When it comes to buying a home as a single mom on one salary, the struggle is real.
The process of buying a Home can feel overwhelming for anyone, for single moms it can be twice as difficult. Home loans for single moms with poor credit are difficult to obtain. Mortgage lenders consider three main factors when evaluating an application.
Which is what makes it difficult buying a home on a single moms salary. Ideally you can compensate by over-performing two of the three factors to qualify.
- Credit score should meet or exceed stated minimums
Fannie Mae – 620
Freddie Mac – 620
FHA – 580
USDA – No floor
VA – No floor
- Debt-to-Income (DTI) ratio should fall under ceiling guidelines
- Down payment size above 20% avoids mortgage insurance
Single moms with only one income often find it hard to present both a low DTI and a large down payment. The government (FHA and USDA) offers down payment assistance at a price: ongoing mortgage insurance.
What is debt to income ratio?
Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. Lenders look at how much of your income goes to debt and won’t let you borrow more than a set percentage of your monthly before-tax income.
To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.
For instance, if you have two children and make $29,000 per year (approximately $2,417 per month) and your lender uses a 28 percent front-end ratio and 36 percent back-end ratio, your maximum mortgage payment would be around $677 per month and your maximum debt payment would be $870 per month.
For many single moms money is tight. Child support payments don’t always come though on time, is at all. Balancing a budget when you have children is very challenging for single parents.
When buying a home as a single mom just getting the down payment is a struggle.
Since many conventional loans require a high down payment of 10% – 20%, what is a single mom buying a home to do?
The Government has created loan programs that make it easier to qualify for a mortgage and require a low down payment. FHA loans are one of the most popular types of home mortgages used today.
They require a small down payment of just 3.5% of the purchase price. On a $200,000 home that comes to a down payment of $7,000.
For a single mom saving $7,000 can seem like a mountain to climb.
But then mountains are meant to be climbed right?
The Zen Warrior knows that the obstacle is the path.
The obstacle isn’t to be avoided. It is to be confronted. For every obstacle presents an opportunity to improve our condition. In the case of buying a home as a single mom this improves the lives of the people you hold dearest.
All Beings have a need and a right to shelter. It’s fundamentally the most important thing we can have in life. When we have a home to live in, we have peace of mind. One of our most basic needs are met. Through this we can devote our time and energy to other endeavors.
To save $7000.00 over 2 years you need to put away about $290 per month into savings. If you put this into a simple savings earning you just 1% per month, at the end of two years you’ll have approx. $7029.60 in savings.
Another way but more risky is to invest that few hundred dollars in stocks. You’d need a very good financial advisor to take this action. Plus you want an exit strategy because the objective is to purchase a home not play the market.
Rather than spending your tax return, take that money and invest it. Either open a high interest savings or money market account. Or find a financial planner, friend or relative who really understand how the stock market works and follow their advice.
You can turn $1000.00 into $10,000 in a reasonable amount of time. Or you can leave it to chance and play the lottery. 😉
Buying a home as a single mom strategy
In addition to the down payment there are other factors to consider when buying a home as a single mom. There are closing costs, appraisals, repairs, title reports, insurance and invariables that can and do arise.
This is why it’s crucial to have a Realtor you trust to guide you and walk you through the process. People who think they can go through this stressful experience on their own are doing themselves a disservice. In fact my clients with the most money and experience, even licensed professionals always use the service of a good Agent.
Why? Because we are trained to look out for your best interests. We’ve spent our careers going through the process and know how to navigate it. Also because there are unscrupulous Agents out there who will happily take every advantage they can of people unfamiliar with the time constraints.
When people tell me they are representing themselves in their home sale or purchase, I always ask if they also fill their own teeth? A Dentist is trained to do dental work and a Realtor is trained to do Real Estate.
A single mom buying a home on a single moms salary deserves an Agent who understands the struggle.
I’m not saying a man doesn’t understand the plight, I’m just saying a woman understands it better. Even more if that woman is a mother and single, divorced or widowed. We’re a special club of high level intelligence, patience and strength. The are no other Beings like us on the planet.
Buying a home as a single mom should be a goal we all attain and by helping one another, we can get there. Don’t let defeat and desperation take hold of your mind. If you’re saving for a home, trying to put $200 a month away and your baby needs a cap on his tooth, you’ve got to allow for life’s setbacks.
Believe in your goal and yourself. For the reason that that there will be something that comes along the way that will more than make up for that loss. You’ve set your goal for two years and a lot can change in two years.
Buddha tells us “Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment.”
The power of a positive mind cannot be underestimated. Above all when it comes to buying a home as a single mom. Likewise be diligent in your affirmations morning and night. Be vigilant of anyone who deters you from your path. This includes the neigh-sayers in your family and men who don’t support you every step of the way on your path.
Practice daily meditation. This helps you stay focused and be more calm.
- Build a network of like minded people around you. As the saying goes, you are the company you keep.
- Be cautious with whom you associate. If they are not for your greater good they don’t serve you well.
- Find online support groups for financial freedom. They provide tips and strategies from people who’ve been where you are.
- Most of all be kind to yourself. Due to the fact that things don’t change overnight, but they do change, that is the one guarantee in life, change is constant.
I believe in you!