Home Loans for Low-Income Single Mothers

If you’re a single mother living on a limited income, you have options that can help make the dream of homeownership a reality. Home loans for low-income single mothers may include government-backed mortgage options like FHA loans and USDA loans. If you are struggling on a single income, you may also qualify for down payment assistance that helps you save money to put down while also meeting your and your child’s needs. 

The Best Home Loans for Low-Income Single Mothers

Government-backed mortgage loan options are popular home loans for single parents because they have lower down payment and credit requirements. Government-backed mortgage loans have insurance from specific branches of the federal government, which means lenders may offer them looser qualification criteria when compared to conventional loans. Some of the most popular options for single mothers on a limited income to get a mortgage loan include: 

FHA Loans

FHA loans are backed by the Federal Housing Administration, which is part of the Department of Housing and Urban Development (HUD). The biggest selling point of using an FHA loan as a home loan option for single parents is the down payment requirement. FHA loans allow you to buy a home putting down as little as 3.5% of the purchase price of the home at closing. 

On a $200,000 home, 3.5% would be $7,000, as opposed to a conventional loan where as much as 20%, or $40,000 in this case, would be needed to obtain the loan. FHA loans also offer slightly more relaxed credit score limits, so they’re available to more consumers.

One downside to an FHA loan is the need to pay a funding fee. On a conventional loan, you will need to pay for private mortgage insurance (PMI) if you bring less than 20% down to closing. PMI is an additional monthly fee to cover the difference between the down payment, and it will increase the monthly house payment. If you bring less than 20% down when you buy a home with a conventional loan, you can remove your PMI once you eventually reach 20% equity. However, FHA loans never lose their funding fee, which adds an additional charge to your mortgage payment each month. 

While this may seem like a major drawback, an FHA loan can be refinanced to a conventional loan when you reach 20% equity, which removes the funding fee while also helping you avoid PMI charges. Refinance loans can provide more flexibility for homebuyers.

USDA Loans

When considering a home purchase in a rural or suburban area, a USDA loan might be the perfect fit for a single parent. While USDA loans are only available in some communities and not all buyers will qualify, they are one of the only options that single parents have to purchase a property without having thousands of dollars in a down payment. 

The U.S. Department of Agriculture’s Single Family Housing Guaranteed Loan Program (USDA Loan program) was developed to help encourage economic development in less densely populated parts of the country. You must be purchasing a home in a sufficiently rural or suburban area in order to qualify. If your home qualifies, you can purchase a property with $0 down. 

To qualify, a home must be within the USDA’s defined eligible area, and the buyer must not exceed a certain income amount. You must also agree to personally occupy the home as your primary residence (you cannot use this type of loan to buy an investment property) and the home you purchase must be in safe, livable condition. This can make a USDA loan an ideal choice for single parents with less money down looking for a safe home to settle down in with a child. 

VA Loan

VA loans are available to active members of the military, veterans and surviving spouses of veterans when purchasing homes. This type of loan is not available to everyone, but to those who qualify, it provides fantastic benefits. 

If you’re a single parent who has served in the military in the past or who is currently an active-duty servicemember, the VA loan will likely be your best bet when buying a home. VA loans do not require a down payment, can feature special interest rates, have lower closing costs, and there is no need for additional mortgage insurance with these loans. While you will need to pay a VA funding fee when you use this type of loan, the VA funding fee is a one-time charge — not a recurring expense added to your premium, as is the case with the FHA funding fee. 

Housing Finance Authority Assistance

All 50 states have a Housing Finance Authority (HFA) that provides education and access to grants and mortgage credits to low- to middle-income households. Your local HFA is a perfect place to start exploring the idea of home ownership as well as low-income loan options. Depending on the state that you live in and your unique situation, you may qualify for benefits like tax credits for a mortgage payment, closing cost assistance or more competitive interest rates. 

As a low-income single mother, you should review your state’s HFA programs to learn more about how you can take advantage when buying your first home. This website has a list of every state’s HFA and a link to their websites.

Professional Loan Programs

Like VA loans, there are other programs that are not open to the public, but that do make a big difference to those who qualify. Professional loan programs are open to doctors, lawyers, teachers, first responders, police officers and firefighters, just to name a few. These programs offer exclusive interest rates, discounted real estate services and even lower-priced homes to those who qualify.

