How to Get a Mortgage if You're a Single Woman
Single women are one of the fastest growing segments of the mortgage market as demographic factors and social trends mean more women are buying homes on their own. This is an excellent development as it reflects the much deserved economic equality and financial independence that woman continue to fight so hard to achieve. In theory, the mortgage process should be the same for women and men and we have come a long way since the time when it was challenging, if not impossible, for a single woman to buy a home.
In reality, however, there are some mortgage considerations that apply to women more than men. Qualifying for a mortgage with a sole income, varying employment history including potential gaps and part-time work as well as alternate income sources such as alimony or child support are all issues that are applicable to many single women. Understanding these issues is important as you assess your ability to qualify for a mortgage as well as what size loan you can afford.
Although the female homeownership rate continues to grow significantly, more single woman could get approved for a mortgage than they probably realize. Understanding qualification requirements, especially the guidelines that are most applicable to you, makes you a more informed applicant and enables you to better understand your mortgage options. In short, the more you know about the mortgage process, the more likely you are to qualify for a loan and buy a home. This is particularly important if we want to close the homeownership gender gap.
Below we outline how to get a mortgage if you are a single woman. It is important to highlight that most of these points hold true for all applicants, as gender or marital status should not play a role in the mortgage process. But while the information provided below is helpful for all borrowers, we believe it is an especially valuable resource to empower single woman to find the loan that is right for them.
Get Prepared
The mortgage process involves a lot of documents and paperwork so it is helpful to get prepared and organized before you apply. Lenders typically require that you provide pay stubs, W-2s, tax returns and bank account statements to verify your employment, income and assets when you apply for a mortgage. You are usually required to provide pay stubs and bank account statements for the prior two months and W-2s and tax returns for the prior two years, depending on lender guidelines. You may also be required to provide additional documents if you are self employed. It is very helpful to gather these documents before you meet with lenders to make sure you are not missing any paperwork, which can slow down the mortgage process.
Review our Mortgage Process Checklist
Check Your Credit Score
Your credit score is very important when you apply for mortgage. It impacts your ability to qualify for a mortgage as well as the interest rate you pay. Borrowers with higher credit scores pay lower mortgage rates and borrowers with lower scores pay higher rates. Most mortgage programs also have a minimum credit score requirement that you must meet to be eligible for the program.
Understand the Credit Score Required for a Mortgage
All of this reinforces how important it is to check your credit score and report before you apply for a mortgage. This enables you to understand where your credit score stands and also identify and resolve any negative issues on your credit report. In many cases borrowers find issues on their credit report that they were not aware of, such as a late payment or account in collection. It is much better to address any credit report issues before you apply for a mortgage than after. Plus, it may take some to resolve an issue and see an improvement in your score. The good news is there are many websites like Credit Karma and Credit Sesame that enable you to check your credit report and monitor your credit score for free.
Know the Qualification Requirements
Although mortgage qualification guidelines can vary, lenders usually focus on the same factors to evaluate your loan application. Lenders review your credit score, debt-to-income ratio, employment history and other factors to determine your ability to qualify for a mortgage. We addressed your credit score above but the other qualification requirements are also very important.
Review Mortgage Qualification Requirements
Debt-to-income ratio is the maximum amount of your gross income that you can spend on monthly debt payments including your mortgage, property tax and homeowners insurance as well as other monthly expenses such as credit cards, car and student loans. Lenders typically permit a maximum debt-to-income ratio of 40% - 50%, depending on the mortgage program and other considerations. The higher the debt-to-income ratio the lender applies, the higher the mortgage amount you qualify for. Lenders also usually require a two year employment history although there may be some exceptions.
What if I Have a Break In My Employment?
Many women ask how a break or gap in their employment impacts their ability to qualify for a mortgage as lenders typically require a continuous two year job history. Many women take time off from work to have children, raise their family or for other reasons. The good news is that employment gaps are permitted in many cases as long you can explain the reason for the gap and have been back to work for at least six months. Some lenders also require a two year work history in a similar field prior to the gap but lenders are generally becoming more flexible on this point which is positive for women. Please note that the guidelines on employment gaps can vary by lender and mortgage program so be sure to understand a lender's policy on this issue before you apply for a mortgage.
Learn the Employment History Requirement for a Mortgage
Can I Include Income from a Part-Time Job on My Loan Application?
Many women supplement their incomes with part-time work and this income can also help you qualify for mortgage. Lenders typically require a continuous two year history of part-time employment for the income to be included in your mortgage application. You are also typically required to provide pay stubs and tax returns to verify the income. But as long as you have a two year track record and the income is relatively steady, a part-time job can help you qualify for a mortgage or afford a higher loan amount.
