Home Buying Programs & Mortgage Assistance for Single Parents
Homeownership is a challenging process, for even the most prepared of individuals. For parents living on a fixed, single income, however, the process of homeownership can be daunting. After homeownership comes the added cost of property tax, homeowners insurance, and all maintenance costs that occur throughout the duration you live at the property.
The home buying process is a beast all its own, however. Many single parents wonder about how their credit score, or their status as a “single parent” might affect their chances of being approved for a home loan. Not to mention that coming up with a down payment is particularly challenging on a fixed, single-income.
There are a number of resources available to help single parents find affordable mortgages. This includes down payment assistance programs, government sponsored mortgage programs, and resources aimed to help single, low income, or otherwise marginalized families find affordable housing.
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Down Payment Assistance Programs for Single Parents
Saving for a down payment can be one of the biggest obstacles preventing individuals from homeownership today. For single parents, especially, saving up for a down payment can be a difficult feat to overcome. Luckily, there are more than 2,000 down payment assistance programs available across the U.S. that can help single parents find resources allowing them to purchase a home.
Down payment assistance programs are one such resource that single parents can take advantage of. These programs vary by state and organization, so you’ll likely have to research programs that work for your individual circumstance.
In general, however, these benefits range from a few thousand to tens of thousands of dollars and can be put toward closing costs, prepaid balances, or principle reductions.
Typically these programs are available through municipal governments and/or non-profit institutions. Many of these institutions provide assistance based on certain qualifiers that prioritize marginalized and disenfranchised populations, single parents being just one demographic.
FHA Loans for Single Parents
An FHA loan is a mortgage that is insured by the Federal Government through the Federal Housing Administration (FHA). For first time home buyers, FHA loans are particularly attractive because they allow down payments that are a mere 3.5 percent for individuals who have qualifying credit scores of 580 or higher. For those whose credit scores are in the 500-579 range, a 10 percent down payment is required. Keep in mind that the lower your credit score is, the higher your interest rate is likely to be when applying for an FHA loan.
The program was created in response to a foreclosure crisis that occurred in the 1930s, and helped to stimulate the housing market by making loans accessible for individuals with lower or poor credit scores.
There are a number of requirements necessary to qualify for FHA loans, which can be found on the HUD website.
USDA Loans for Single Parents
The United States Department of Agriculture (USDA) is one of the biggest government sponsored programs that offer help to home buyers who are struggling to come up with a down payment. They are said to be one of the most helpful of all real estate ownership programs for individuals who are experiencing financial difficulty. Having to rely on only one income for all household expenses often qualifies many single parents for housing assistance from the USDA.
A USDA home loan might be the right fit for you if you’re hoping to live in a rural area and purchase a home without having to come up with a down payment. The term “rural” is subjective, however, as many of these USDA approved areas surround metropolitan cities.
USDA loans have low interest rates and and no down payment required. Typically interest rates are lower than that of the FHA loan. While there are no hard and fast rules to qualifying for a USDA loan, the government is more likely to prove that you have your finances in order. You’ll likely need to prove that you have stable employment, or that you are subsidizing your income with other government programs that will allow you to be able to afford the monthly mortgage payment.
To see if you qualify, visit the eligibility requirements portion of the USDA rural development page.
VA Mortgages for Single Parents
The U.S. Department of Veterans Affairs (VA) program guarantees loans made to eligible Veterans, Service members, Reservists, National Guard members and qualifying surviving spouses. To be qualify, the Veteran or active duty service member may not have had a dishonorable discharge, and they must meet the length of service requirements.
If you qualify for a VA loan, this may be one of the best options available for single parents. In essence, the VA guarantees to pay a percentage of the loan. This allows the eligible party to obtain a no-down payment mortgage with a competitive interest rate, and does not require private mortgage insurance. The loans are also able to be refinanced at a later date.
In order to apply for a VA loan, you will need a valid Certificate of Eligibility (COE) which can be obtained through a few ways:
- Online through the VA’s eBenefits page
- If you are unable to obtain a COE online, check with your lender. In many cases they will be able to access your COE using the Automated Certificate of Eligibility (ACE) program
Finding Low Cost Homes
In today’s real estate market, finding a good deal on a home can be far more challenging than one might expect. A good place to start your search is the Housing Affordability Index, which is a resource dedicated to measuring whether a family earns enough income to qualify for a mortgage loan based on the average home price in their area. If you find that housing is too expensive in the area that you currently live, this could be a useful tool to help you plot your next moves, whether cross country, or just a few miles over.
It also may be worth looking into houses that have been foreclosed upon, as they are often a low cost alternative to buying a home in the traditional market. However, these houses might have to be sold sight unseen, and have a number of issues that the bank likely won’t negotiate price over.
It also may be helpful to speak to a realtor, especially if you’re a first-time home buyer. They can help you find the best deals in your area, and work with you on making an offer. There are a number of other options available as well, which we have highlighted below.
Habitat for Humanity
Habitat for Humanity is an organization that partners with potential homeowners in order to provide a safe, affordable place to call home. Individuals help in the home building process, and in return, the organization also helps prepare families for the various responsibilities necessary for homeownership, including personal finance, mortgage payments, and maintenance and upkeep.
In order to qualify for a Habitat for Humanity home, prospective homeowners need to be able to demonstrate a clear need for safe, affordable housing. Those needs will vary by community.
They must also be an active participant in the building process of their home or potentially the homes of others in the community. They can also include taking courses designed for new homeowners or volunteering for Habitat’s ReStore.
These homes aren’t free, but the mortgages are far lower than most. Payments are cycled back into helping communities build additional homes.
To apply or ask further questions, find your local Habitat for Humanity chapter.
Government Home Sales
A HUD home is a 1-4 unit residential property that has been acquired by Housing and Urban Development as a result of a foreclosure on an FHA-insured mortgage. From there, HUD becomes the owner of the property and sells it in order to retrieve funds lost from foreclosure.
Anyone who has the cash on hand or can qualify for a loan may buy an HUD property. However, HUD homes are initially put on the market for people looking to buy the home as their primary residence. If the property doesn’t sell within a certain timeframe, it is then opened up to buyers who are looking for investment properties.
It’s worth noting, however, that HUD properties are not guaranteed to be in good condition by HUD. Since houses might be in significant disrepair, HUD urges homebuyers to get an inspection from a licensed professional before submitting a bid to purchase.
If you find that the house is in disrepair, there are loan options available that can help to not only secure the funds for the house, but also the repairs necessary to make the house functional and in good repair. If this applies to your situation, consider applying for a 203(k) Rehabilitation Mortgage.
To find available HUD homes, visit the HUD Homes website.
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This post was updated February 28, 2019. It was originally published July 5, 2018.