Getting a mortgage when you’re a single parent is challenging. If you’re self-employed to boot, good luck!
Honestly, finding a mortgage was the single most stressful part of our recent house move. It is enough to make you wonder if it’s even worth it!
If you’re in the midst of single parent mortgage stress, you have my sympathies. I want to share some of the things I learned over the past six months about single parent mortgage applications. Hopefully they might help you, too!
Your Mortgage History Doesn’t Matter
My single parent mortgage application SHOULD have been a no-brainer.
I had a mortgage for 12 years. I wanted to sell my house and use the equity to pay a deposit on a new house. Then I’d take out a new mortgage of the same amount as my original loan. This meant I could buy a bigger, newer house but keep my monthly payments the same.
What I didn’t realise was that mortgages have changed in the past 12 years. Lenders don’t care about your payment history or your deposit. They are primarily focused on affordability. In other words, can you PROVE that you can afford the repayments easily.
Single Parents Are Not Equal
The problem with single parent mortgage applications is that affordability issue.
Single parents have many of the same household expenses as married people. Things like electricity, running a car and childcare cost the same for single and dual-parent families.
But single parents may well have lower household income. They often have complicated finances, with wages, maintenance, child benefit and tax credits.
As a Single Parent, You Need a Mortgage Broker
A good mortgage advisor is your secret weapon.
They (should) know the market inside out and be able to identify the lenders that offer the best deals AND which will work for your circumstances.
My mortgage broker was able to tell me which lenders took account of child maintenance. She also knew which would offer a higher earnings multiple for a single applicant, based on the deposit I would be paying.
The process of applying for a single parent mortgage feels endless. A lot of that’s because you need to provide so much additional paperwork. I could have saved loads of time having this stuff ready to begin with.
So be prepared with bank statements that show your address, utility bills, P60 or SA302 print-outs, letters from accountants, CMS paperwork, utility bills etc. Due to money-laundering regulations, even my mortgage broker needed a bunch of paperwork, including copies of my passport, driving license and so on.
If you already have a mortgage, get a provisional settlement figure and details of any early payment redemption penalties – your broker will need to know this when applying for a new mortgage.
You Might Get Rejected (to start with)
Being turned down and subjected to so much scrutiny as a single parent is hard.
As a single parent, you work so hard to provide for your family. But mortgage companies will not congratulate you on working so hard to keep your heads above water.
The reality is that mortgage lenders have set criteria and as a single parent you might not meet them. They often ask for additional information from single parent mortgage applicants. I had to provide evidence of life insurance, income protection, and multiple letters from my account. Even then, they took FOREVER to make their minds up.
One lender rejected me because of some missing maintenance payments. Another rejected me because my freelance income varied from year to year.
A third lender approved me, but the house I wanted to buy was valued at less than the sale price. The builder lowered the price of the house (hurrah!) but paying less for the house changed the loan-to-value ratio. This meant I was no longer eligible for the same mortgage.
You Get There in the End
At this point I was getting VERY frustrated.
It can feel as though your status as a single parent makes you unworthy of a mortgage.
Then, in the middle of yet ANOTHER mortgage application, I found a house.
I knew it was THE house because the thought of not getting it made me want to cry.
My broker submitted a “material change in circumstances” form to the lender. This meant the lender didn’t need to re-do all the financial checks, they just requested a new valuation. Thankfully, this came back fine, and I was officially offered a mortgage.
I didn’t want to tempt fate after such a long process.
I didn’t spend ANY unnecessary money on anything until after the purchase had completed, and the mortgage funds had been transferred.
Once we finally found the right lender, the process of getting the mortgage was fairly quick. I paid a reservation fee on my new house on December 6. The valuation was a little delayed by Christmas, but this worked in our favour as I’d been able to get my ex to pay three regular maintenance payments before the application went to final underwriting.
With that done, we got the formal mortgage offer on January 12, and then moved into our new house in the middle of March.
Top Tips for Single Parent Mortgage Applications
I’ve gone through the process of applying for a mortgage as a single parent twice. Here are some tips that I hope will be helpful to anyone else:
- First, prepare your accounts for scrutiny. Make sure you have paid down your credit card. Put all your accounts in the same name, and ensure all your tax/council tax payments are up to date.
- If you receive maintenance payments, make sure it’s being paid consistently (identical amounts, once a month) into the same account each time. Use a reference that makes it clear that it’s child maintenance.
- Pause unnecessary expenses. While applying for my mortgage, I paused payments into my pension and ISA. I also cancelled Flea’s gym membership. It’s only temporary but it did mean I had more disposable income.
- Meet with an independent advisor upfront, to see what you can expect to borrow, and which lenders you’re likely to be able to apply to as a single parent.
- If you’re self-employed make sure you have three full SA302s. If you’re employed, make sure you have your P60s, or request duplicates from HMRC.
- Do you have any odd quirks in your finances? Make sure you can explain them. Provide proof if necessary. This might be an updated statement, or a letter from your bank or accountant.
- Download statements from the websites of your utility company and bank account. They have to show your address, so you might need to go into branch to get them ‘endorsed’ if it doesn’t show this info by default.
- Don’t assume that your bank will give you a decent deal. I’ve banked with the same high street lender for 15 years and they’ve turned me down for a mortgage twice, now. Ask your advisor about smaller lenders that are flexible on lending ratios, and that will take into account any maintenance or benefit payments you receive.
- Stock up on tissues. It’s hard and it’s stressful but it WILL all be worth it in the end. Promise.