How to buy a house as a single mom: 5 steps for first-time buyers

If you’re wondering how to buy a house as a single mom, especially on a low income, know that it is possible with the right resources.

Sarah Coleman-Lee, a single mom and one half of a mother-daughter realtor team based in Charleston, says she regularly helps single women achieve their dreams of homeownership. 

“You are more than capable of buying a home,” Coleman-Lee says. “It may take a little longer, but it's 100% achievable.” 

This post will help you get in position to buy a home on any income. We’ll cover: 

• Buying a house with government help vs. the traditional way
• Steps for how to buy a house as a single mom
• What to expect during the home-buying process

Buying a house with government help vs. the traditional way: 3 differences

If you have a low income or receive government benefits, you may be eligible to purchase your home with help from a government-backed loan or through a special home-buying program like these:

• HomeReady Mortgage from Fannie Mae
• FHA Home Loan
• Home Possible home loan from Freddie Mac

Peter Bieda, a real estate agent and mortgage broker based in Chicago, is the COO of FHA Lend, a mortgage lending company licensed in 48 states. He says there are several differences between buying a home through a government program vs. using a conventional mortgage: 

Government-backed loan	Conventional loan
Lower down payment: If you are working with a government-backed loan such as a Fannie Mae HomeReady or Freddie Mac Home Possible mortgage, you can pay a down payment as low as 3% of the home’s purchase price.	Down payment: With a conventional loan, lenders set their own down payment requirements — you might have to put down 15% or more.
Government insured: When the government backs a loan, lenders are protected if the buyer stops paying the mortgage. This often translates into lower interest rates and better odds of approval for low-income home buyers.	Not government insured: When a loan isn’t government insured, it’s riskier for the lender, so they may demand higher interest rates or deny loans to borrowers with financial challenges or low credit scores.
Accept credit scores in the 500s: For an FHA loan, you’ll need a credit score of at least 500 to qualify (580 for a 3% down payment), while VA and USDA loans have no minimum score requirement.	Minimum credit score requirement: Most conventional home loans require a minimum FICO score of 620.
Some income limits: Some homebuyer programs have a maximum income limit. For example, you can only qualify for a HomeReady Mortgage if your income doesn’t exceed 80% of the Area Median Income for the property's location. However FHA loans do not have a minimum or maximum income requirement.	Debt-to-income ratio limits: Most conventional loan lenders care less about your income level and more about your debt-to-income ratio, which should be 50% or less to qualify for a conventional loan.
Program purchase limits: For example, the FHA loan limit is $472,030 in most parts of the country.	Individual purchase limits: You are only limited by the amount of money a lender approves you for based on your income/credit score.
Mortgage insurance: Mortgage insurance is typically required on FHA and USDA loans because you’re putting less money down on the home.	Mortgage insurance: You’ll likely only need to pay for mortgage insurance If you make a down payment less than 20% of the purchase price of the home.

Keep in mind that all lenders don’t work directly with government home-buying programs, so you’ll have to do some research to find one that does. Most state housing websites have a directory of approved lenders.

Check out our post on low-income home loans for single mothers.

How to buy a house as a single mom: 5 steps

These are the steps for how to buy a house as a single mom:

1. Improve your credit score
2. Figure out how much you can afford for a house
3. Work to earn more and save your down payment (if required)
4. Consider your mortgage options
5. Determine if it’s the right time to buy

1. Improve your credit score

Do you know your credit score? Lenders use that three-digit number to measure your level of risk as a borrower. Scores range from 300 to 850, and most conventional home loans require a credit score of at least 620. The higher your credit score, the lower your interest rate.

Here are some tips to help improve your credit score: 

• Request a credit report to see where you stand. You can get a free report from the Federal Trade Commission (FTC)-approved site AnnualCreditReport.com every 12 months.
• Request the removal of wrong or negative information from your credit report. The FTC offers guidance on how to address errors. For negative information, you can contact the creditor directly and negotiate a pay-for-delete agreement, which means you agree to pay off the collections account in exchange for a removal of the negative mark. If the account is old, you can also request a goodwill deletion or adjustment. Otherwise, you can wait for the negative mark to be removed from your report, which typically happens after seven years.
• If you need a quick credit score increase, check out Experian Boost. It’s a free service that factors in on-time, positive payment history from accounts like your cell phone bill or streaming service. Experian reports those who qualified for a boost improved their FICO score by an average of 13 points. 
• Pay your existing accounts down. This can positively impact your credit use rate.
• Ask for a credit line increase. Contact your credit card companies, or make an online request. This can immediately improve your score.
• Pay your accounts on time. If you have trouble remembering when to pay, you can often sign up for automatic payments.
• Keep accounts that are in good standing. Do not cancel them after you have paid them off.

