With the financial responsibilities facing a single parent, home ownership might seem difficult, if not impossible, to achieve. However, with some time, dedication and know-how, the savvy single can achieve their dreams and provide a sound foundation for themselves and their family.
The first and most important step for a single parent who is considering home ownership is to obtain copies of credit reports from the three major reporting agencies. Examining your credit allows you to understand your credit score and your debt to income ratio. Examine the report for errors. Mistakes can be removed, possibly improving your credit score by a few crucial points.
Next, consider paying down and paying off as many accounts as possible. Closing accounts can cause a small temporary drop in your credit score, but one of the things the lender will consider when processing your application for a mortgage is your debt-to-income ratio. The higher your income relative to your outstanding debt, the better risk you will appear to lenders.
Lenders expect that the borrower will invest in the home they wish to buy. Most lenders require a down payment of at least 20%. Saving a down payment can seem daunting, but with careful budgeting, it can be done. Many single parents feel overwhelmed by budget issues, so consider enrolling in a budget-management course or consulting a debt counselor to help create a long-term financial plan.
Pre-qualifying for a mortgage is the next step on your journey to home ownership. By pre-qualifying for a loan, you get a solid idea of how much house you can afford and make yourself more attractive to sellers. Keep in mind; a pre-qualification is not a promise on the part of the bank to offer you a loan. It does, however, provide you with valuable information about how much you may be able to borrow based on your current income.
Finally, you’ll need to consider what type of mortgage you want to apply for and which type of lender you’ll look for. The two basic traditional mortgages are “fixed rate” and “adjustable”. A fixed-rate mortgage is payable at the same interest rate over the life of the loan, while adjustable rates can change annually, depending on fluctuations in the market. Borrowers with excellent credit, a healthy, steady income and a large down payment should consider dealing directly with a lending institution. As a single parent, you may need to rely upon a mortgage broker to help you find a mortgage that fits your needs.
The Federal Housing Administration (FHA) is one lender that offers loans with less-stringent requirements than traditional lenders. Another alternative is to check with the Housing and Urban Development (HUD) office. While HUD doesn’t loan money, it does work with FHA to help low-income families find grants and qualify for housing assistance, including mortgage loans. Another alternative to consider are the Habitat for Humanity program in your area. Habitat homes are low-cost housing built by qualified volunteer labor, and may be an excellent way for a single parent to realize the dream of home ownership.
Useful tips on getting a Mortgage as a Single Parent
