Low-income home loans? Single moms have 8 options

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Single women accounted for 20% of first-time, and 18% of repeat home buyers in 2021, according to the National Association of Realtors. That same year, a Freddie Mac study found that 58% of single female head of household renters didn’t believe they would be able to afford a home.

Even though the journey to homeownership has its challenges, it is possible for single moms to buy a home with the right knowledge and resources. 

Keep reading to discover affordable mortgage loan options and education programs to help single moms with aspirations of homeownership:

How to buy a home as a single mom

Even if you have a low income, you may qualify for special home-buying programs for single moms and low-income individuals.

1. Is it time to buy?

Timing is everything when it comes to buying a house as a single mom. Research interest rates, explore loan options, monitor home prices, and make sure you have a financial plan in place to purchase a home.

As interest rates rise, home prices continue to drop along with the economy overall, so if you can afford it, the real estate market may be more accessible to you now than in recent years. 

The New York Times offers a calculator to help you determine whether you should rent or buy a home: Rent or Buy Calculator

Should you keep the house in divorce? How to decide …

2. 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. Banks and lenders commonly use a FICO Score to determine eligibility, but some may use a VantageScore. The higher your credit score, the lower your interest rate, according to credit reporting agency Experian.

To 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. Right now, you can get a free weekly report, if needed, through the end of December 2022.
  • 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, which involves submitting a request that details the reason for the negative mark and proof that you’ve taken steps to improve your score. Otherwise, you can wait for the negative mark to be removed from your report, which typically happens after seven years, according to the Consumer Financial Protection Bureau.
  • 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.
  • 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.

According to Quicken Loans, a minimum FICO score of 500 is necessary to qualify for a Federal Housing Administration (FHA) loan, with a 10% down payment. If you score a 580 for that same loan, you’ll need a 3.5% down payment. A conventional loan requires a 620 score to start the process. 

If you’re a veteran, you can apply for a U.S. Department of Veterans Affairs (VA) loan. These loans don’t have a minimum score or require a down payment, but you can expect a VA lender to set its own qualifying score.

How to sell a house for cash fast (and without a Realtor)

3. Figure out how much you can afford for a house

To get an idea of how much house you can afford, use an online mortgage calculator like this one from Bankrate. Enter your information to get a rough estimate.

You can also work with your preferred lender to get a mortgage prequalification. This is an estimate of how much you can borrow based on your credit report and other financial data such as income and debt.

If you are in the process of buying a home, you’ll also 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 one.

Look at ratio of debt to income for mortgage

Your debt-to-income (DTI) ratio should follow the 28/36 rule. Your total monthly home cost (including mortgage payment, interest, property taxes, insurance, and any HOA fees) shouldn’t exceed 28% of your pre-tax monthly income. Your total monthly debt payments (including the home cost) shouldn’t exceed 36% of your total monthly debt payments. 

To get the first number of your DTI, divide the monthly home cost by your total monthly income. For example, if you make $5,000 per month pre-tax and housing costs will be $1,500, your DTI would be 30%. 

If you have a monthly debt of $500 (that includes car payments, student loans, credit card debt, etc.) in addition to your $1,500 housing costs, add them together then divide by the same monthly income, which gives you 40%.

In this example, your DTI would be 30/40. You’d need to lower your debt and make more income to afford the mortgage and have a financial cushion. Or you can look for a less expensive home.

4. Work to earn more and save your down payment (if required)

Earning more money is the best way to reach your financial goals.

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

For side gigs, join the 2 million workers who use Steady app to earn up to $27/hr., plus bonuses.

Other ways for single moms to fund a down payment

Down payment assistance programs vary by state and region, including:

  • Grants that you don't have to pay back
  • Forgivable loans that require you to stay in your home for a set amount of years
  • Deferred payment loans that are only due if you sell the home, refinance the mortgage, transfer the deed, or pay off your mortgage
  • Individual development accounts (IDAs) that allow you to deposit money in a special bank account and have those funds matched by the account sponsor
  • Programs like Fannie Mae’s Community Seconds or Freddie Mac’s Affordable Seconds that allow you to pay your down payment as a second mortgage 
  • Borrowing money from your retirement account (make sure you check with a financial advisor to understand the tax implications, first)

There are also first-time homebuyer programs that offer down payment assistance and help with closing costs. To find programs in your area, you can start with the Google search “down payment assistance near me.”

5. Look at all the mortgage options.

Don't just take the first mortgage rate you are offered, or assume your current rate is the best you can do. Shop around for the best APR and repayment terms:

There are a variety of loans and resources available that support first-time home buyers, people with low incomes, and veterans. (See this list of home loans.)

