Home loans for single parents

If you’re a single parent who wants to purchase a home, don’t let the task of saving up a down payment dissuade you from fulfilling your dream. According to the National Association of Realtors’ 2021 profile of home buyers and sellers, 28% of the people who bought a home this year were single: 19% women and 9% men.

Help is out there, and you may be able to find what you need to make that dream a reality.

5 tips to help single parents become homeowners

Whether you’re a single parent or have a spouse, the requirements for securing a home loan are the same. The only difference is you’re applying with one income instead of two. Use the tips below to figure out what options are available to you.

1. Determine how much you can afford. A good place to start is to determine how much you can borrow using our mortgage affordability calculator.
2. Look for low down payment loans. Once you know how much you might qualify to borrow, take a look at some of the more accessible home loan options, such as FHA and VA, which offer low down payment options and loans that require no down payment in some situations.
3. Ask about down payment assistance programs. Some lenders facilitate state housing programs to help low-income homebuyers come up with the down payment they need, either through grants or zero-interest loans.
4. Look for HUD homes. A HUD home is a home that had an FHA-insured mortgage and went through foreclosure. These homes are usually sold at a steep discount.
5. Accept a gifted down payment. If you’re lucky enough to have a family member who can contribute to your home purchase with a down payment, this eliminates one of the major hurdles to homeownership.

Find out how much you can borrow

Down payment gifts

If saving for a down payment to purchase a home isn’t feasible, having someone gift you the money can be an option. However, there are rules and regulations that homebuyers must adhere to when using gifted funds for a down payment.

The two main rules to consider are the source of the down payment and the amount. The money for the down payment must come from a family member, spouse or domestic partner. And how much you can be gifted depends on the type of loan.

If you’re taking out an FHA or VA loan, the entire down payment can be a gift. But if you’re taking out a conventional loan, all your down payment can be gifted only if you’re putting down at least 20%.

You’ll also need to properly document the source of the gifted funds. A gift letter is required that you and the donor must sign. The letter must include the amount of the gifted funds, the name of the donor, your relationship to the donor and a clear statement that says the money is a gift that doesn’t need to be repaid.

Low down payment options

Coming up with a down payment of 20% to purchase a home might be out of reach for some. But there are low down payment options available.

• FHA. With an FHA loan, you’re only required to put down 3.5% of the purchase price. Credit requirements are also less stringent. You need a minimum credit score of at least 580. If your credit score is between 500 and 579, you might still qualify with a down payment of 10%.
• USDA. The US Department of Agriculture’s Rural Development mortgage program offers limited home loans with 0% down. The catch is that you have to be willing to purchase a home in eligible rural areas. USDA home loans come with two fees: a 1% upfront guarantee fee that can be rolled into the total loan amount and a 0.35% annual guarantee fee.
• VA. Loans backed by the US Department of Veterans Affairs are designed for qualifying veterans, active-duty service members, members of the National Guard and Reserves and their families. VA loans offer up to 100% financing with no down payment required.
• HomeReady. Backed by Fannie Mae, this program allows you to purchase a home with a 3% down payment if you meet certain requirements. It’s intended to help low- and middle-income buyers purchase a home.
• Conventional 97. This program, also backed by Fannie Mae, is another option if you have a 3% down payment.

Compare mortgage lenders that offer FHA loans

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Down payment assistance programs

For those having a hard time saving for a down payment, the local housing authority may be able to help. Many local governments offer down payment assistance programs that can sometimes help cover closing costs as well. If you qualify, you may be able to apply for a no- or low-interest loan or for a grant to help cover your down payment expense.

The type of assistance available to you may depend on your location, financial situation and whether you’ve owned a house within the last three years. In Florida, for example, qualifying first-time homebuyers can get $10,000 to $30,000 for down payment and closing costs. But you don’t always have to be a first-time homebuyer to qualify.

3 tips for saving up a down payment on a single income

Trying to save for a down payment while raising children on a single income can be difficult, especially as the costs of both are increasing. To help you reach your financial targets, consider:

1. Setting a goal. How much do you need to save? How long will it take? Set a clear goal and stay focused on the finish line.
2. Budgeting. A budget is essential to any financial plan. List all the money you take in and find ways to cut down on the money going out.
3. Getting a savings account. If you’re saving for a goal such as a down payment, high-interest savings accounts are solid options. Not only do the accounts let you earn interest but they also have features to help you save.

Mortgage brokers can help your search — for a fee

Mortgage brokers specialize in helping borrowers in difficult or unique circumstances. They can help you find lenders that accept government assistance as a source of income and will help you work out how much you can realistically borrow.

But that service comes with a fee. Mortgage brokers typically charge 1% to 2% of the loan amount, which is either paid by the homebuyer or the lender. If you’re paying the fee, you can either roll it into your mortgage or pay for it up front.

Bottom line

Purchasing a home as a single parent might seem difficult, but affordable options exist. Compare mortgage products to find the one that fits your personal and financial situation.

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