2. Figure out how much house you can afford

There are a lot of costs involved in homeownership:

• Mortgage: For a $200,000 30-year mortgage with a 7% interest rate, you can expect to pay about $1,300 a month.
• Mortgage insurance: Mortgage insurance lowers a lender’s risk of approving a loan and is usually necessary when you make a down payment less than 20% of the home’s purchase price. If you put 3% down on that same $200,000 at 7% interest, you’ll pay about $100/month in mortgage insurance until you reach 20-22% equity in your home (at which point the policy will be canceled).
• Property taxes: According to investing advice company the Motley Fool, the median real estate tax paid in the United States was $2,971 in 2021 (the most recent data available).
• Home insurance: Bankrate found that the average cost of homeowners insurance in the U.S. is $1,428 per year for a policy with $250,000 in dwelling coverage.
• Utilities: Energystar.gov reports the average annual energy bill for a single-family home is $2,060. Check out our post on how to get free money to pay bills. 
• HOA fees: If you live in a development with homeowners association fees, expect to pay between $100 and $1,000 per month to cover things like lawn maintenance, pool maintenance, snow removal, and trash removal.
• Home maintenance and repairs: According to internet services company Angi, the average American spends $3,018 a year on home maintenance and repairs.

Freddie Mac offers a calculator to help you determine how much mortgage you can afford.

If you are in the process of buying a home, you’ll need a mortgage pre-approval, which will show a specific, maximum amount you’re approved to finance. That letter is only good for 90 days, so wait until you are ready to buy to obtain pre-approval.

3. Look at ratio of debt to income for mortgage

Certified Financial Planner R.J. Weiss of Geneva, Ill., suggests a 50/30/20 budget to assess whether you can afford to buy a home.

The 50/30/20 budget involves allocating your net take-home income like this: 

• 50% toward necessities (food, shelter, transportation, clothing)
• 30% toward wants
• 20% toward debt payments and savings

Weiss says to rethink buying a home if adding a mortgage tips your necessities category over 70% of your monthly income.

Another common budgeting tactic is to ensure your housing costs are no more than one-third of your income. To calculate the percentage of your housing costs, divide the monthly cost of homeownership by your total monthly income. 

The New York Times offers a calculator to help you determine whether you should rent or buy a home.

4. Save your down payment (if required)

Depending on the type of mortgage you plan to get, you’ll need to save at least 3% of your home’s purchase price for a down payment. If you’re taking out a conventional loan, you may need to save 15% or more. 

Some loans — like VA loans, which are for veterans, members of the armed forces, and their spouses — allow you to put $0 down. However, that’s not advisable for several reasons: 

• You’ll pay more money in interest over the life of your loan
• You won’t be able to afford as much home as you would if you put money down
• You'll start out with zero equity in your home (which means it will take you more time to build substantial equity in your home)
• You’ll have to pay for private mortgage insurance (PMI) until you reach 20-22% equity in your home. Expect to pay 0.1% – 2% of your loan amount per year (the less you put down, the more you’ll pay).  

Here are some ways to save money for a down payment:

Open a high-interest savings or checking account

Many banks pay 5% or more on savings accounts these days.

Increase your income

Earning more money is the best way to save your down payment.

This post offers strategies for negotiating a higher salary, while this one has high-paying jobs you can do without a degree.

Apply for down payment assistance

States often offer grants and forgivable loans for down payment assistance to low-income home buyers. Research HUD home buying programs in your state and check with your state housing finance authority (HFA).

