October 21st, 2016 | Single Parent Purchases
Buying a home as a single parent can be financially challenging, but very satisying in the end. Nothing says that you cannot purchase a home if you do not have a spouse. There might be some challenges you will have to overcome in order to achieve homeownership, but it is definitely a possibility for many single parents.
The first step is to be realistic about what you can afford. There are many mortgage affordability calculators in our THE LEARNING CENTER on the top tab here which can help you determine your options. When you use these calculators or figure out the amount you can afford on your own, make sure you are accurate regarding your income and your monthly obligations. The more realistic you are about what you can afford, you'll find yourself comfortable with your decison.
Determine your Mortgage Options
Because you have only one income to use for qualifying purposes, you may have a harder time meeting the requirements of certain loan programs. This is especially true if you do not have a large amount of money to put down. Just several options for low downpayment purchase loans which are very popular currently are the following:
* 1 STOP Mortgage is pleased to offer 1% down payment purchase loans, with a 2% gift of equity for you at closing! This is the best and most dynamic program we have ever offer and we're excited to share all the details with you.
* USDA – You do not need a down payment for this program, but the kicker is you have to purchase a home in a rural area. This simply means outside of the city limits and in an area with a population less than 20,000. If you have low income, this is a great avenue to pursue.
Keep in mind, if you really want to obtain a conventional loan and you have the good credit score to secure it, you may have to pay Private Mortgage Insurance if you put less than 20% down on the home, however, it is not included in your monthly payment for the life of the loan. The PMI costs can vary from one purchase program to another with non-PMI programs available. Make sure to question and weigh your options.
Single Parent & Loan Qualification
As a single parent, you might have more income you can use for qualifying purposes than you realize. The obvious income to use is your salary or income you make from your job. You will have to prove receipt of this income recently, with your paystubs and over the last few years with your W-2s or tax returns. If you receive child support or alimony as a result of the divorce, however, you may be able to include that income in your total income as well.
The rules regarding child support and alimony are offered by the post "Buying a New Home as a Single Parent" here and are simply:
* You must prove consistent receipt of the income with your bank account statements or canceled checks.
* You must prove that the income is meant to continue for at least the next three years, which can be done with the court ordered child support documents or divorce decree. If you can prove consistent and future receipt of the income, you can use it to help lower your debt-to-income ratio.
Know your Credit
If you were involved in a troubling divorce, your credit score might have taken a hit without you realizing it. If you had combined debts that your ex-spouse does not regularly pay or just let go altogether and your name was on the account, your credit could suffer as a result. Before you apply for a mortgage, pull your credit and see what is reporting on there. If there are accounts that are not yours because the court deemed your ex-spouse responsible, take the steps to get the accounts removed from your report.
If you have debts on your credit report that you are responsible for, but that are negatively reporting, take the steps to bring the accounts current; the higher your credit score, the more mortgage choices are available to you.
Buying a new home as a single parent might not be as hard as you think! As long as you prepare ahead of time and know what to expect, it can be a pleasant experience. Do yourself a favor by not getting in over your head. Know what you can afford and prepare for purchase by preparing your credit and your assets/reserves to give yourself the very best options available. Give us a call at (901) 388-1588 and we'll help you determine your ideal mortgage loan.