Single Parent Home Buying
Buying a home as a single parent, especially after a divorce, can be a challenge if you are not prepared.
Unfortunately many sellers view a single parent buyer as “less” qualified than a couple, regardless of income. The seller’s primary objective is to get the best price. However, selecting an offer that has the best chance of closing does come into play. The underwriting process is difficult for anyone, single or married. Logic tells you a married couple has twice the resources to overcome a potential underwriting problem than a single parent. There are some ways to overcome this:
- Down Payment: Probably the most difficult you would guess. A minimal down payment on a contract, 3.5% for FHA and 5% on Conventional, becomes a problem when you are up against other offers with 10% or even 20% down. Many times a parent or even friend can “gift” you money. If possible, you can even structure the divorce in a manner that “divides” up the assets allowing you a larger cash portion in order to have a larger down payment.
- Write a Letter: It never hurts to let the seller know your situation. I’m not saying play on the sympathy of the seller. Oh wait, yes I am! Write that letter telling your story, divorce, children, love your home, want to keep the children in the same schools so not to disrupt their lives any more than necessary, your children have friends in the area, whatever it takes. Even send them a picture of your new single parent family.
- Prequalified vs. PREUNDERWRITTEN:
- Prequalified: A prequalification letter is a must to accompany any offer on a home. There are many variances, but in general it says your lender has reviewed your credit, debt and income and at this point, you are qualified to buy a certain price home. However, the problem is many prequal letters are not worth the paper they are written on. There are many good lenders, but as with any industry, there are some not so trustworthy!
- PREUNDERWRITTEN – PREAPPROVED: This may be your Ace In The Hole”. This is where a Fully Approved (Fully Underwritten) Buyer letter comes into play. There are a number as lenders now offering this service. The underwriting process involves taking the buyers application, contract, appraisal, debt, income, employment, and any other pertinent information and it is all reviewed by the underwriter. This is the most difficult process in buying a home and is where most problems arise. If there is a debt to income ratio problem, something on your credit the loan officer thought would be ok, or any number of other issues, the deal could fall apart. So you might ask the question, why wouldn’t this all be done before you write an offer on a home? That way the only thing keeping you from closing would be a problem with the actual home. Good question. And now that service is available. Certain lenders will complete the entire underwriting process (the buyer part, not the home of course since at this point there is no home). Seller’s and listing agents love this! Talk about a solid contract, it doesn’t get more solid than this, regardless of down payment. You could be up against other buyerd putting 10x’s as much down and still get the deal because you are Fully Underwritten and they aren’t!
As I always mention, there are many moving parts to this process. I would be happy to sit down over coffee and walk you through the entire process. Good luck and feel free to call, text or email me any questions you might have.
Kreg Hall, owner of Hall Realty Group, has been awarded the Platinum Club, Customer Service Award, and is a two-time RE/MAX “Realtor of the Year.” With more than 20 years working with clients in the real estate and relocation process. Kreg’s goal is to provide knowledgeable representation and assist clients in making a complex process easier. www.kreghall.com
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