Buying a Home for the First Time as a Single Mom
You just wrote out the rent check. You’re frowning because you know that money isn’t really helping you. Sure, it keeps a roof over your family’s heads, but other than that it’s a cash outlay that seems … wasted. You’d love to apply that same amount to a mortgage, but as a single mom, you feel like your hands are tied. You can afford a mortgage, but saving up for the down payment when Billy needs braces and Bridgette’s dance classes just went up is proving to be impossible.
The good news is that there are programs out there that can help you not just with buying a home, but with getting the down payment together too.
Advantages of Buying
There are advantages to owning a home instead of renting. The biggest advantage for most people is knowing that mortgage payments are going toward ownership of the home instead of making a landlord rich. With each mortgage payment, you are accumulating equity in the home. That equity equates to tangible assets and eventually could mean an extra cash flow if you need it.
Another major advantage comes at tax time. Owning a home opens up several tax credits and deductions. Interest payments, property tax payments, and certain home improvements can be used to offset your tax burden.
A third advantage is choosing the best neighborhood for your family. When you rent, you tend to go with the best place you can get with the money you have, with the intention of upgrading at the end of the next lease. When you have kids, this could mean a change in schools, which can cause issues that can be tricky to navigate. When you buy a home, you can focus on a specific neighborhood and determine the best one for your family for the long term. You no longer have to worry about what to do when the lease is up.
Do What You Want, It’s Yours
When you rent, there are only so many changes you can make to your home without getting landlord approval. This can even include changing the paint color of the walls, laying new carpet, or swapping out sink fixtures. When you own your home, you are free to change whatever you want. Don’t like the color of your shutters? Paint them from kelly green to burnt sienna. Replace the carpet with tile or hardwood. Install the pasta arm above the stove. You’re free to make the changes you want because it’s your home. You own it.
Loan Options
When a couple decides to buy a home, they usually combine their incomes so they can afford a larger home or a house in a better neighborhood. But as a single mom first time home buyer, you only have your income to go on. Depending on your level of income, this could create a major barrier to home ownership. But there are several loan programs that can help get you into the home of your dreams.
FHA - This program helps low- and moderate-income people afford homes. The FHA loan program is run by the Federal Housing Administration and offers loan guarantees for people who might not meet the income eligibility guidelines for conventional loans. To qualify, you must have a credit score above 500. For scores between 500 and 579, you can apply for a mortgage for up to 90% of the cost but must make a down payment of 10%. If your credit score is 579 or higher, your down payment requirement can drop to as low as 3.5%. If you need help with the down payment, there are programs that can help you with raising those funds as well.
VA Loans - If you are currently in the military or served previously, you can qualify for a mortgage through the Veterans Administration. A VA loan doesn’t necessarily require a down payment, mortgage insurance, or a minimum credit score. You will need to provide your certificate of eligibility and either pay out of pocket or finance the VA funding fee.
USDA’s Rural Housing Service (RHS) - For this program, you apply for a mortgage from a lender that takes part in the RHS program. If you’re approved, the RHS guarantees the loan. To qualify, the home must be your primary residence and not a home used for rental income. If you purchase land, it must be used for your primary home, the home must fit your family size, and the purchase price cannot exceed the price limitations.
Other Options
Many people do not realize that each state has its own programs to help low- to moderate-income families buy a home. The U.S. Department of Housing and Urban Development’s website has a database of programs and organizations that can help people afford a home. The database is sorted by state and includes contact information and brief explanations about each program.
You also should see if your profession can help you obtain financing or down payment assistance. Teachers, first responders and other emergency workers, and union members might qualify for special assistance. Check with the major organizations that support your profession to see if there is a program that can help.
Things to Consider Before Buying a Home
Now that you know there are programs out there that can help you qualify for a mortgage and help you come up with the down payment, you have to consider the ins and outs of owning a home. Here are a few things you should consider before diving into buying a home:
A house is not cheap. Things break. The roof will leak. The hot water tank will eventually go kaput. When you rent and these things happen, you pick up the phone and call the landlord, and he has the legal obligation to fix whatever is broken. But when you own your home, it’s on you to get these things fixed.
Insurance - As a renter, you might have had a renter’s insurance policy. If the apartment burns down or there’s a leak in the basement and things you stored are ruined, for a small monthly premium, you can get these things replaced. Homeowner’s insurance can be costly, but it’s required when you have a mortgage. You have to insure the house and its contents. And if you live in a floodplain, flood insurance is also required when you have a mortgage. Finally, depending on the type of mortgage you get, mortgage insurance might also be a requirement. If you put less than 20% down on your home (and you don’t have a VA loan), this additional cost is a real possibility.
Taxes - Depending on where you live, you might have to pay property taxes. This tax can range from pennies on the dollar up into the thousands, depending on the value of your home, the neighborhood it’s in, etc. When you’re researching neighborhoods, you’ll want to find out the average property tax amount for that area so you can prepare.
Buying a home is the culmination of the American Dream. Just because you’re a single mom, that doesn’t mean you should be deprived of that milestone. Knowing your options and what to expect during the process makes the journey that much easier to navigate and more enjoyable at the end.