If you fall into one of these categories, one of these loan programs could make your home ownership dreams a reality. Your lender will likely be able to point you in the right direction, but a few of the most well-known professional loan programs include:

• Homes for Heroes
• Teacher Next Door
• Good Neighbor Next Door

First-Time Home Buyer Grants for Single Moms

The following grants are designed to provide financial assistance and support single moms. The grants may cover various expenses related to homeownership, such as down payments, closing costs, and mortgage assistance. The goal is to make homeownership more accessible for single parents who may face additional financial challenges.

Homeownership For Public Housing Residents

This program aims to assist residents of public housing in becoming homeowners. It provides opportunities for individuals and families living in publicly owned rental properties to transition into homeownership. The program may offer financial assistance, counseling from a housing counselor, and educational resources to guide residents through the process of buying a home. The intention is to empower public housing residents to achieve the goal of owning their own home.

National Homebuyers Fund

The National Homebuyers Fund is a non-profit organization that provides various financial assistance programs to help individuals and families become homeowners. Their programs typically offer down payment assistance, closing cost assistance, and grants to reduce the financial burden associated with purchasing a home. The organization focuses on serving low and moderate-income homebuyers who may face challenges in accessing affordable housing options.

Good Neighbors Next Door

Good Neighbors Next Door is a program designed to promote community development and homeownership in specific areas. It provides significant discounts on available homes for national, state, and local law enforcement officers, teachers, and emergency medical technicians. The program's objective is to encourage professionals in these crucial public service roles to live in and contribute to the revitalization of targeted neighborhoods.

Government Grants

Government grants are financial assistance provided by a governmental entity, such as federal, state, or local governments, to individuals, organizations, or communities for specific purposes. These grants are typically intended to support activities that benefit society or address specific needs or issues.

In the context of homeownership, government grants can help individuals with down payments, closing costs, and other expenses related to purchasing or maintaining a home. These grants aim to stimulate economic growth, increase homeownership rates, and provide opportunities for individuals who may not otherwise be able to afford homeownership.

Down Payment Assistance Programs for Single Mothers

These down payment assistance programs for single mothers can take various forms, with some offering grants or loans specifically designated for down payment assistance, while others may offer educational resources and guidance to help single mothers navigate the process of purchasing a home.

The eligibility criteria for these programs can vary, but they generally prioritize single mothers with low to moderate incomes and demonstrate a commitment to homeownership.

Some examples include the Federal Housing Administration (FHA) loans, state-specific programs such as the California Housing Finance Agency's CalHFA loan program, and non-profit organizations such as Habitat for Humanity.

How Can Single Moms Prepare to Buy a Home

Taking the right first steps to purchase a house will ensure a smooth process and allow you to make a competitive offer once you find the perfect family home. Here is a quick list of things to do before entering the home-buying market.

Assess Your Credit

Purchasing a home is far easier with a good credit score. If you have outstanding debt or loans that can be paid off, then take care of those before moving forward.

Find Your Loan

Your situation is unique, and not every home loan for single parents will be the same. Do your own research and sit down with a home loan professional to learn more about which loan option might be best for you and your unique access and circumstances. 

Get Preapproved

Before beginning to look at houses, get a preapproval letter from your lender. Your preapproval letter will give you the maximum amount you are approved to borrow in a home loan as well as an idea of what your interest rate will be.

Make Your Budget

While you might be preapproved for a certain amount, it’s rarely a good idea to spend right up to your budget — especially when living on a single income. Determine a monthly payment you would be comfortable with and work with your lender to find a home price range that fits your budget.

Compare Home Loans for Single Mothers 

Benzinga offers insights and reviews on the following home loan providers. Consider continuing your search for the right financing with a few of the links below. 

Finding the Best Home Loans for Low-Income Single Mothers

Finding the best home loans for low-income single mothers is crucial for providing stability and security for themselves and their children. By taking advantage of programs specifically designed for this demographic, you can access affordable financing options and achieve your dream of homeownership.

These specialized home loans offer flexible eligibility criteria, low down payment requirements, and competitive interest rates, ensuring that you can navigate the challenges of homeownership successfully. Financial assistance programs and counseling services are also available to provide guidance and support throughout the loan application process.

With the right home loan, you can establish a strong foundation for your family and create lasting stability for a brighter future.

Frequently Asked Questions