low-income loans for single parents vary based on your situation and the prospective property. An FHA, VA or USDA loan could be a great option, in addition to conventional loan programs designed for lower-income borrowers. For those who don’t have money saved for a down payment and are eligible, a VA or USDA loan is ideal – if you’re eligible.
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Single-Parent First-Time Home Buyer Grants
There are no grants specifically for single parents. But you could qualify for those made for first-time home buyers or low-income buyers.
- HUD funding: The U.S. Department of Housing and Urban Development (HUD) offers funding to support housing initiatives for citizens. Explore home-buying programs in your state to see what resources are available.
- Good Neighbors Next Door: The Good Neighbors Next Door HUD program is available to law enforcement officers, teachers, firefighters and emergency responders willing to buy homes in specific revitalization areas. It offers a discount of up to 50% on the home’s list price.
- National Homebuyers Fund: The NHF nonprofit organization provides grants for down payment and closing cost assistance. Buyers may be eligible for up to 5% of the loan amount in a grant.
- Homeownership for Public Housing Residents: This HUD program is available in some states and allows public housing renters and low-income families to purchase a unit from the public housing authority.
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Homeowner Programs For Single Parents
Looking for support beyond grants? These programs can help single parents become homeowners.
- Homeownership Voucher Program: This program helps Section 8 housing residents become first-time home buyers by using rent vouchers for buying and maintaining a home.
- Habitat for Humanity: Apply for an interest-free loan in exchange for “sweat equity” in the home construction process.
- Operation Hope: This HUD-approved housing counseling program teaches individuals how to buy a home through group and individual sessions.
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Down Payment Assistance Programs
Down payment assistance (DPA) programs vary widely by region and are usually offered at the local, state or county level, or through local nonprofit organizations.
There are four common types of programs:
- 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 need to be paid only 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
Pros And Cons Of Buying A Home As A Single Parent
Owning a home offers housing stability, but it’s also a major financial responsibility. Here are some benefits and drawbacks to consider, especially when you’re a single parent.
| Pros | Cons |
|---|---|
| Build equity and wealth in your home over time | Ongoing maintenance and repair costs can add up |
| Stay in the house on your own timeline, not a landlord’s | Takes longer to move if you have life changes |
| Maintain stable principal and interest payments, even as rent prices increase | Home value depends on the current real estate market |
How To Prepare For A Mortgage As A Single Parent
Once you’ve found the right resources, it’s time to prepare for the housing application process.
1. Create A Budget
Creating a budget is one of the first steps to buying a home. Include both one-time and ongoing costs, including:
- Down payment
- Monthly payment
- Closing costs
- Moving costs
- Reserves
- Ongoing maintenance expenses
Regardless of what amount a lender approves, borrow only what you can reasonably afford in your total monthly payments. A home affordability calculator can help you determine how much house your budget will allow.
2. Check Your Credit
Your credit score is one of the main ways lenders decide your risk level as a mortgage applicant – which also impacts your interest rate and loan terms. Increase your chances of getting approved for the best rate by checking and improving your credit in advance.
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.
3. Calculate Your Income Sources
Part of applying for a home is income verification. There are several types of income that are counted toward your mortgage application, including:
- Employment wages
- Self-employment income
- Child support or alimony
- Investment income
- Social Security or other government benefits
4. Consider Your Debt
In order to calculate your mortgage affordability, lenders also consider the amount of debt you have. Add up all of your monthly debt payments (including alimony or child support and your estimated monthly mortgage payment) and divide that total by your gross monthly income. Multiply that number by 100 to get your debt-to-income ratio (DTI); the lower it is, the better.
To improve your chances of getting approved for a mortgage, aim for a DTI of 36% or less.
5. House Hunt For The Future
Once you’re financially prepared to purchase a home, it’s time to get preapproved and shop for a house. Think about the features you need both now and in the long term, such as:
- Number of bedrooms
- School districts
- Emergency services
- Neighborhood
With a home that fits your needs and your future, you can hold onto it for the time it takes to build equity.
As you prepare to buy a home, make sure you set a maximum budget to keep your monthly payments affordable. This is especially important if you live in a competitive real estate market that may require a home offer that’s over the asking price.
Take The First Step To Buying A Home
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FAQ
The Bottom Line: There’s Housing Help For Single Parents
Buying a home as a single parent can feel daunting, but there are many resources available to help those who are struggling to become homeowners. Look for home loans that cater to your personal situation, whether it’s poor credit, low income or little to no savings.
Explore our Mortgage Calculator to test out different price points for your future home so that you can confidently make a purchase when you’re ready.
Lauren Ward
Lauren Ward is a writer with over a decade of experience covering financial topics for businesses and publications. Her work has also been featured in major publications such as U.S. News and World Report, CNN, Business Insider, The New York Post and Bankrate. Her expertise includes real estate, mortgages, small business, insurance and more.
