Home loans for single parents: Best loan programs in 2022

Are there home loans for single parents?

There aren’t necessarily ‘special’ home loans for single parents. However, there are several mortgage programs that meet the typical needs of single moms and dads.

These loans could help you get around the problem of lower income when buying as a single parent.

There are also assistance programs that can offer money toward your down payment, as well as homebuyer education programs and one-on-one counseling to guide you through the home buying process.

All in all, buying a home as a single parent may be easier than you think.

In this article (Skip to...)

• Can I buy a home?
• Home loans for single parents
• Assistance programs
• Types of down payment assistance
• Buying with lower income
• Strategies to help you buy a house
• Where to find help

Can I buy a home as a single mom or dad?

Of course, there’s no such thing as a ‘typical’ single parent. Some are wealthy, while many are working hard to juggle both child care and their personal finances.

If money’s not an issue for you, and you have a 20% down payment for the home you wish to buy, you can easily get a conventional mortgage (one not backed by the government), provided you’re reasonably creditworthy and don’t have too much existing debt.

Your next step is to find a lender you like the look of and get preapproved for your mortgage. And you don’t need to finish this article.

But life’s not like that for most single moms and dads. You might find that money’s often tight and that your credit score takes occasional hits.

Still, you, too, could become a homeowner.

Home buying requirements for single parents

Just be aware that every lender will want to be sure you can comfortably afford your new mortgage payments and the financial burdens that come with homeownership.

Lenders calculate that affordability in the context of your current monthly budget, using something called your debt-to-income ratio (DTI).

DTI compares your monthly, pre-tax income against your ongoing debts — including your future home loan — to make sure you have enough cash flow to support a mortgage payment.

As importantly, you’ll need an OK credit score, which could be anywhere from 580 to 620 or higher depending on the minimum credit score requirements for the loan program you choose.

The best mortgage programs for single parents

If money’s a little tighter on your single income, you might be looking for a mortgage program that has looser eligibility requirements.

Luckily, many common loan programs are very flexible in this regard. Home buyers can choose from a wide range of low and even no-down-payment home loans depending on their needs.

Here are a few of the best programs to help single moms and dads buy a home affordably:

• Conforming loans — A type of conventional loan that conforms to rules laid down by Fannie Mae and Freddie Mac. You’ll need a down payment of only 3% of the home’s purchase price and a credit score of 620 or better. But you’ll have to pay mortgage insurance until your mortgage balance falls to 80% of the home’s then market value
• FHA loans — Backed by the Federal Housing Administration (FHA). At 580, the credit score threshold is lower than with conforming loans. But you’ll need a 3.5% down payment. And you’ll pay for mortgage insurance until you sell, refinance, or pay off your loan. So many buyers choose a conforming loan if their credit score is 620 or higher
• USDA loans — Backed by the U.S. Department of Agriculture (USDA). No down payment is required. But you must buy in a designated rural area (which includes 97% of America’s landmass) and have an average or below-average income for the place where you want to buy. You still have to pay mortgage insurance, but at a lower rate than other types of loans. Expect to need a credit score of 640 or higher. This is a good choice if you and the home are eligible
• VA loans — Backed by the U.S. Department of Veterans Affairs (VA) and open only to veterans, service members and a few closely related groups. There’s zero down payment, no continuing mortgage insurance, and usually the lowest interest rates of any mortgage. Credit score requirements vary by lender and range from 580-660. These are almost always the best loans for those who are eligible

In addition, all states and many cities and counties have their own mortgage programs, most of which offer down payment assistance. But nearly all are based on one or more of those in the above list.

>Related: Basic requirements to buy a house: 6 Must-haves for buyers

Are there programs to help single parents buy a house?

You bet! Down payment and closing cost assistance programs, as well as home buyer counseling, are available in every state and can help single parents become homeowners.

These home buyer assistance programs are not restricted to single parents. However, they’re often intended to help buyers on low or moderate income, and many single moms and dads fit the bill.

You should shop around between these programs to see which suits you best — just as you should with mortgage lenders.

Each DPA is largely free to set its own eligibility rules and to decide how much to give or lend to applicants. So we can’t tell you whether you’ll be in line for help where you live nor how much you might receive. But you can find out by doing a little research on your own (Google “down payment assistance in [your area]") or by asking your mortgage lender what’s available locally.

Types of down payment assistance for single parents

Each down payment assistance (DPA) program is different. But they usually provide up to several thousand dollars or 3-4% of a home’s purchase price. So you may be able to buy a home even if your savings are small.

This assistance generally comes in one of these four forms:

1. An outright grant that never has to be repaid
2. A forgivable loan, with zero interest and no repayment, that is forgiven over x years, (often five). Once that time’s up, you owe nothing, providing you haven’t sold the home, refinanced, transferred ownership, or paid back your main mortgage
3. A deferred loan, also typically with zero interest and no payments. But you have to pay back the full amount when you sell the home, refinance, transfer, or pay back your main mortgage
4. A loan ('second mortgage’) that you pay back in equal installments over a set term, often 10 years. This is paid back in parallel with your main mortgage so you have two payments each month

Those are the most common forms of assistance. But, as we said, DPA programs get to set their own rules. So it’s possible yours will have some variation on those.

