The United States Department of Agriculture (USDA) is one of the biggest government sponsored entities (GSEs) giving help to potential home buyers who are in need of help. Although there is no specialized program for single moms, there is plenty of help if you look. USDA home loans are among the most helpful of all real estate ownership programs for people who are experiencing difficulty in their lives.
Single mothers face the challenge of having only one income in the household to rely on, plus caring for the expenses of the children under his or her care. Here are five ways for single moms to use the USDA to make homeownership a reality.
1. Can the USDA help me if I do not have any cash right now?
In its loan portfolio, the USDA has 100 percent down home loans that require no down payment from the borrower. Not only that, but borrowers that are backed by the USDA may also receive a waiver for the private mortgage insurance (PMI) payments that lenders usually require. Relief from the PMI is an additional feature that is only available for borrowers backed by the full faith of the government.
There are also no upfront fees that are associated with USDA insured loan packages. Along with this, USDA packages tend to have lower interest rates when compared to other types of mortgages. All of this means that the USDA can get you into a home with no money down if your other finances qualify.
2. Is the location of my home an issue?
In order to qualify for a USDA home loan, you may have to purchase a home that is in an eligible area. One of the major programs that gives all of the benefits mentioned above is the Rural Housing Program. However, do not automatically think that you actually have to buy a house that is outside of your current lifestyle: This program actually subsidizes real estate in metropolitan areas and big city suburbs.
You can check the location of eligible programs directly on the USDA website here. As a single mother, you can juxtapose the results from the eligibility map and a map of top school districts and family oriented neighborhoods to find great locations for your new household.
3. What kinds of loans does the USDA have?
The two major types of USDA loans are direct loans and guaranteed loans. Unlike many other GSEs, the USDA is actually a direct lender for certain people, and single mothers are a part of that group. You may be able to qualify for a loan directly from the government that is geared towards families and people who have a relatively low income. This means that you can go directly to the USDA if you are rejected when you try to get a loan from a private banking institution.
A guaranteed loan allows the USDA to act more like other GSEs. Instead of giving a direct loan, the USDA serves as an insurance underwriter, lowering the risk profile of the borrower. The borrower still needs to qualify for a loan through a private lender, but these lenders will be USDA approved with plenty of experience with people in your situation. The government basically becomes your guarantor in this program, giving you the best chance of approval at a bank even if you have bad credit and a low income.
4. Do I need to have my other finances in order?
There are no hard and fast rules to the USDA program: The idea is to get borrowers like you past the sometimes overwhelming fixed upfront and closing costs that come with buying a home. However, the lender and the government need to know that you will be able to handle the loan once you actually get into the home. To this end, you need to show a stable income or a proper web of resources that bring you enough money to handle the monthly mortgage payment.
You may be able to cross reference your finances with other government programs. The major concern is keeping the records straight to give to your lender and to the USDA. Government programs do not necessarily know what the others are doing, so if you are subsidizing your income with other programs, keep the documentation organized. This will help to show your lender and the USDA that you have the ability to keep up with the mortgage even if you do not currently have a job.
5. Can I use the USDA program even if this is not my first house?
Many people mistakenly believe that they can only use the USDA programs if they have not been in the housing market before. The USDA understands that things happen at all points in life. This is why there is no first time home buyer limitation on USDA programs. You can use it as many times as you can qualify for it.
2 Point Highlight
However, do not automatically think that you actually have to buy a house that is outside of your current lifestyle: This program actually subsidizes real estate in metropolitan areas and big city suburbs.
There are no hard and fast rules to the USDA program: The idea is to get borrowers like you past the sometimes overwhelming fixed upfront and closing costs that come with buying a home.
