Friday 3 April 2020

What You Need to Know to Buy a Home as a Single Mom

Home ownership is a huge part of the American Dream and nearly everyone envisions themselves owning a home at some point in their lives. As a single parent, claiming this dream as your own may seem impossible. After all, you don't have the luxury of having dual incomes and providing for your kids continuously saps your paychecks. Yet, some single moms are beginning to make this dream a reality. Last year, single women accounted for almost 20% of home purchases. 
So, take heart! Purchasing a home for you and your children is possible. If you're ready to make your dream a reality, here are a few tips to get you started and expedite the process. 

1. Check and Raise Your Credit

Before even considering purchasing a home, take a look at your credit score. If it's below 620, you may have a difficult time finding a mortgage lender willing to offer you a loan. While you could still get a mortgage with a score as low as 500, it's best to aim for a higher score. This will get you a better interest rate and a lower down payment rate once you're approved. 

If your score is low, spend a few months taking measures to raise it before applying for a loan. Work to pay off any debt, avoid making any large purchases with your credit card and pay any overdue or unpaid bills. Prioritize these expenses in your budget to quickly raise your score and officially begin the home buying process. 

2. Determine Your Budget 

Speaking of budgets, yours is probably tight to begin with. However, creating a clear-cut budget will help you stick to it and keep you on the right track. Determining your budget now will also show you where you might be able to cut spending and save more for a down payment. Putting more down on a down payment could score you a lower mortgage loan interest rate in the long run.

Additionally, consider what your budget will look like after you become a homeowner. One of the perks of renting is you typically don't have to worry about maintenance or landscaping costs. However, once you own a home, that responsibility shifts to you. Having room in your budget for unexpected expenses like leaky pipes or mole infestations can save you from a tough financial predicament down the road. 

3. Compare Mortgage Lenders

Just as you would with your new home, take a decent amount of time to choose a mortgage lender. Lending institutions may offer you widely varying rates, even if your credit score and down payment amount remain the same. So, don't pick the first lender you see. Rather, spend time researching and get quotes from several different lenders. Compare interest rates and find one that works for you. 

It's also important to consider additional fees, of which there may be many. For instance, one lender might offer a slightly lower interest rate but charge exorbitant closing, processing and title fees. In this case, you may be better off choosing a lender with a higher interest rate and fewer fees. Ask each lender for an official, written loan estimation to have for your records. This will also make it easier to compare prices. 

4. Shop Around for a Realtor

Likewise, shop around for a real estate agent and be choosy. The realtor is your negotiator and should work in your favor by helping you navigate offers and closing procedures. They also help you look for and find your perfect home. Obviously, you need someone who knows what they're doing and can negotiate with the seller and other agents to get you the best price. 

The best way to shop around for a knowledgeable realtor is to first look online and read reviews. Narrow down your options to a handful of realtors. Then, interview each one in person if you're able. Ask lots of questions regarding their availability, methods of communication and repertoire. The best agent will be able to work around your schedule as a busy mom and still communicate effectively. 

5. Look for Grants and Support Programs 

As a single parent, you don't have the benefit of a second income contributing to buying a home. Luckily, this may make you eligible for special financing, grants and support programs that can help ease the financial burden. For instance, Habitat for Humanity helps low-income families based on their willingness to work with the organization and their ability to pay back an interest-free loan. You might also qualify as a first-time home buyer, making you eligible for special programs. 

Your local Public Housing Agency might also offer a Housing Choice Voucher home ownership program. Families who join the program use this voucher to buy a home and receive assistance with monthly expenses. The Federal Housing Association also offers a loan program to help those with a lower credit score purchase a home by lowering required down payments. 

Have a Back-Up Plan

With a bit of persistence, research and hard work, you'll land yourself a home before you know it. However, owning a home is another adventure entirely. From paying bills on time to maintaining a stable, reliable source of income, scraping together enough money to make monthly payments may be difficult. This is especially true if unexpected expenses or circumstances arise that may prevent you from paying your bills. 

Therefore, it's best to plan for the unexpected. Look into programs that can offer temporary financial assistance if you find yourself in trouble. You can also ask family members or close friends if they'd ever be willing to loan you money were you ever unable to make a payment. Doing so now will ease stress levels later and ensure you stay in the new home you worked so hard to get. 

No comments:

Post a Comment