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

Buying a house as a single mom: The process you can expect

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

  1. Prepare for homeownership. This includes building your credit history, getting pre-approved for a mortgage, figuring out how much you qualify for, and saving for a down payment and closing costs.
  2. Find a real estate agent (if you choose to use one). Most home buyers do not directly pay to use a real estate agent. 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. Finance the property with a home loan. You'll need to find a lender to finance your mortgage. Shop around for the best interest rates or programs that offer low interest rates and low down payments for low-income single moms.
  5. Make an offer on the home you want. Once you're pre-qualified for a mortgage from your lender, you can make an offer on the house you want to buy. If you're working with a real estate agent, they'll handle back and forth negotiations with the seller's agent.
  6. 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, 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.

Low-income home loans

There are a lot of home loan options available for low-income households. Learn more about these helpful programs so you can choose the best fit. Ask your preferred lender which programs they offer for creditworthy, low-income borrowers.

HomeReady® Mortgage from Fannie Mae

As a borrower, your income must be 80% of the area median income (AMI). You can use the Fannie Mae AMI lookup tool to check your geographic area’s AMI.

You’ll need a minimum 620 credit score to apply, though 680 can unlock better rates. Down payment options are as low as 3% and funding from relatives, grants, and Fannie Mae Community Seconds is allowed. There are no geographic restrictions. 

You can get reduced mortgage insurance that cancels once you reach 25% equity. Finally, you must take the Fannie Mae HomeView online course or an approved alternative HUD-approved course to be eligible. 

FDIC loans via Operation HOPE Home Buyers Program

Operation HOPE Home Buyers Program helps low-income home buyers through FDIC-approved loans, down payment assistance, and first-time buying assistance.

Operation HOPE offers multiple programs to increase financial knowledge in underserved communities. Its first-time home buyer education program provides HUD-certified coaches to guide you through the home loan process.

You’ll get group training as well as one-on-one coaching that extends beyond the classroom. When you are ready to pursue an FDIC loan, your Operation HOPE team will continue to provide support. They can also connect you with other professionals along the way.

FHA Home Loan

Check into getting a Federal Housing Administration (FHA) loan. It can offer lowered closing costs and down payments. The FHA offers fixed-rate loans available in 15- and 30-year terms nationwide.  

Borrowers enjoy low down payments and closing costs. It’s ideal if you have moderate to low income and a low credit score.

With a score of 500 to 579, you'll need a down payment that is 10% of the cost of the home. At 580 or more, you’ll only put 3.5% down.

With an FHA loan, you must pay mortgage insurance, and if you put down less than 10%, you will pay it for the life of the loan. 

The property you want to buy must meet FHA eligibility requirements. For example, the FHA loan limit range for homes across the country is $420,680 to $970,800. You can check your specific area with this FHA lookup tool.

Home Possible® home loan from Freddie Mac

If you’re looking for low income home loans for single mothers, a Freddie Mac Home Possible mortgage could be right for you. With as little as 3% down, you can become a homeowner. To be eligible, your income cannot exceed 80% of the area median income (AMI).

Use the Home Possible Income and Property Eligibility Tool to look up a specific property’s AMI limits.

There are no geographic limits on loan amounts, and you can apply even if you do not have a credit score due to lack of credit history (though approval isn’t guaranteed). Mortgage insurance is required on one-unit properties, but once your loan balance is less than 80%, is no longer required. 

VA Home Loans

If you are an active duty or reserve member of the armed forces, veteran, or eligible spouse, a VA loan could be the best way to go. If approved, you won’t need to provide a down payment or mortgage insurance. Plus, closing costs are kept to a minimum. There are no loan limits if you can afford the property.

The VA guarantees part of the loan and works with private lenders to offer affordable interest rates. The loan is available in every state and tribal lands via the Native American Direct Loan (NADL).

USDA Single Family Housing Direct Home Loans

The U.S. Department of Agriculture helps rural borrowers refinance their mortgages. This offer, in response to borrowers who did not have to pay a monthly mortgage because of COVID-19, helps keep payments affordable once they resume. 

These direct home loans are available for very low- to low-income borrowers who were approved for a mortgage payment stoppage due to COVID-19. You must meet or fall below the income limits for your area to be eligible. Your credit score is not a factor unless you have substantial federal debt.

USDA Single Family Housing Guaranteed Loan Program

The USDA Single Family Housing Guaranteed Loan Program offers a year-round application process. If you live in a rural area, this loan provides a way to purchase or build a home with no money down for qualifying applicants. The program offers 100% financing from approved lenders because it guarantees 90% of the loan.

To be eligible, you cannot exceed 115% of the area median income (AMI). You can use this USDA tool to check eligibility for properties and income. There is no set credit score, but you must show a history of making an effort to repay any debts you have.

Habitat for Humanity

Habitat for Humanity fixes up and builds affordable homes. The nonprofit serves 50 states and about 70 countries. If you are willing to take home ownership classes, volunteer at a Habitat ReStore, or help build your own home (or someone else’s), you could be one of the next Habitat homeowners.

