Loan Advice

Home Loans for Single Moms

by Jim Hughes   June 5, 2020

There were roughly 15.76 million children in the United States living with a single mother, in 2019. And the percentage of U.S. children living in single-parent households continues to steadily increase. In fact, the country has the highest rate of children living in single-parent households. Indeed, a 2019 Pew Research Center study of 130 countries and territories found that 23% of children in the U.S. under the age of 18 live in one-adult households, which is more than three times the number of children who do so world-wide. In countries such as China, Nigeria, and India, singe-parent households only make up 3%, 4%, and 5% of all households, respectively.

Single mothers may find home loans.

Single parents can often feel monetarily strained and may find it difficult to navigate finances with only one income due to a lack of necessary funds. Single mothers, in particular, also often have a difficult time qualifying for some mortgage loans because of gender-based discrimination. Indeed, studies have found that women are charged higher mortgage rates than men are.

Rising housing costs don’t make it any easier, either. The median home price in the U.S. is $247,084. And for some states like Hawaii, this number can be as high as $636,451. Plus, the median down payment amount for first-time homebuyers is 6%, with 57% of non-homeowners maintaining that they would find it financially difficult to own a home, according to a 2019 survey by the National Association of Realtors (NAR). Such steep costs can make it difficult for single mothers to find and qualify for mortgage loans.

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Below, we highlight specific home loans for single mothers, in addition to federal and local resources that single-parent homeowners can utilize.

Best Mortgage Loans for Single Mothers

There are a number of mortgage options that single mothers can opt for. These options typically have more moderate down payment terms, as well as less strict credit and insurance requirements.

FHA

The Federal Housing Administration (FHA) assists first time home buyers by offering loans that have low down payments, low closing costs, and easy credit qualifying. With FHA loans, down payments can be as low as 3.5% of the original purchase price, which can make it easier for those who are financially compromised, to find affordable housing options. Interested individuals can find FHA lenders near them through the U.S. Department of Housing and Urban Development’s lender list search page.

USDA

The United States Department of Agriculture (USDA) offers loans with zero down payments and low rates. Such loans are available for low-income rural and suburban homebuyers.

The USDA offers three loan programs: direct loans, loan guarantees, and home improvement loans and grants.

  • Direct loans offer interest rates as low as one percent and are for low to very low-income consumers who do not have safe or sanitary housing, are unable to obtain a home loan from other sources, or have incomes at or below the low-income threshold. Direct loan amounts will vary depending on where the applicant is located.
  • Home loan guarantees are issued by participating local lenders and are available to U.S. citizens and permanent residents who have a dependable income, and satisfactory credit scores. These loans allow individuals and families to receive low-interest rates on their mortgages, even in cases when a downpayment is not made.

To qualify for a USDA loan, owners should make monthly payments that are 29% or less than their monthly income, as well as have a debt ratio that is no greater than 41% of their total income. Additionally, applicants who do not have credit scores or who have poor credit histories may be able to qualify with “non-traditional” credit references such as rental and service payment records.

Homeowners should note that such loans are only offered to owner-occupied primary residences and that other qualifying requirements will vary depending on household size and location. Consumers can visit USDA’s eligibility site for more information.

  • Home improvement loans are financial grants that help homeowners fix and improve their homes. Loan amounts can be as high as $27,500 in some cases.

VA Loans

Veterans Administration loans are available to military personnel and their spouses. These loans are available for single mothers who are serving, have served, or are widows of military service members.

These loans help homeowners purchase, improve, or buy homes. Through direct home loans, the VA acts as a mortgage lender and works directly with individuals and families to manage and apply for loans. And with backed home loans, the VA supports a portion of loans taken out from private lenders. This also means that in cases of foreclosures, lenders are able to recover losses due to the VA guarantee, making such loans less risky. This is why almost 90% of all such loans are made without a down payment.

Individual lenders may have specific eligibility requirements such as having an acceptable credit score or getting a home appraisal. Those who qualify can visit the VA site for more information regarding loan eligibility and find out how to apply.

Additional Home Buying Resources

For single mothers who do not qualify for the above programs or who are interested in other assistance options, there are a number of state and local resources that can also help make homeownership easier.

