Home Loan for Single Mothers: A Comprehensive Guide to Home Loans and Financial Independence

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Are you a single mother who wants to own a home? If yes, you may be wondering if there are available home loans for single mothers. According to the latest published survey by the Redfin News, about 31 percent of single mothers were homeowners in 2017. This is five percent lower compared to the survey conducted in 2010, which is 36 percent.

Given the rising home prices across different states in the US, single mothers may be in a dire situation of getting a home loan. But you should not lose hope because as long as you have a good credit score and Debt-to-Income ratio (DTI), you have a higher chance of getting that home loan you need.

Are There Available Home Loans for Single Mothers?

There are no home loans specifically indicated for single mothers, but there are still many conventional and government-supported loans that can cater to the needs of single mothers when they decide to buy a home.

Single mothers tend to have a harder time getting a home loan compared to married couples as their gross monthly income alone cannot meet the qualifying requirements of lenders. Fortunately, one can still get a housing loan by applying for a voucher or grant program.

How to Get a Home Loan

These are the things you should keep in mind to get started with your home loan:

  1. You should have a good Debt-to-Income ratio (DTI) - Before qualifying for a home loan, your lender will calculate your Debt-to-Income ratio, wherein your monthly income is compared against your monthly expenses, debts, as well as your mortgage payments to determine if you are qualified for the loan.
  2. You should have a good credit score - credit score refers to the numerical score of an individual in terms of his/her ability to pay debts on time. If you want to increase your chances of getting that loan, you should have a credit score of at least 580 to 620 or higher. You can determine your credit score through a bank statement or from a credit bureau.

Types of Home Loans for Single Mothers

There are many types of home loans that you can apply for as a single mother. Here are several home loans you might want to try.

FHA Loans

This type of loan is assisted by the US Federal Housing Administration (FHA). What’s good about FHA loans is that they give low mortgage and down payment rates which are about 3.5 percent. This is much lower than other conventional home loans that charge about five to seven percent mortgage rates.

Another advantage of FHA loans is that they offer loans to any individual regardless of the profession so long as you meet other income requirements. They also have a minimum credit score requirement of 500.

FHA is a good home loan for single parents. The only downside of it is that they charge monthly Mortgage Insurance Premiums (MIP) which are a bit more expensive than conventional loans. You also have to pay the mortgage insurance until the home is refinanced. If you don’t want to pay the monthly mortgage insurance, you need to pay a 20 percent down payment.

VA Loans

VA loans are loans backed by the Department of Veterans Affairs and it exclusively provides home loans for individuals who are active members of the military or close family members of a veteran.

What’s good about VA loans is that they don’t require a downpayment. They even have one of the lowest mortgage interest rates, and they don’t come with monthly mortgage insurance. You only have to pay a one-time funding fee of 2.3 percent of the total amount of the loan.

The only downside of VA loans is that it is only limited to veterans and surviving close relatives who are entitled to such loans.

USDA Loans

USDA loans are under the supervision of the US Department of Agriculture and are intended for low to moderate-income families living in rural areas. If you are planning to buy a home in a rural area you may qualify for a USDA loan. Classifying a rural area is not always the same for USDA, because even famous urban areas can still be classified as rural.

What’s good about USDA loans is that it comes with low-interest rates, no required down payment, low-income requirements, and low mortgage insurance premiums.

The only downside of USDA loans is that they only provide loans to qualifying rural areas and it requires a minimum of 620 credit score.

Conventional Home Loans

If you are going to apply for a conventional loan, you have to make sure that you have at least a minimum credit score of 620 and a reasonable monthly income. Most conventional loans also require you to pay a five percent down payment, which is a bit more expensive than FHA loans. So if you plan to apply for a conventional home loan, you need to make sure that you have a stable income.

Many kinds of conventional home loans like Fannie and Mae and Freddie and Mac only require three percent interest.

Final Word

Now that you know the different types of home loans for single mothers, now you can decide what type of loan you will choose based on your credit score and ability to pay mortgage premiums.

If you can pay at least a 3.5 down payment and a monthly mortgage premium, then you might want to choose FHA loans. On the other hand, if you plan to buy a home in a rural area, USDA loans are the best option, as you don’t need to pay a down payment.

Another option is the VA loans which are fit for military veterans or the loved ones of a veteran. Lastly, Conventional loans are best for single mothers who have a stable and adequate income and a good credit score.

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