Where to Secure a Home Loan for a Single Mother
If you’re a single mom looking for a home loan, the first place you should check is with the Federal Housing Administration (FHA). They offer some of the most affordable loans for single moms.
For one, the FHA only requires borrowers to make a 3.5% down payment – a far cry from the 20% of most conventional loans if you don’t want to pay mortgage insurance. What’s more, you can use a financial gift from someone else to pay for the entire down payment with no restrictions.
Another advantage with an FHA loan is that they have fewer strict requirements. You only need a credit score of around 620 to get accepted. In some cases, your credit score can even dip as low as 580.
So, what’s the drawback? Well, you need to pay a mandatory mortgage insurance premium (MIP) with FHA loans. These tend to be more expensive than other loan types, up to two times what private lenders might charge. The MIP, unlike with conventional loans, also stays throughout the life of your loan, regardless of how much of the principal you pay off.
Nevertheless, the mortgage premium is often an acceptable trade-off for homeownership, making FHA one of the best low-income home loans for single mothers.
The United States Department of Agriculture (USDA) also offers grants for single moms to buy a house in rural areas. If you want to buy a home in these locations, this is a fantastic single mother loan.
USDA loans have low interest rates and don’t require a down payment, making homeownership much more affordable. USDA loans require you to pay mortgage insurance premiums, but at much lower rates than an FHA loan.
The VA loan is a mortgage exclusively for veterans or active military personnel and their family. If you qualify for it (either you’re a veteran yourself or a widow of a veteran), it’s one of the better loans for single moms with no income or very limited earning capacity.
The requirements are even more relaxed than with the FHA loan. You don’t need to make a down payment, and you won’t see any mortgage insurance premiums. The loan is also 100% backed by the federal government, so there’s reduced risk for you as well.
The drawback to VA loans, of course, is that they’re restricted only to veterans.
It’s much more challenging to be approved for conventional loans. This is due to the fact they have stricter requirements than other loan types. For example, you need an excellent credit history (620 or above) and proof of income.
These loans also have higher down payment requirements – as much as 20%. Depending on the lender, you can settle on less than that, but you’ll need to pay for mortgage insurance. The good news is that the premiums are cheaper compared to that of FHA loans.
Suppose you don’t qualify for any of the government loans for single mother households listed above. In that case, conventional loans will be your only option.
However, conventional loans aren’t all that bad. They could be potentially cheaper in the long run because you pay fewer mortgage premiums than an FHA loan; you can even have it waived. They’re also much more flexible in terms of what house you can buy and your loan timeframe.
Single moms have further help in the form of home buying assistance programs, making it easier to pay for your mortgage.
First-time house buyers can receive mortgage credits from the IRS. These can help you allocate more funds to your loan repayments by lowering your yearly taxes.
There are also profession-based assistance programs that can help homebuyers in certain professions, such as medical front-liners and teachers. The Good Neighbor Next Door program, for example, can offer up to a 50% discount on the house’s price.