If you are a single parent, and don’t currently own your own home, you may believe that home ownership is out of reach. In truth, home ownership is not only possible, there are several options that can actually make it easier than ever before.
Below are some of your options for financing and buying a home, as well as information on the cost of ownership.
Financing and Buying Your Home
The conventional home loan is the most common method for purchasing a home. To qualify you must have a credit score of at least 580, your expenses should not exceed 36 percent of your gross income, a 20-percent down payment, and the cost of the property should be less than the lender’s maximum loan limits. If you are unable to make a 20-percent down payment, you will be required to purchase mortgage insurance, and you could end up paying a higher interest rate. Conventional mortgages are available through a variety of lenders, and anyone is eligible to apply.
VA loans are conventional loans, except that the VA is essentially vouching for you and guaranteeing repayment. Just like the conventional loan, you will need to have a good credit score, and a good debt to income ratio, but the VAs backing may make it easier for you to secure the loan without a down payment. Additionally, the interest rates for VA loans could be lower than those of conventional loans.
VA loans are available through a variety of lenders, including online vendors like lowvarates.com, but are only available to veterans, current and former service members and their spouses, and widows of service members. VA loans might be available to ex-spouses under certain circumstances. Anyone interested in a VA loan should contact the VA for more information.
FHA and HUD loans have slightly more flexible criteria than conventional loans. Depending on the program, you could qualify to purchase a home with little to no down payment, or get help with closing costs. FHA loans tend to be for “turn-key” homes, while HUD loans tend to be for abandoned or forclosed homes that may need substantial repair. Both HUD and FHA loans are only available through approved lenders.
The Cost of Ownership
A lot of mortgage providers will try to appeal to new buyers by illustrating how your mortgage payment could be much less than what you’re paying to rent. While the mortgage might certainly be cheaper, it is only one part of the overall cost of ownership. The cost of ownership goes beyond your mortgage payment and utilities, and includes things that you might not have to consider as a renter, such as:
Property insurance, including fire and flood;
Property taxes and fees, such as garbage collection; and,
Repairs and maintenance, including yard work.
For example, your mortgage and utilities may only be $1,000 a month, but the property taxes could be $12,000 per year – adding another $1,000 per month to your expenses. If the house is older you might need to make frequent repairs and do extra maintenance, and your insurance premiums could be higher because the house has no fire or home security system installed.
As a result, that $1,000 monthly house expense could turn into $2,500.
Before you start the process of buying a house you should log your total income, including any spousal or child support, as well as all of your expenses–except your current housing costs–to determine how much you will have to spend each month. When calculating your monthly mortgage payments, you should include at least an extra $100 each month for maintenance and repairs, and you should also calculate the property taxes for the area.
If the total cost of ownership is more than you can currently afford, consider looking for a house in an area with better tax rates, or postponing your search until you can eliminate some expenses, or saving up to make a larger down payment, which can lower your monthly mortgage payment.