Home Ownership As A Single Parent

When it comes time to providing for your child or children, we all want to provide the best we possibly can and where you call home has to be at or near the top of this list.

If you’re a single parent, you probably want to give your children the best possible environment to grow up in. If part of your plan for that includes getting a house for you and your kids, there are a few things you need to think about.

Get Familiar with the Home Ownership Process and Requirements – Plan for It

Most have a general idea of what buying a home entails, but now it’s time to get down to specifics. Knowing the process and understanding the requirements means you can then plan for achievement and work towards your goal.

You need to know the down payment requirements, income requirements, credit requirements and more. You need to work on the individual pieces to the puzzle and bring it all to the table.

Ideally as a single parent, you would want to build up a savings account to accommodate your down payment and closing costs. But also, and more importantly, you need to develop an emergency fund. This usually means having 3 to 9 months of savings in case you lose your income. How much can be somewhat discretionary, but I would view 3 months as the absolute minimum and target for at least 6 months.

Next, you should look at how much you will have available for your down payment and closing costs. This will at least provide you with a maximum price range for a home, based on the minimum down payment requirements. The down payment amount you have available will also affect whether you have to pay for mortgage insurance or not, and if so, how much.

Now, you have to think about your monthly payment and include taxes, utilities, and other monthly expenses. You may have to tweak your purchase price expectations depending on what your monthly budget is, in spite of or in addition to your down payment availability.

Credit

One of the main factors lenders use to quantify loan applications is credit. Know what it is today, and know what it takes to get to where you need to be if it needs work. Remember, as a single parent, a lender can only rely on one credit score, so make it as high as possible.

If you are coming out of a relationship and your credit was mostly joint, now is a good time to get things organized. Now is also a good time to get to know how your credit score is generated and learn to work within those guidelines so you can achieve highest score possible prior to your purchase.

All too often, when becoming single and being used to two incomes, we rely on credit to meet monthly shortfalls, resulting in using credit as a fictional type of income. Yes, you will have to pay it back. It’s important to get into a plan and budget as soon as you can.

If you have a lot of debt that may affect your borrowing power, now is the time to set up a pay down strategy. What works? Different things for different people. I personally hate consolidation loans. The idea of shifting debt from one lender to another to have the privilege of having one payment does not appeal to me. There is no upside unless there is a drastic interest rate differential. I would rather see minimum payments made on all credit and a focus on making as large a payment as possible on your smallest debt to pay it off. Then the next smallest and so forth.

Child Support

If you are receiving child support, this income can be used to qualify for a mortgage provided it is verifiable. However, if you are the one paying child support, this will of course reduce your affordability.

Get Your Mortgage Pre-Approved

I am not talking about putting some info on a piece of paper and having someone tell you how much you can or cannot afford. I am talking about a formal pre-approval and doing some financial planning and forecasting.

Sitting down with a mortgage professional will tell you where you stand and how much you can afford. However, if there is any work to be done, they can also help create a road map for you so you can achieve your goals.

Plan short and long term when looking for your home

You have to purchase something that meets your current situation. But you also have to be realistic in determining how long you will be in this home. What does the future look like? It depends were you are at in your life. Are you kids very young or are they in high school and may be moving out soon? Do you need room to grow?

How are the schools in the area, do they meet your needs? Is getting to and from work easy. Does the home need work? If so, do you have the funds for this? Take a close look at your overall situation and determine whether buying makes sense for you.

If you think you’re ready to get started with purchasing a home, let us know and we can set up a free consulting session for you.

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.

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