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Tips For Single Parents To Buy A Home

Mukta Gaikwad Oct 27, 2018
Single parent homes have gone on to become a global phenomenon. Rather paying for the rents for the homes, a number of single parents are opting to buy their own homes. The reason for the same may vary, but the formula to work them out are as follows...

Points to Consider

  1. Affording a Home
  2. Credit Counseling
  3. Down Payment
  4. Closing Costs
  5. Loan Guarantees
  6. Repayment Options
  7. First Time Home Buyers Loans
  8. Documents Required
Divorce, broken relations, death of a parent or teenage pregnancy are the reasons for a person being a single parent. This may be your choice or a decision taken or conditions may force you, there are people to support you in your efforts to be a single parent and yet own a home.
According to the 2016 census available (from the US Census Bureau report), the rate of children living with only their mother is 23%, and that of children living with only their father is 4% in the US. The trend has seen more women as single parent than men. However, in the recent times men are also seen as single parents.
According to statistics available on single parent homes, 10.4% Australian households were single parent homes and United Kingdom saw around 3 million families headed by single parents. In other words, such homes are not just a phenomenon in the West, but a global one.
These days there is a increase in the number of single parents opting to buy their own homes. This can be attributed to the thinking that one will repay the loan instead of paying the rent for rented homes. Since it is a single parent family, the cash inflow is limited, but the number of responsibilities are galore.
Therefore, it is not uncommon to see many single parents struggling to keep their families afloat. We will now see the things, a single parent should consider, in order to buy a house.

Affording a Home

When there are talks about a single parent buying a home, the first point considered is the cost of the house. No doubt, it is hard, when there is only a limited income flow. However, a silver lining in the dark clouds are the home buying programs.
There are both federal owned and community based organizations, to help single parents realize their dreams. The basic rule to remember, when looking for a home is that the cost of the house should not be more than 2.5 times the annual income.
To find out the right plan, the first step is to find out about the homeownership programs in your home state. There are various local State Housing Finance Agency, where you can get the necessary information from. These agencies are backed by the government. Gathering information from Housing and Urban Development (HUD) will also prove to be of help.
There is an added advantage of seeking help from HUD. Other than mortgage related information, you will also be able to gather information about home-buying process and about the different home-buying programs in your area.

Credit Counseling

Going for credit counseling is recommended, to buy a home. The state housing agencies offer such counseling. Talking to the counselor about rent-to-own is also useful. There are three aspects considered to buy a home.
  • The amount to be paid each month should not be more than 26% of the gross monthly income. This includes property tax and insurance amounts.
  • Whatever be the credit, including home loans, the monthly repayment amount has to be less than 38% of gross monthly income.
  • While availing home loans, there should be 2 to 3 months worth payment in the emergency fund.
  • Having a good credit score and a clean credit is necessary, for single parents to get low rate Federal Housing Administration (FHA) loans.
  • Single parents are considered for loans by FHA even if they have part-time employment 18 months at a stretch. However, with other money lenders it is important to have been in employment for 24 months and at two different jobs.

Down Payment

An important part of owning a home is down payment, that is to be paid. You will have to make necessary savings for the down payment or a relative has to gift you the said amount or opt for down payment grants. Such programs are especially for the first time home buyers, low-income families, single parent homes and individuals.
There are various home investment partnerships, to be considered, if it is difficult for you to pay the down payment. To be eligible for such a partnership, the buyer should be under a certain income level. It is important to note that if the down payment has been funded by grants, the seller cannot contribute towards the down payment or closing costs.

Closing Costs

When one is buying a home, among the other things, there are the closing costs. In some cases, this cost may be waived off, if seller of the property agrees to pay the cost himself. However, note that there is only a specific amount, which seller can pay. The rest is paid by the buyer.
It is important to note that the closing costs will have to be paid even though you have 100% finances. This includes fees, notary fees, loan fees, etc.

Loan Guarantees

Often single parents' mortgage loan may not be approved. This is when Housing and Urban Development pitches in and stands as guarantor for the loan amount. If a single parent is not eligible for the mortgage, then he/she can apply for Federal Housing Administration (FHA) mortgage insurance.
At this point, it is important to remember, that loan guarantee naturally does not mean that the loan will be approved always, however, the chances of getting the loan amount sanctioned are higher in such a case.

Repayment Options

When one is opting for a home loan, along with the loan formalities and down payment options, the repayment options will also have to be decided. If in a mother's qualifying income child support is also included, then the court documents will have to be shown to prove that the father of the child is obligated to pay the said child support amount.
It is important to note that a letter from the father or a notary is not a valid proof. In some cases, the bank statements, which prove the payment of the child support amount also have to be produced.
If you are currently on rent assistance, after availing the loan, rent assistance will be lost. In other words, the income will drop, which means you will have to reevaluate repayment options.

First Time Home Buyers Loans

There are various facilities for the first time home buyer. One can utilize the various options, which exist that can be made use of. To be eligible for these loans, you will have to be actually buying a home indeed for the first time, either on your own or with your partner or anyone else.

Documents Required

To not face dejection, ensure you have all the necessary documents ready. These are:
  • Verification of rent for 12 months
  • 12 months canceled checks
  • Bank statements, for child support payments
  • To prove full-time income W-2 (Wage and Tax) statement
  • Latest copy of pay slip (if anything unusual in the pay slip like 'extras', a letter from the HR representative of your company explaining it, especially 401K loan repayment or wage garnishments)
  • Documents proving single parent status.
While buying a home, a single parent should always have the fundamentals of single parenting in mind to have a conducive environment for the child to grow in. To repay off the loans and to protect the child from economic disparities the parent should not overwork, as it can lead to neglecting the child for long hours everyday.
To run efficient and blissful single parent homes, the secret lies is not gathering much information about it, as it leads to prejudices and pre-conceived notions. Keep the optimism within you, alive and the parent and the child can have a blissful life.