FHA Loans for Single Moms

Buying a home as a single mom can be challenging, especially when you’re managing rent, childcare costs, and everyday expenses. If you find yourself in this position, the FHA loan program may be able to help.

FHA loans are for borrowers who don’t have a large down payment, which can be common for single-income households. If you’re a single parent who’s ready to own your own home, here’s everything you should know about FHA loans.

FHA loans for single parents

An FHA loan can be a great option for single parents thanks to its flexible requirements. These loans are insured by the Federal Housing Administration, which allows lenders to offer more lenient terms:

• Low down payment: You can make a down payment as low as 3.5% if your credit score is at least 580. For a $250,000 home, that’s $8,750, which is much lower than the 20% down payment expected for conventional loans.
• Flexible credit requirements: FHA loans allow credit scores as low as 500 with a 10% down payment and 580 with a 3.5% down payment. This gives borrowers with limited or poor credit history a path to homeownership.
• Lower DTI requirements: Lenders may approve FHA borrowers with higher debt-to-income (DTI) ratios. This can make qualifying easier for single moms managing additional debt, like student loans or a car payment.

FHA loan requirements

While FHA loans are more forgiving than conventional mortgages, there are certain requirements you’ll need to meet:

• Credit score: You’ll need a minimum credit score of 580 with a 3.5% down payment, or 500 with a 10% down payment.
• Steady income: You’ll need to show you’ve maintained consistent employment for the past two years. You can demonstrate proof of income by providing your pay stubs, W-2s, and tax returns.
• Debt-to-income ratio: In general, the maximum debt-to-income ratio is 43%, including your mortgage expenses. However, some lenders may be willing to go as high as 50%.
• Property standards: Any property you purchase must be safe, structurally sound, and able to maintain its value over time. An FHA appraisal is required to ensure the property meets these conditions.
• Mortgage insurance: All FHA loans require both an upfront mortgage insurance premium (UFMIP) of 1.75% of the total loan amount. There’s also an annual premium, which ranges between 0.15% and 0.75% of the loan balance. This mortgage insurance protects the lender if you default on your loan.

Applying for an FHA loan

The process for applying for an FHA loan is similar to other mortgage applications — here’s what that looks like:

1. Check your credit score: Request a free copy of your credit report from the three major bureaus at AnnualCreditReport.com. Verify that all the information on your report is correct and that you meet the minimum credit requirements.
2. Find an FHA-approved lender: Not all lenders offer FHA loans, so confirm that yours does before applying. You can find an FHA-approved lender by searching on the USDA’s website.
3. Get preapproved: Gather your financial documents and submit a pre-approval application. Getting preapproved will help you determine how much house you can afford to buy.
4. Find an FHA-approved property: Once you’re preapproved for the loan, you can begin house hunting for homes that meet the FHA’s appraisal standards. Once you’ve found the right home, you can submit an offer.
5. Close on your loan: Once your offer is accepted, the lender will order an FHA appraisal. From there, you’ll go through the final stages of underwriting. Once these steps are completed, you can move toward closing on your home.

FHA mortgage alternatives

While FHA loans are popular, they’re not the only option for single parents hoping to buy a home. Depending on where you live or your financial situation, one of these programs may also be worth exploring:

• USDA loans: USDA loans are available for low- to moderate-income borrowers in rural and certain suburban areas. USDA loans offer 0% down and reduced mortgage insurance costs.
• VA loans: If you’re a veteran or surviving spouse, you may qualify for a VA loan with no down payment and no mortgage insurance requirement.
• Down payment assistance programs: Many state and local governments offer grants or forgivable loans to help with your down payment and closing costs.

The bottom line

FHA loans can make homeownership attainable for single parents with limited savings or less-than-ideal credit. With lower down payment requirements and flexible lending standards, they can be a good option for first-time homebuyers.

Before you apply, take some time to compare lenders, review your credit, and look into local assistance programs. With the right support, owning a home as a single mom is within reach.