To be eligible, you must demonstrate a need to secure safe housing and be able to make affordable monthly payments.

Are there any programs to help single moms buy a house?

If you are dreaming of home ownership, there are single-parent home-buying programs to help you find affordable properties and programs that offer mortgage assistance.

Some of these federal, state, and nonprofit home-buying programs also educate you on the home-buying process from beginning to end. 

Check out the following resources:

The Chenoa Fund is a government-chartered organization that provides up to 3.5% down payment assistance for those with a FICO Score of 620 or higher. If your income is less than 115% of your area’s median income and you make your mortgage payment on time for 36 months, the mortgage is forgiven. If you make more than 115% of your area’s median income, the downpayment assistance must be repaid.

Community Seconds is a Fannie Mae-approved second mortgage that allows you to use the funds available from state and local governments as well as housing nonprofits to put together a down payment, get help with closing costs and even complete minor renovations.

HomePath properties are Fannie Mae-owned homes offered to the public at a discount after the previous owner defaulted on a Fannie Mae-owned mortgage. These mortgages come with low down payments, renovation loan eligibility and closing cost assistance of up to 3% of the home’s purchase price.

Single mom home loans FAQs

How hard is it to buy a house as a single mom?

No matter your income, there are many programs to help single moms achieve homeownership. It can be an uphill battle to ensure you are financially capable of owning a home and making regular payments, but there are many programs available to help you buy a house as a single mom.

Does my state have a homeownership assistance program?

Every state has some type of program to help homeowners — from government programs to private and nonprofit options. To find local help, start with a Google search on “homeowner assistance programs near me” or “first-time home buyer help in (your state).” 

Find state-based programs offering assistance with down payments, closing costs, and special financing options. 

How can a single mom build a house?

Check with organizations like Habitat for Humanity. They build houses with affordable mortgage terms. You can apply and have a chance to help build your own home. The FHA and USDA also provide home loans you can use for new construction.

How can a single mom get home loans with bad credit?

If your credit score is low, you’ll want a home loan that does not require a credit score or has options for low credit scores (less than 600). For example, VA loans don’t require a minimum credit score or down payment, and FHA loans have options for single moms with a score of at least 500. Home Possible® home loans from Freddie Mac also don’t require a credit score to apply.

Bottom line: Home loans for single mothers are available, along with assistance

There are home loans available for single moms. While loan amounts, interest rates, and fees vary, there is likely an option that will work for your financial situation. Plus, you can get assistance to pay your mortgage through grants, tax credits, and government programs. 

Research all options to find mortgage assistance programs that best suit your needs. You can also talk to an HUD housing counselor or enroll in a first-time home buyer class to get more information on assistance programs so you know what to expect as you start the process.

If you are struggling with money and need financial or other assistance, check out this list of resources:

Free laptops$500 monthly single mom grant
Free clothesScholarships for single moms
Free carFree Christmas gifts
Free smartphoneGovernment assistance for single moms
Free wifiFree and low-cost prescriptions
Free formulaFree diapers
Free gasFree toys
Free daycareAffordable dentures
Free prescription glassesFree money
10+ charities that help single mothersTutoring and homework help
Free or low-cost after school programsHealth insurance
Cash for carsFree food
Dumpster divingFree school supplies
Home buyer grantsFree housing
How hard is it to buy a house as a single mom?

No matter your income, there are many programs to help single moms achieve homeownership. It can be an uphill battle to ensure you are financially capable of owning a home and making regular payments, but there are many programs available to help you buy a house as a single mom.

Does my state have a homeownership assistance program?

Every state has some type of program to help homeowners — from government programs to private and nonprofit options. To find local help, start with a Google search on “homeowner assistance programs near me” or “first-time home buyer help in (your state).”

How can a single mom build a house?

Check with organizations like Habitat for Humanity. They build houses with affordable mortgage terms. You can apply and have a chance to help build your own home. The FHA and USDA also provide home loans you can use for new construction.

How can a single mom get home loans with bad credit?

If your credit score is low, you’ll want a home loan that does not require a credit score or has options for low credit scores (less than 600). For example, VA loans don’t require a minimum credit score or down payment, and FHA loans have options for single moms with a score of at least 500. Home Possible® home loans from Freddie Mac also don’t require a credit score to apply.

Robyn Evans is an award-winning writer, inspirational author, and occasional songstress (especially in the shower). Born and raised in Baltimore, she focused on helping women make healthy choices for body, mind and soul. She’s a grateful bonus mom to a photographer son and activist daughter and works with young writers through a nonprofit called the Youth Writers Challenge. Robyn writes for corporate clients, is a former feature writer for The Carroll County Times, has written for The Baltimore Sun and is the author of three books.
Robyn's website | Robyn's LinkedIn profile

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