Being a single mom is tough, and trying to raise a kid in just one income can be rather stressful. Similarly, getting approved for a mortgage as a single mother is quite difficult. Luckily for all, there are some options, designed solely for the single parents whenever it is about the matter of getting a home loan.
Following some simple steps can help you big time in addressing your needs and procuring the best mortgage loans, used for raising your child in the best manner and environment possible.
Getting approved for a mortgage on one income
For most of the single moms out there, money is rather tight. Child support based payments do not always come though on time. Sometimes, some money will never come at all! So, trying to balance a budget whenever you have little ones by your side, can prove to be quite challenging for some single parents out there.
Whenever the matter is associated with applying for home loan, you might have to match some debt to income ratio, often termed as DTI. This DTI is going to be the ratio of the current monthly debt payments that you have to deal with and compare to your monthly income. For most of the mortgages out there, you might want DTI ratio of no more than just a ratio of 41%.
Proficient use of a calculator
Now, the question is how much amount you can actually afford to deal with the home mortgage loans. For that, online calculators are here and ready to offer you the best response now. The average household income of an American is around $74,000, assuming that you do not have monthly debt payments you can afford a home priced at around $285,000 with 3.5% down payment for $1800 monthly.
Through the online calculator, you can calculate how many houses you can actually afford using various factors and different costs. This calculator mainly provides the best possible estimate of maximum borrowing power you have based on some factors. It is not always mandatory to be exact. On the other hand, if you need some information on liberty lending, you better get down to experts to help you out in this regard well, for sure.
Income & Debts
The first factor in this regard is the income and debts. Here, the team will factor the pre-tax income and then the monthly debt payments. These payments will often include car payments and even credit card, student loan debt and more.
Here, taxes are included and are well adjusted according to state you are purchasing.
The next stop is the credit score. One major factor over here is determining how much of home you can actually afford is the credit rating. The interest rate is tied directly to the FICO score. The higher this score gets, the lower the rates will be. You can adjust the calculator to factor in credit score and adjust interest rate accordingly.
Debt to the Income Ratio
The monthly payment amounts you have compared to monthly income is what is called DTI. The back end maximum DTI ratio most mortgages need is 41% and front-end ratio is 31%. You can adjust DTI ratio to see how much house you can actually afford with various ratios.
Front End Ratio
Under the front end ratio, it will not include mortgage payment into monthly debt payments. Under the back end ratio, it will have estimated monthly payment of mortgage including escrow into monthly debt obligations.
The online calculator will adjust borrowing power automatically and monthly housing costs depending on the amount of down payment. PMI is the next one in this list. If you put less than 20% on home, you have to get mortgage insurance. PMI is mostly added if you have a loan to value ratio higher than 80%.
More about the down payments
The biggest and most primary hurdle in terms of home ownership for the single moms has to be the down payment. Most of the conventional loans will require a high down payment of 10 to 20%. Coming up with such an amount is no doubt difficult for anyone in general, mostly for the single moms out there.
- But, the government has created some of the major loan programs, making it rather easier for qualifying for a mortgage and will require some low down payment.
- You have the FHA loans, which are one of the most popular types of home mortgages that are used nowadays. They are in need of smaller down payments of around 3.5% of the purchase price. So, on a home price of around $200,000, the down payment will come up to around $7000.
- There is another amazing benefit of FHA loans for you to consider. Here, the down payment can always work as a gift from a friend or even a family member of a close relation. FHA loans will allow around 100% of down payment amount to be justified and gifted from anyone. For that, all you need is just a basic down payment gift letter right for your loan officer over here.
Perfect assistance for the single moms
You will come across so many local down payments and government assistance and grant programs, which are only made available for the single moms and the first time buyers of homes out there.
You can also search for the assistance programs on the official websites and it will make your search a lot easier than before. County websites and the local city will also have some of the major down payments along with some of the other grant programs and assistance ones listed for you to consider.
Go through the options
You are always invited to go through all the government program and grants first before making the right decision in this regard. The services are always going to act in your favor once you have some thorough tips and tricks on them. Just be sure of your choice first and then move forward with the best-proven point.