Homeownership can mean self-sufficiency, comfort and financial stability to single parents. It also means a place your children can feel safe and happy.
Even with just one income, a single parent can find the best mortgage, the best loan term and the best lender for their situation to get them into a family home.
To help in this adventure, here is a simple guide to get you started with advice from an expert who has helped many single parents through the years.
Find the right house, neighborhood and schools
Picking the right home could come down to finding a home in a specific school district. A real estate agent can help you with making the best choices and getting the information you need to make the best decision on a house and location. Even if your child is a baby, they will be attending school before you know it. You want to make sure that your house is zoned for the best performing elementary school in the city.
Choose a caring lender
“Make sure your lender has your best interest at heart,” says Erik Sandstrom, senior loan officer/sales manager at Caliber Home Loans in La Jolla, Calif. “You can determine that by talking to them either in person or on the phone. Are they trying to sell you something? Or do they act too busy to deal with you?”
Determine your budget
There are many useful affordability calculators for purchasing a home online. Choose a calculator that adds in all your monthly expenses including credit card debt, groceries and any car payment. You need to get a clear picture of what’s within your personal budget. Sandstrom suggests a good rule of thumb for single parents is to get a mortgage less than 31 percent of your income to debt ratio.
Build a credit score of at least to 680
A single parent can look at more mortgage options with a score of at least 680, including conventional loans. Conventional loans offer more tax benefits than other programs, Sandstrom says.
To help your credit, bring your revolving debt below 30 percent of the credit limit of your credit cards. For instance, if your credit card has a $10,000 limit, then you shouldn’t have any more than $3,300 on that card.
Understand the mortgage available
FHA loans only require 3.5 percent down while conventional loans usually ask for five percent down. However, if your credit score is high enough, you can opt for a three percent conventional loan. If you are a veteran or in the military, a VA loan is going to be the best option with no money down and lots of other benefits. USDA loans are useful if you are buying in certain locations, such as rural or counties.
Discover downpayment and closing cost assistance
There is plenty of money available to help low income, high income, first-time homebuyers, or just people buying in certain areas. Sometimes those assistance programs are enough to cover the downpayment and closing costs. “In California, we have a few programs that provide both – 3.5 percent for the down payment and 3.5 percent for the closings,” Sandstrom adds. “Remember to find a lender that is certified to offer these programs. It is a much lengthier process but so worth it for the homebuyer.”
Get an inspection once your offer is accepted
Unless your lender requires it, there are no mandates or rules saying you need to get a home inspection. But those in the business say it is the best reassurance you have that something major won’t go wrong at least in the next few months.
Actually follow the inspector around to take your own notes and understand what might be wrong in the home. Also, keep all your home buying documents and data in one file and make copies of everything.
Understand the no-no’s before your closing
Sandstrom has seen many loans not go through because homebuyers decided to buy a new car before the loan was closed. Don’t apply for any new credit, don’t change jobs unless you inform you loan officer, and definitely don’t make large deposits to your bank accounts unless you have documentation.
Save as much as possible for the closing
Furnishing and taking care of a home can cost a lot. If you’ve been renting for years, you might have to buy a lawnmower, rakes and other necessities for landscaping for your new home. You also have to think about furniture, dishes, curtains and more. That all takes money, and some forget to save up for these expenses.
Most of all, remember to have patience and ask a lot of questions during your journey into home buying. There are no dumb questions, and if you don’t understand something that your real estate agent, lender, inspector, banker or title person has told you, then have them say it again until you get it. After all, home buying is an important process for both you and your family.