Down payment assistance requirements

Home buyer assistance usually comes with the following conditions. You must:

1. Be a first-time home buyer. Not all, but many, DPA programs are only available to those who haven’t owned a home in the last 3 years
2. Complete a homebuyer education course
3. Choose a mortgage lender from a list of ones approved by the DPA program. (But you should still comparison shop among those)
4. Have a household income that’s at or below average for the area where you’re buying
5. Not have significant savings or other assets
6. Have a credit score that exceeds a set threshold — sometimes 580, 620, or 640, depending on the type of mortgage you want
7. Buy a home in an area covered by your DPA. Some are statewide but others are county- or city-specific

Many programs offer greater sums or easier eligibility to those willing to buy in areas that have been designated for regeneration. So, if you don’t mind buying your first home in a neighborhood that’s currently less desirable (but has prospects), you may be able to move more quickly.

Single parents: Buying a house with lower income

A common home loan issue for single parents is one we’ve mentioned already: your debt-to-income ratio or DTI. There are two reasons for that:

1. Household income is an important component of DTI, and you have only one income to throw into the calculation
2. Many single moms and dads have a harder time staying on top of their finances and have higher existing debts than some two-parent families

But don’t panic if your debt burden is high. Because it may not be as bad as you think.

Your DTI is calculated by adding up all your inescapable monthly debt payments and dividing those by your pre-tax household income. Those debt payments include:

• Your new homeownership expenses (mortgage, property taxes, homeowners insurance, and sometimes homeowners association dues)
• Minimum payments on credit cards
• Installments on other loans, like auto loans, student loans, and personal loans

You don't count items on which you can economize, such as food, gas, utilities, phone bills, and so on. You can learn more about DTIs by clicking this link.

Most lenders regard a 36% DTI as “good.” But many are happy with 43%. And some types of mortgages allow up to 50%, providing you’re a good borrower in other respects — which usually means you need a good credit score.

For example, FHA loans and Fannie Mae HomeReady loans allow 50% DTIs. And Freddie Mac’s Home Possible loans can go as high as 45%.

Strategies to help you buy a house as a single mom or dad

Buying a home as a single parent presents unique challenges. But there are creative strategies you can often use to overcome those roadblocks. Here are a couple of examples.

1. Use alimony, child support, and/or renter income toward your mortgage

Your salary isn’t necessarily your whole income. Other funds you receive regularly may boost your income and therefore reduce your DTI.

For instance, as a single parent, you may receive alimony and child support. And mortgage lenders count those as part of your income.

It’s unlikely that lenders will currently regard child tax credit receipts as part of your income because those, at the time this was written, are due to expire at the end of 2021. But, if President Joe Biden gets his way, they will become a permanent benefit. And, in that case, they may count as income — just as other continuing state or federal benefits do.

Finally, both Fannie Mae and Freddie Mac allow you to include renter income as part of your household income.

Suppose you make $4,000 a month in salary and you plan to rent out a bedroom in your new home to a border for $600 a month. You can add that $600 to your $4,000 for DTI purposes.

2. Consider a co-borrower or co-signer when seeking home loans for single parents

If you’ve read all the above and are still convinced you can’t get a mortgage, you may have one other way to qualify. And that’s by getting someone either to co-sign the mortgage or to become a co-borrower.

But don’t get too excited about this idea until you’ve finished reading this section. Because there can be serious downsides to such an arrangement.

If you persuade someone to co-sign your loan, that person’s credit score won’t make much difference. But their income will be added to yours when your DTI is calculated. And that should make it much easier for you to get approved.

Co-borrowers

If someone is a mortgage co-borrower, they should normally live in the home. And they will be obliged to make monthly payments — including yours if you fall short — because their rights and duties are equal to yours. So, if they fall short, you’ll be the one obliged to make up the shortfall.

It’s easy to imagine ways in which co-borrowing would work well. Maybe you have an old and trusted friend who’s also a single parent and who also wants to become a homeowner. You could share chores and child care as well as the home. Or perhaps you’d like to buy a home with your aging parent(s).

You don’t necessarily have to share your living space, either.

One option may be for you and your co-borrower to buy a two-unit, multifamily residence, where you occupy one unit and he or she occupies the other.

Downsides of a co-borrower or co-signer

Co-signing and co-borrowing can have huge downsides if things go wrong. A co-signer is guaranteeing your loan. So he or she could be liable for your whole mortgage if you default. And they’d likely see their credit ruined if it came to that.

Meanwhile, co-borrowing is a long-term commitment. And if one of you wants to leave before the other, the one staying may have no choice but to sell up. And, again, you’re jointly and severally liable for the mortgage, meaning if one of you stops paying, the other will have to pay — or risk foreclosure.

There are no upsides to co-signing someone else’s mortgage. And the potential downsides can be life-changing if the loan goes bad. So don’t be upset or offended if someone refuses — even if that person is a very close relative or friend. You’re asking them to put their own finances on the line.

Co-borrowing at least provides some upsides while the arrangement goes well. And often things do go well for as long as it suits both parties. But there are still significant risks if things start to go wrong.

Where to find home buying assistance as a single parent

Many people are pleasantly surprised by how easily they qualify for home loans as single parents. Others have to spend some time getting their credit scores and DTIs straight before they apply.

But finding the help and advice you need should be easy.

A good place to start is with the U.S. Department of Housing and Urban Development (HUD). It provides lists of homebuyer education programs and down payment assistance programs by state.

Simply click on the name of the state where you want to buy. And then keep clicking links until you drill down to the information you need.

Oh, and according to that website, “HUD sponsors housing counseling agencies throughout the country to provide free or low-cost advice. Search online for a housing counseling agency near you, or call HUD’s interactive voice system at: (800) 569-4287.”

A good housing counselor should do much of the heavy lifting for you, advising on whether you’re likely to qualify for a mortgage, helping you to pick the right type of loan, and guiding you to your best choice of DPA.

Happy house hunting!