Learn How Alimony or Child Support Help You Qualify for a Mortgage
Alimony and child support do count as income when you apply for a mortgage as long as the payments are expected to continue for at least three years after your mortgage closes. Lenders want to make sure that the payments are going to be steady and continue into the future if you plan on relying on them to pay your mortgage. You are also typically required to provide the legal document, such as a court order, that outlines the terms of the payments.
Understand How is Child Support Treated When You Apply for a Mortgage
Determine What Size Mortgage You Can Afford
The amount of mortgage you can afford depends on your monthly gross income and debt expenses. As referenced above, lenders apply a maximum debt-to-income ratio to determine what size loan you can afford. Simply put, the higher your income and lower your monthly debt payments, the higher the mortgage amount you can afford. Other factors such as your mortgage rate, down payment, the length of your loan and loan program also impact your mortgage amount.
Use our Mortgage Qualification Calculator to determine what size loan you can afford
One point we always emphasize is that borrowers should feel comfortable with their mortgage amount and monthly payment regardless of the loan amount the lender says you can afford. You should evaluate your monthly payment within the context of you overall budget as well as your risk tolerance. A lender may qualify you for a certain loan amount but you ultimately decide the mortgage and payment that meet your financial objectives.
Select the Right Mortgage Program
There are several points to highlight when it comes to choosing the right mortgage program. First, you are not required to make a down payment of 20% when you buy a home. Saving for a down payment is one of the biggest obstacles to buying a home, especially for sole borrowers with only one income. The good news is that there are many low or no down payment programs that make owning a home much more attainable. For example, the VA and USDA home loan programs require no down payment for eligible borrowers while the FHA Program requires a down payment of only 3.5% and some conventional programs only require a down payment of 3%. Each program has its pros and cons but the point to emphasize is that there is wide range of financing options for borrowers.
What Mortgage Program is Right for Me?
There are also different types of mortgages including fixed rate, adjustable rate mortgages (ARM) and interest only mortgages. Each type of loan has risks and benefits. For example, most borrowers select a fixed rate mortgage because it provides the certainty that your monthly payment never changes over the life of the loan. With an adjustable rate mortgage, your monthly payment is typically lower during the first several years, but then your interest rate and monthly payment may increase over the remainder of the loan. Interest only mortgage offer the lowest initial payment, which means you can afford the highest loan amount, but also expose borrowers to potential payment shock. Be sure to understand both the advantages and disadvantages to select the mortgage program that is right for you.
Best No and Low Down Payment Mortgage Programs
Shop Lenders
After you have determined what size mortgage you can afford and selected the loan program that is right for you, the next step is to shop multiple lenders. Comparing proposals from multiple lenders is the best way to save money on your mortgage because it enables you to find the loan with the lowest interest rate and closing costs. An independent analysis by mortgage leader Freddie Mac shows that borrowers that compared two mortgage quotes save an average of $1,500 and borrowers that compared five quotes saved an average of $3,000. Most people comparison shop to find the best price when they buy a car, television or even gas, and you should apply the same approach to getting a mortgage. In fact, comparison shopping for a mortgage is even more important because of the dollar amounts involved. Reducing your mortgage rate by as little as 0.125% can translate into thousands of dollars in savings over the life of your loan.
The table below shows the mortgage rates and closing costs for leading lenders in your area. Contact multiple lenders to shop for your mortgage.
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Negotiate the Best Mortgage Terms
After you have received mortgage quotes from multiple lenders, we highly recommend that you use that information to negotiate the best loan terms possible, which means the lowest mortgage rate and closing costs. Studies show that women are less likely to negotiate financial matters such as salaries and pay raises but you could leave a lot of money on the table by not negotiating your mortgage.
Learn How to Compare Mortgage Proposals
For example, if one lender offers a lower interest rate but higher closing costs than another lender, see if the lender with the lower rate will match the lower closing costs. There is almost no downside to negotiating with lenders -- the worst thing that can happen is the lender says no -- and significant upside as you could save a lot of money on your mortgage. Plus, having multiple quotes give you leverage to obtain the best mortgage terms possible.
Use our Mortgage Comparison Calculator to compare loans with different rates and closing costs
Select Your Lender
This one goes to eleven, which means you have put in all of the preparation and hard work so you are ready to select your mortgage lender. In addition to finding the lender that offers the best loan terms, make sure that you are comfortable with the lender. Ask lots of questions to better understand their application process and make sure the lender possesses the expertise required to process your mortgage, especially if you choose a non-conventional loan program such as an FHA, VA or USDA loan. We also recommend that you ask for at least three client references so you can assess the level of customer service the lender provides. The mortgage process can be challenging and full of surprises so you want to make sure you select a lender that has the experience necessary to close your loan.
Review Questions Borrowers Should Ask Lenders Before Getting a Mortgage
Sources
"Women Homebuyers." 2019 Profile of Home Buyers and Sellers. National Association of Realtors, November 7 2019. Web.