The approval rules don't change for a single parent. The budget around the payment does, so it pays to run two sets of numbers: the price a lender will approve, and what a normal month looks like after the house payment and the day care bill. Both are below, with the same family.
What the lender counts for a single parent
- Your wages, plus overtime or a second job once it has the history the program asks for.
- Child support you receive, grossed up 15% on FHA and 25% on Conventional because it isn't taxed, as long as it will continue at least three years. The child support page covers the paperwork.
- Alimony, Social Security survivor benefits for a child and disability income, each with its own continuance rule.
- Your debts: the payments on your credit report and any child support you pay. Day care, school costs and groceries aren't debts in FHA or Conventional ratios.
Example one: what Angela can be approved for
Angela has two kids, ages 4 and 9. She earns $4,000 a month as an office administrator and receives $450 a month in court-ordered child support that has arrived on time for two years. Her car and card payments total $200. Here's FHA at a 5.75% rate, with property tax at 0.95% of the price a year (the high end of the 0.74% to 0.95% range QualRate uses for Florida) and insurance of $283 a month:
| Wages only | Wages plus child support, grossed up 15% | |
|---|---|---|
| Qualifying income | $4,000.00 | $4,517.50 |
| Highest FHA price | $228,000 | $263,000 |
| House payment | $1,870.79 | $2,114.53 |
At $263,000, the payment is $1,507.00 in principal and interest on a $258,236.41 loan (including the 1.75% upfront mortgage insurance premium), $208.21 in property tax, $283.00 in insurance and $116.32 in monthly mortgage insurance. That's 46.8% of her qualifying income for housing and 51.2% with her debts. The support for her 9-year-old runs about nine more years, well past the three-year mark.
Example two: Angela's monthly budget
Approval is the ceiling. Here's the month at a $250,000 home instead, where the payment is $2,024.00: $1,432.51 in principal and interest, $197.92 in property tax, $283.00 in insurance and $110.57 in mortgage insurance. Say Angela takes home $3,500 from her paycheck after taxes and benefits, and her day care bill is $600 a month.
| Renting now | Owning at $250,000 | |
|---|---|---|
| Take-home pay plus child support | $3,950.00 | $3,950.00 |
| Rent or house payment | $1,950.00 | $2,024.00 |
| Car and card payments | $200.00 | $200.00 |
| Child care | $600.00 | $600.00 |
| Left for food, utilities, gas and the rest | $1,200.00 | $1,126.00 |
Owning costs her $74 a month more than renting. In exchange, her principal and interest is fixed for 30 years, about $3,158 of the first year's payments pays down her own loan balance, and filing for Florida's homestead exemption trims the property tax. Day care also tends to shrink once a 4-year-old starts kindergarten.
How each program treats a single parent
- FHA: 46.9% housing and 56.9% total with an automated approval, from a 580 score at 3.5% down, with a 15% gross-up on child support and gift funds allowed from family.
- Conventional: From a 620 score, with a 25% gross-up on child support and a total ratio up to 50%.
- VA: A parent and two children are a household of three, so the residual income minimum in Florida's region is $889 a month on loans of $80,000 and up, or $1,066.80 when total debt runs above 41%. Dependent care is subtracted as a job-related cost.
- USDA: $0 down, with 29% and 41% ratios. For the household income limit, USDA subtracts $480 per dependent child and child care costs for children 12 and under that let you work, which can bring a single parent under the limit.
When the numbers need help
- Ask a parent to co-sign. It's one of the most common ways single parents reach a higher price, and a co-signer doesn't live in the home or go on the title.
- Use FHA 100% financing. A down payment assistance second covers the 3.5% down from a 580 score, and Florida Housing Finance Corporation runs several of these programs.
- Let the seller pay closing costs. FHA allows up to 6% of the price.
- Clear a card. Every $100 of monthly debt paid off frees $100 for the house payment when the total ratio is the limit.
Put your wages, your child support and your debts into the QualRate calculator and compare the approved price with the payment you're comfortable with. Then call AAA Capital Funding at 888-601-8344, and we'll show you which program and which assistance gets you there.