What Are Home Loans for Single Parents?

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Contributor, Benzinga
October 10, 2023

Many single parents dream of buying a home. Home loans for single parents can come from a wide range of programs and funds. Examine loan qualifications and learn about local and national homeownership programs. Consider applying for grants designed to support single parents as well as low-income individuals. The dream of owning a home can be closer than you think. 

Can a Single Parent Apply for a Home Loan?

Yes, a single parent can apply for a home loan. Many mortgage loans can prove useful for single parents.

What Are the Qualifications?

Qualifications for owning a home include the ability to fund a down payment, low debt-to-income ratios and strong credit. A reputable lender can help clarify the process. Top lenders have useful tools such as mortgage calculators, loan options and resource centers to inform and empower potential borrowers.

High Down Payment

A down payment is an upfront payment when purchasing a property. Having funds available for a down payment increases a single parent’s likelihood of receiving a favorable loan because people with higher down payments are considered lower risks to the lender.

Low Debt-to-Income (DTI) Ratio

A debt-to-income indicates monthly debt payments by monthly gross income as a percentage. It’s recommended to have a DTI of 35% or lower.

Good Credit

A credit score indicates a person’s creditworthiness. Scores above 620 are usually considered good for a conventional loan. Higher scores get borrowers better terms and rates. Know your credit score prior to applying. To improve a credit score, pay bills off in full or consider using auto payment features to avoid missing payments.

Single-Parent Homeownership Loan Programs

Examine multiple homeownership loan programs to choose the best opportunity for you. Several government-backed loans such as FHA loans and VA loans have low or no minimum down payments and flexible credit requirements.

FHA Loan

The Federal Housing Administration (FHA) is a government organization that offers government-backed loans to qualified borrowers. It’s designed to help people obtain housing by offering flexible terms, low down payments and lenient credit requirements.

Borrowers interested in an FHA loan will likely need to pay mortgage insurance premiums (MIPs). FHA loans have caps on the amount that can be borrowed.

VA Loan

The United States Department of Veteran Affairs created a type of mortgage loan called a VA loan. The loan is available to veterans, active-duty service members and eligible spouses. Benefits include flexible refinancing, no down payment and low costs. Potential drawbacks include required inspections, required appraisals and funding fees.

USDA Loan

The United States Department of Agriculture (USDA) loans money to buy a home to homebuyers in rural areas. Borrowers must be permanent residents or U.S. citizens. No down payment is required. The loan uses a fixed-rate mortgage.

Consider the benefit of a single-family housing direct loan, which assists eligible low-income applicants to obtain sanitary housing within rural areas.

Conventional Loan

A conventional loan is not backed by the government. The loan provides more home loan options and requires less paperwork. However, conventional loans often require higher credit scores and increased down payments. Conventional loans are a good option for individuals with strong credit and low debt.

State-Run Home Loan Programs

Examine state-run home loan programs. For example, California offers a wide range of homebuyer loan programs designed to offer government loans and conventional loans while providing down payment assistance programs. These mortgage programs often have deferred payments and fixed interest rates. Interest rates or mortgage rates vary depending on an individual’s general creditworthiness.

Home equity loans can provide single parents with quick funds. However, home equity loans are risky given that the loan uses your home as collateral. Missing payments could result in a single parent losing their home.

State programs can help first-time homebuyers or low-income borrowers attain homeownership. Examine how states handle programs such as the Temporary Assistance for Needy Families (TANF) program. TANF is a federal government program that gives states funding to help low-income families. Many states have programs geared toward single parents.

Individual Development Account

An individual development account (IDA) is a type of bank account to help people save for large purchases. Contributions are matched by programs such as TANF. States or non-profits work with financial institutions to offer assistance to borrowers who have proof of employment and are willing to take financial literacy courses.

Single-Parent First-Time Homebuyer Grants

Grants and programs such as the National Homebuyers Fund, Good Neighbors Next Door and government grants are possible options. Grants can come from federally funded, state-funded and privately funded programs. Research these grants to have a stronger understanding of the opportunities available to you.

National Homebuyers Fund

The National Homebuyers Fund (NHF) promotes affordable housing by covering up to 5% of the down payment or closing costs. Homebuyers do not need to be first-time buyers.

Good Neighbors Next Door

The program offers police officers, firefighters, emergency medical technicians and teachers the ability to own a house at 50% off the list price. In return, borrowers must agree to live in the property for a minimum of three years and meet additional requirements.

Government Grants

Examine government grants at the local, state and national levels and consider combining programs to increase the level of assistance provided. Each state has different requirements and programs.

Homeownership for Public Housing Residents

The Public Housing Authority (PHA) can offer public housing residents an ownership plan as well as ownership assistance. PHA uses capital funds to help with closing and downpayment fees.

Single-Parent Down Payment Assistance Programs

If you need down payment assistance, there are several programs available for single parents. Take note that each of these assistance programs would have different down payment requirements:

  • Single Family Housing Direct Home Loans
  • Single Family Housing Guaranteed Home Loan Program
  • Single Family Housing Repair Loans and Grants
  • The Chenoa Fund
  • Housing Choice Voucher Program (HCVP)
  • State-Aided Public Housing Programs
  • Matched-Savings Programs
  • Good Neighbors Next Door Program
  • National Homebuyers Fund

Buying a House with a Low Income as a Single Parent

Buying a house with a low income is possible when using family housing programs and resources. Build up a credit score by paying bills in full and on time. Speak with a mortgage lender to review home insurance rates and calculate a realistic mortgage payment. Refinance when the process can provide better terms and rates. Examine various local and state programs to learn about all of the possible opportunities.

Resources Give Single Parents the Opportunity to Buy a Better Nest

A number of programs, grants and funds make it possible to get a house with low credit and a minimal down payment. Having home equity allows single parents to have a stronger financial standing. Build a better tomorrow and buy an attainable home for your family using one of these available home loans.

Frequently Asked Questions

Q

Is it harder to get a mortgage as a single parent?

A

It can be harder to get a mortgage as a single parent, but if you work with down payment assistance programs to navigate stringent standards while exploring various grants, your chances may improve. 

Q

How much can a single person borrow for a mortgage?

A

The exact amount that a single person can borrow for a mortgage depends on several factors such as income and the sum of the intended initial down payment. 

Q

How can a single parent save for a house?

A

When saving for a house, stay on budget and know your credit. Credit scores can impact an individual’s loan eligibility. 

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