Meet with a housing counselor.

Housing counselors are trained to provide financial guidance in relation to home buying and homeownership. Such counselors typically receive training from the U.S. Department of Housing and Urban Development (HUD) and unlike real estate agents, are familiar with HUD and FHA assistance programs and are therefore able to provide tailored guidance for first-time home-buyers.

Housing counselors can

  • provide a specific homeownership action plan for the individual in question, which can be particularly helpful for those facing financial obstacles
  • answer difficult questions related to home equity, foreclosures, and the like
  • provide mortgage counseling to new homeowners or seniors
  • can help individuals narrow their search based on budget limits

Buy a home with an IDA.

IDAs or Individual Development Accounts are matched savings accounts that are typically set up to help low-income individuals and families. Some organizations offer IDAs that match savings, dollar to dollar.

A U.S. Census Bureau’s Survey of Income and Program Participation found that the IDA participants surveyed saved an average of $935 after three years in the program, which was a net savings rate of 1.2% of their earnings. Additionally, participants of the program were 35% more likely to be homeowners and 84% more likely to own businesses.

This resource can be a viable alternative to home loans for single moms.

Apply for a Habitat for Humanity house.

Habitat for Humanity is a nonprofit housing organization that provides housing for communities across the U.S. The organization has helped up to 29 million families and individuals in need since its inception in 1976.

To qualify for a habitat home, individuals must show the need for affordable housing, must be able to pay an affordable mortgage, and must be willing to help in the process of building their new home.

The organization not only helps to build homes but also provides assistance with:

  • renovations in existing, damaged homes
  • cleaning and rebuilding after natural disasters
  • lobbying for fairer housing policies
  • microloans for home improvement

Those who are interested can apply directly, on the organization’s website.

Find local housing resources.

In addition to federal home loans for single mothers and help from national organizations, homeowners can also look into local housing resources. Individuals can refer to their local public housing agencies and authorities to find out what specific programs are being offered. Examples of local home assistance programs include:

Alternative Loan options

Individuals who want alternate options to conventional home loans for single moms can consider looking into short-term loans, such as payday loans online. These loans are cash advances that are borrowed against a future salary. While such loans can often prove to be more flexible than traditional lines of credit from banks and credit unions, payday loan lenders typically check applicants’ credit scores to determine loan eligibility. Short-term loan lenders will also typically have specific lending requirements based on the state in which they are located, as well as on a borrower’s specific financial situation.

Those who are considering this option should note that such loans are intended to be paid back in one mass sum, plus interest, and not in increments, as is typically the case with installment loans.

Single mothers can also opt for federal and state nonmortgage loans or programs that can provide relief to low-income or single-parent households. These include:

  • Temporary Assistance for Needy Families (TANF)
  • Women, Infants, and Children supplemental nutrition program
  • Supplemental Assistance for Needy Persons (SNAP Benefits)
  • The National School Lunch Program
  • Low Income Home Energy Assistance Program (LIHEAP)
  • Weatherization Assistance Program (WAP)
  • Child care assistance programs (CCAP)
  • Head Start Programs
  • The Family Unification Assistance Program
  • Section 8 House Voucher Program
  • Low-Income House Tax Credit Assistance Program
  • Low-Income House Coalition
  • The YWCA
  • The Catholic Charities

Bottom Line

Mitigating finances can prove difficult for single-parent homes, and especially for single-mothers. There are a number of state and federal funded loans that offer mortgages at lower interest charges and with lower down payment requirements that single home buyers and low-income families can apply for.

Local charities and nonprofit organizations also typically have assistance programs specifically for single mothers who may be having difficulty making ends meet. Single mothers can research national and local aid programs to see what the most appropriate options for them are.

Jim Hughes   OpenCashAdvance Marketing Manager
Personal Finance
Jim Hughes remembers checking his first email on the original BlackBerry 850 nearly 20 years ago. It was spam, and he fell for it. Even so, he’s been on the beat every day since, following the ebbs and flows of financial technology. Look to Jim for insider exclusives on shorter-duration loans, installment loans, and other popular products in fintech today.
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