For example: 

• In Alabama, single mothers can get 4% of the sale price — up to $10,000 — for down payment assistance through the “Step Up” program. 
• Idaho homebuyers can get up to 10% of the sale price of a home they want to buy to pay their down payment or closing costs
• Florida Housing offers $10,000 in down payment and closing costs in the form of a deferred second mortgage loan on FHA, VA, USDA and conventional loans

These down payment assistance programs are available to homebuyers nationwide: 

• The Chenoa Fund (excludes New York state): The Chenoa Fund is a national program that offers second mortgage loans to prospective homeowners who need help to fund a down payment and/or closing costs. Borrowers must be seeking an FHA-insured loan for their first mortgage, have a FICO Score of at least 600, and choose from one of these assistance options:
  • Repayable: 10-year term with a fixed interest rate 2% higher than the first mortgage interest rate
  • Forgivable: 30-year term with a 0% interest rate and no monthly payments. This loan is forgiven at the borrower’s request when forgiveness conditions are met, which are determined by the down payment assistance amount:
    • 3.5%: Forgivable after 36 consecutive, on-time payments on the first mortgage
    • 5%: Forgivable after the initial 120 payments on the first mortgage.

• Fannie Mae Community Seconds: If you plan to purchase a home with a Fannie Mae-backed mortgage, you may also be eligible for a Community Seconds loan, a  second mortgage on your home to cover your down payment, closing costs, and/or minor home renovations. These loans are:
  • Offered by your primary lender but may be funded by local/state housing agencies, nonprofit organizations, and even local employers
  • In some cases, deferrable until the first mortgage is repaid or may be completely forgivable — the lender sets the terms, which must comply with these guidelines set by Fannie Mae
  • If the lender allows, they may be deferred until the first mortgage is repaid or forgiven without repayment. 
  • Freddie Mac has a nearly identical Affordable Seconds program. 

Home buyer grants

Some organizations and charities offer grants to help low-income families buy a home. Check out our post on 12 first-time home buyer grants for single moms.

5. Research your mortgage options

Shop around and compare mortgage lenders to find the best APR and repayment terms.

You can also inquire about low-income home loans at your current bank or join a credit union. Both may have programs or discounts for home financing or work with outside organizations to help you buy a home.

5. Determine if it’s the right time to buy

Even if you have job security, money saved for a down payment, and a high credit score, be strategic about when to purchase a home to save money in the long term. 

While home prices remain high, U.S. News and World Report predicts a 5.3% decrease in existing home sale prices in 2023, as long as mortgage rates remain relatively high. 

As of March 2023, mortgage rates are over 7% for a 30-year fixed-rate mortgage. 

Rocket Mortgage reports that home prices are typically lowest in the winter, though you will likely have less homes to choose from. 

Interest rates and home prices regularly fluctuate throughout the year, influenced by everything from local to global factors.  

Ready to buy a house? Here’s what you can expect:

According to the National Association of REALTORS®, there are six main steps involved in buying a house:

1. Prepare for homeownership

Build your credit history, get pre-approved for a mortgage, figure out how much mortgage you qualify for, and save for a down payment and closing costs.

2. Find a real estate agent (if you choose to use one)

Your agent will be paid a portion of the seller's commission fee from the final sale price of the home.

3. Search for a property

If you work with an agent, they'll schedule times for you to tour local houses for sale until you find one you'd like to buy. 

4. Make an offer 

Once you're pre-qualified for a mortgage from your lender, you can make an offer on a home. If you're working with a real estate agent, they'll handle back-and-forth negotiations with the seller's agent.

5. Close and move into your new home

The average closing period is 30-45 days, during which time you'll have to pay for a home inspection ($300 to $500), provide financial proof of mortgage eligibility, schedule utilities at your new property, and plan a move-in date. 

During closing, you'll sign paperwork to transfer homeownership into your name and pay closing costs, which are typically 3% to 6% of the loan amount. 

Unless the seller specifically requests to continue occupying the home for a period after closing, you can typically move into your new home right away — the ultimate reward after all of the hard work it took to get here.

Check out these other resources for single moms:

Help for single moms: 16+ resources	$500 monthly single mom grant
Government assistance for single moms	Scholarships for single moms
Free money for bills	Free home repairs
Free car repairs	Free food
10+ charities that help single mothers	Free daycare