Home Buying for Single Parents
While being a single parent can be challenging in many ways — and life as a single parent can be expensive — it doesn’t make home ownership impossible. However, given the right house, the right mortgage, and a few strategies, many single parents can afford to become homeowners. Having strong credit can also be a part of turning a parent dreaming of a home into a parent with a home.
Debt-to-income ratio is the total amount of debt divided by the amount income you bring in. Mortgage loan candidates may present less of a lending risk if their debt-to-income ratios are low. If the total amount of debt you have is high compared to your total income, your ratio will be high, and it could show lenders that you’re already carrying too much debt.
First, create a financial plan that calls for paying down your debt while also saving for a down payment on a house. Paying down debt can help free up money to make monthly mortgage payments. If you have mounting credit card debt, paying it off it could reduce your credit card utilization, which is one of the components of your credit score. One way to pay down debt is to reduce the money you spend elsewhere so that you can send it to your creditors.
Saving to buy a house serves two purposes. First, it can give the borrower the money they need to make a down-payment, which for some loans is a prerequisite. Second, every dollar that a borrower puts down is one dollar they won’t have to borrow — and make monthly payments on. This reduces the monthly payment, making the home more affordable. If a borrower can afford to put 20 percent down, it may even eliminate the additional expense of private mortgage insurance.
Buying a reasonable house can be especially important for a single parent. Having lower payments means that there is more money left over for child care or for college savings. Be sure to research various real estate markets to get a sense of what you can afford vs. how your investment might change. Every neighborhood is different, and moving a little outside of a competitive market might help you afford a home that fits your needs.
Consider Government Mortgages
Having qualified, government-sponsored mortgages can be ideal for single parents and other buyers who want to purchase a home without having a lot of money to spend. The Federal Housing Administration mortgage program allows a down payment of as little as 3.5 percent in some instances.
Other government-sponsored loans that may be able to offer assistance include mortgages from the Department of Veterans Affairs (VA) or the Department of Agriculture Rural Development (USDA). Each of these may have mortgage qualifications that are different compared to traditional loans.
Don’t let being a single parent get in the way of achieving your dream of homeownership. Take reasonable steps toward reaching your goals and keep your credit usage in check along the way. Before you know it, you’ll have a home both you and your children can enjoy.
About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.