As a single mother, purchasing a safe and secure home for your family is a top priority in your mind.
However, you may be struggling to purchase the right home due to high down payments, closing costs, or even bad credit.
Don’t give up yet.
There is plenty of help available for low income families and single mothers who are having trouble finding the right home loan.
FHA Mortgage Program
The Federal Housing Administration (FHA), which you may know as part of HUD, or the department of Housing and Urban Development, has been helping single mothers and low income families purchase homes since 1934. This administration insures your loan, so your lender is able to offer you more in a loan, including:
- Smaller down payments
- Reduced closing costs
- Ability to qualify for loans despite less-than-perfect credit
The FHA, found at www.fha.com, can help you in many ways. They can reduce your down payment to as low as 3.5% of your home’s total purchase price, include fees and closing costs in your loan, and help you refinance your home if you need to make repairs.
They can also help you obtain a loan for a fixer-upper home, and include the costs of purchasing the home and fixing it up all in one easy loan. This organization is also able to help with financing mobile home and manufactured housing, whether it is on personal property or in a mobile home park.
Home Buyers Credit
Did you already purchase a home, but are struggling due to the massive amount of money you had to spend for it? If you purchased your home in 2008, 2009, 2010, or 2011, or this year you are in luck.
The government has provided a home buyer’s tax credit for all individuals who qualify. You can receive 10% of the total purchase price, up to $8,000, when you file your taxes if you purchased your first home, and up to $6,500 if you are a repeat home buyer and purchased a new home.
The current Home Buyers Credit expires on April 30, 2012. You must purchase your home before that date in order to continue to qualify for the tax credit.
Home Loans for Single Mothers With Bad Credit
Like many other single mothers and parents today, you may have bad credit. This does not necessarily mean you can not qualify for a loan, though. Many lenders will still work with you and provide you with a loan, but it will come at a price.
Most home loans for single mothers are offered to individuals with bad credit have very high interest rates. This could become a burden down the road, causing you to struggle to make your monthly payments. If you have bad credit, and are interested in purchasing a house, consider the following options.
- Seller Financing – If you can, consider purchasing a home from an individual who is willing to finance the home for you. You would typically need to provide the owner with a low down payment and then make your monthly payment directly to the seller.
- Rent to Own - If loans are out of the question, consider a rent to own home. This would be similar to seller financing, except generally only a portion of your monthly payment would go toward your down payment of the home. Part of the rent you pay each month would be used simply as income to the seller. After a certain period of time, hopefully after you have raised your credit enough to qualify for a loan, you will have the option of purchasing the home.
- FHA Loans – The FHA is also more forgiving of bad credit than many lenders and may be able to work with you to finance your home.
- Sub-prime Loans - While these loans may be your last choice, they can still help you purchase the home of your dreams. These loans are often offered to individuals who do not qualify for a traditional loan and carry high interest rates and high prepayment fees. This means that if you do have the money to pay off the loan more quickly, you will be penalized and forced to pay a fee.
Steps for Getting Approved for a Mortgage
If you are a single mother and are thinking about purchasing a home, make sure you know the right steps to take to get approved for a mortgage.
- Find the right lender. Do some research on the various resources available to single mothers and find a lender that will help you get into your dream home. Talk to your friends and family as well to see what loan offer they used.
- Know your credit score. Don’t be blindsided by a bad credit score while sitting in the loan officer’s office. Know your credit beforehand and make sure your credit report is accurate. If your credit is low or there are errors on your report, take steps to correct these problems.
- Have a little patience, especially when repairing your credit. It will take time.
- Assemble the right paperwork before you go through the loan approval process. Make sure you have your pay stubs for the last month, your last two tax returns, bank statements for the past two months, and proof of your last year’s rent or mortgage payments. Providing your loan officer with the right paperwork and proof of your ability to stay on top of your finances will go a long way towards getting approved and will make it easier for them to pull up your credit report.
- Create a budget. If you know how much you can afford each month, you will be more equipped to purchase the right home. Create a budget you can show to your lender. He or she will help you determine whether the home you want to purchase is really feasible with your monthly income.
- Don’t rely on one quote. You should obtain two or three quotes from different lenders. Each will offer you different interest rates, closing costs, and fees. With more than one quote, you can see which loan will be best for you.
- Ask questions. If you don’t get approved for a loan, don’t storm out of the lender’s office. Ask the lender what you can do differently to qualify for your next loan.
If you are a single mother, struggling to purchase your first home, don’t worry, you are not alone. There are many other single mothers out there in the same situation.
Luckily, there are many way to lower your down payments, closing costs, fees, and even qualify with bad credit. Consider these options carefully, and you may be on your way to a moving into a new home before you know it.