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!
How to get a mortgage as a single parent?
The good news is that it’s absolutely possible to get a mortgage if you’re a single parent. I have successfully made two single parent mortgage applications in the UK.
I bought my first flat at 27, and when I moved into a house with my future husband, I converted and increased my RBS mortgage into a joint mortgage. When we divorced in 2007, we sold the house and I used the proceeds to get a new, cheaper property with a fresh mortgage in just my name. More than ten years later, I’ve just secured another single parent mortgage to buy a larger, new-build property.
Single Parent Mortgage Applications can be Complicated
That said, getting a mortgage when you’re a single parent might not be straightforward. When I first got divorced, I applied for mortgages with three high-street lenders and was turned down.
Like many single parents there were complicating factors in my mortgage application status:
- I had a baby, which meant I’d been on maternity leave. After our baby was born, I’d just returned to work for 3 days a week. This meant my earnings weren’t as high as they needed to be to secure the loan.
- During the break-up from my ex, there were issues around payment of child support, meaning regular payments from our bank account bounced, and my credit rating had taken a big hit.
- I had to spend a lot of money on solicitors, so I had no savings to fall back on, or put towards a deposit.
- Courts won’t always take child support into account unless there’s a court order or similar binding agreement in place, which took us several years AFTER the divorce. This meant my overall income appeared lower than it was.
The fact that I had held a mortgage without any issues for several years was irrelevant. Because mortgage lenders don’t really care about your past history. They care about “affordability”. More than anything else they want to learn at what you earn and spend, and that they can be confident you’ll make monthly payments easily.
Mortgage Lenders are not fair for Single Parents
The problem with single parent mortgage applications is this affordability issue. Because the vast majority of single parents have higher expenses than most married individuals.
If a married couple apply for a mortgage, each of them will probably pay 50% expenses such as car, electricity and council tax. Single parent households have the same expenses, but one parent pays 100% of those costs.
Added to which, single parents may well have lower household income. They are more likely to work part-time, because they have greater childcare responsibilities. They often have complicated finances, with wages, maintenance, child benefit and tax credits.
What to do Before you Apply for a Mortgage
If I could tell fellow single Mums one thing about how to get a mortgage, it would be this: get a mortgage advisor.
Like, immediately. A mortgage advisor doesn’t have to cost anything – most will take a commission from whichever lender you eventually take a mortgage from. But they can save you thousands, and a lot of heartache.
If you can, go see a mortgage advisor several months before you want to apply for a mortgage. My advisor was able to tell me, broadly, how much I should be able to borrow as a single parent. They can advise you on small changes you can make that will help you pass those affordability checks. Things my mortgage advisor told me which may or may not apply to you:
- Stop paying into your pension for 3 months before applying for a mortgage
- Stock up so that you can reduce your weekly grocery bill for 12 weeks before applying
- Switch to the best energy deal you can find
- Temporarily stop any non-essential subscriptions eg Audible, website etc
- Downgrade any expensive TV packages
Doing all of these things for 3-4 months before I applied for a mortgage meant that I could demonstrate more disposable income. This meant I was in a better position to pass affordability checks in the event that I found a property at the top end of the price bracket I was aiming for.
Other Benefits of a Mortgage Advisor
When it came time to start house hunting, I went back to my mortgage advisor with my bank statements and a completed monthly budget showing all the money coming in and out of my account.
The mortgage advisor (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. This is only true if you go to a “whole of market” advisor, rather than someone tied to a particular lender.
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. We chatted about my circumstances, and she was able to narrow the search to mortgages that would be on a fixed rate until my daughter finished school.
Paperwork for a Single Parent Mortgage Application
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 utility bills and 3 months of bank statements that must show both your address and bank account number. I found this information didn’t show on statements I printed from my online banking, I needed to request copies from the bank.
You may also need proof of child support payments or CMS payments if applicable, along with copies of your passport, driving license and so on. If you’re employed you’ll need a P60 or if you’re self-employed an SA302 document – both can be requested from the tax office. If you have an accountant, they will also have copies of these.
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. Although I know it isn’t personal, I took it really personally.
As a single parent, I felt that I work so hard to provide for my family, and I’ve come a long way since my divorce. 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 accountant confirming that my earnings were steady over five years.
Even then, they took FOREVER to make their minds up.
- One lender rejected me because my ex sometimes pays child support as a lump sum, rather than an equal payment each month. Lenders like to see predictable, regular monthly income.
- Another rejected me because although my overall income has been the same for three years, the amount I earned from freelance writing was lower last year, compared to two years ago.
- 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. But this meant I was no longer eligible for the same mortgage.
You Get There in the End
After getting rejected for what felt like STUPID reasons, I was starting to get very frustrated. It can feel as though your status as a single parent makes you unworthy of a mortgage.
However, my mortgage broker persevered, and we had a decision in principle from the Co-Operative Bank’s mortgage brand, Platform. The mortgage was for a 65% loan, and we’d secured a DIP (decision in principle) meaning I’d passed the affordability checks and the next step was to value the property.
During this stage, I found another house. I knew it was THE house because the thought of not getting that house made me want to cry. Even better, it cost £40,000 less than the house I had been planning to buy, and was in a better location.
My mortgage advisor 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 on the other property. Thankfully, they hadn’t yet valued house one, so I didn’t even need to pay a second valuation fee.
The valuation went through fine, and I was offered the mortgage. Hurrah!
Don’t Celebrate too Soon!
I earn a good income. I had a great deposit. Even so, it took quite a while to get approved for a mortgage. This is partly down to being self-employed, and partly because I’m a single parent.
Once we finally got the decision in principle in place, 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. The official mortgage offer came through on January 12, and was valid for four months.
Once the mortgage is offered, it’s tempting to immediately go and celebrate. But don’t rush out to buy new carpets, or put anything on your credit card for the new house. Immediately before completion, your mortgage lender will do “final underwriting” on your finances, and if it looks as though your circumstances have changed materially, then you could find yourself with a cancelled offer.
I didn’t spend ANY unnecessary money on anything until after the purchase had completed, and the mortgage funds had been transferred.
One final underwriting was done, the sale completed, and we 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:
- Be ready to have your accounts scrutinised. Make sure you have paid down (or paid off) 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, 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. For example, you might have a gap in earnings due to maternity leave, or a period of illness.
- 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.