The Single Mother’s Guide To Becoming A Homeowner

Single moms can have it tough trying to become a homeowner — between raising their children on their own and paying all the bills, buying a house seems almost unachievable. But, there are loans available and lots of assistance programs to make the dream of homeownership in reach for single mothers.

“It can be tough to support a family on one income. But, if a single mom has decent credit, they could qualify for a mortgage,” says Mark Gundersen, a senior loan officer at Shelter Mortgage Company in Saint Charles, Illinois. “There are programs out there to get people in home who don’t have a lot of savings. Homeownership is the goal of many of these loans and programs.”

Single parents have a harder time qualifying for some mortgage loans

The share of single female buyers remains steady at 18 percent of all recent home buyers (down slightly from 20 percent in 2010) according to the National Association of Realtors (NAR) Profile of Home Buyers and Sellers 2018 Survey. This makes single females the second most common type of home buyer behind married couples. Single male buyers came in at just 9 percent.

The median purchase price for female single buyers, though is the lowest of all household buyer types ($189,000), including single male homebuyers ($215,000). In many real estate markets across the U.S., this means homeownership will continue to be out of reach for many single mothers.

“With the lower end of the housing market — smaller, moderately priced homes — seeing the worst of the inventory shortage, first-time homebuyers who want to enter the market are having difficulty finding a home they can afford,” said NAR Chief Economist, Lawrence Yun. “Homes were selling in a median of three weeks and multiple offers were a common occurrence, further pushing up home prices. These factors contributed to the low number of first-time buyers and the struggles of would-be buyers dreaming of joining the ranks of homeownership.”

But, there is hope for single moms looking to get a home loan. A good place to start is to see what’s available through your local housing authority (a quick Google search will do). Its website can tell you what specific homeownership programs, grants, and loans are available for your situation in your city or state.

“There are usually income and purchase price limitations depending on the county you are going to buy the house in,” says Gundersen. “But, those who qualify can get down payment assistance and below-market interest rates for some programs.”

Single mother down payment assistance programs

According to NAR’s 2019 survey, the median down payment amount for first-time homebuyers was 6 percent, and 57% of current non-owners believe it would be at least somewhat difficult to become a homeowner.

But, there are a lot of down payment assistance programs available for single mothers across the U.S. Some of examples of assistance programs include:

• Baltimore City’s first-time homebuyer program (CDBG Homeownership) offers a $5,000 five-year forgivable loan to first-time homebuyers to assist with down payment and settlement expenses.
• Maine Housing’s First Home Program provides low fixed rate mortgages with little or no down payment. All First Home mortgages also come with payment protection for unemployment.
• Pinellas County, Florida, First-time Homebuyer Program helps with down payment and closing costs assistance with a $7,500, zero percent interest loan that is deferred until you sell, refinance, or payoff the home.

Best home loans for single moms

No matter where you live, there are several mortgages to look into if you’re a single mom. Each have low down payment requirements, less strict credit requirements, and/or different mortgage insurance requirements.

“You should investigate these loan options for your situation with your lender,” says Gundersen.

FHA Loan

Federal Housing Administration (FHA) loans usually have lower interest rates and only require 3.5 percent down. (That down payment can come as a gift too.) Also, your credit score doesn’t have to be excellent either. Depending on the lender, a minimum of 600 is accepted in most areas, while some accept 580.

One of the downsides of an FHA loan is the mortgage insurance premium (MIP). It’s usually almost double what most people pay with traditional conventional loans called private mortgage insurance (PMI), when the down payment is less than 20 percent of the loan.

“For FHA loans, you will pay mortgage insurance till the end of the loan even if you paid off 50 percent of the principal. It’ll be there until you refinance or sell the house,” Gundersen says.

VA Loan

If a single mom is eligible to get a VA loan through her own military service or as a widow, it could be the best loan program out there for her.

This loan is available to military veterans and their families with no down payment requirement, and the Department of Veterans Affairs backs 100 percent of the financing. There is no private mortgage insurance to worry about either.

“You are getting an unbelievable deal with this loan, which is well-deserved,” Gundersen says. “You have no mortgage insurance and there are no down payment requirements.”

USDA Loan

United States Department of Agriculture (USDA) offers a variety of loans to help low- to moderate-income people buy homes in rural areas. But, “rural” can be a misnomer — many of the properties are available in areas surrounding popular, metropolitan cities. USDA loans have very low interest rates and no down payment requirement. You are eligible for 100 percent financing, and the mortgage insurance premium is lower than that of FHA loans. USDA loans do have maximum levels of income, but most single moms will be well below income limits.

Conventional Loan

Gundersen says that you may need at least a 5 percent down payment of your own money for a conventional loan. But conventional mortgage products like HomeReady™ only require 3 percent and even allow you to use renter income to help you get approved.

Borrowers will need a pretty good credit score and credit history, but some lenders are lowering their credit score minimum to attract more buyers. If you don’t put 20 percent down, you will pay private mortgage insurance up to the date you reach 20 percent in the principal. You can choose from 10-, 15-, 20-, and 30-years fixed to pay off the loan’s principal and interest.

Check your home buying eligibility

There are tons of programs that help single moms get approved to become a homeowner instead of a renter.

Get a free eligibility check and be on your way to giving the gift of homeownership to yourself and your kids.