Can You Get a Mortgage If Only One Person Is Working?

Getting approved for a mortgage can be challenging, especially if you’re relying on a single income. With rising home prices and interest rates, buying a home is becoming increasingly difficult for single-income households. However, qualifying for a mortgage with one income isn’t impossible with the right preparation and approach.

How Mortgage Qualification Works for Single-Income Households

When applying for a mortgage, lenders assess your debt-to-income ratio (DTI). This measures how much of your gross monthly income goes toward paying debts, including your potential mortgage payment.

The standard DTI limit set by most lenders is 43%. So if your total monthly debt payments exceed 43% of your gross monthly income you may have trouble getting approved.

For single-income applicants, meeting the DTI requirement can be tricky. Since you only have one source of income to pay your monthly bills, your DTI percentage is probably higher than that of households with two incomes.

However, qualifying is still feasible with careful planning. Here are some tips:

• Boost your down payment A higher down payment lowers your required mortgage amount, improving DTI Save aggressively for a 20% down payment if possible

• Reduce existing debts: Pay down credit cards, loans, and other debts to lower your monthly obligations. This creates “breathing room” in your DTI.

• Improve your credit score Lenders view higher scores (above 740) favorably Maintaining stellar credit can offset DTI challenges,

• Lower your home budget: Opting for a lower-priced home that better aligns with your single income keeps payments manageable.

• Use compensating factors: A good credit score, low LTV, or substantial assets could help balance a higher DTI.

Should You Apply Individually or Jointly?

If you live with someone who makes two incomes, you might want to apply with only one income. For example:

• One spouse is unemployed or between jobs
• One spouse is self-employed
• One spouse has substantial debts or poor credit

In these cases, it may be prudent to apply with the “stronger” income to improve approval odds.

However, joint applications have benefits too, including:

• Higher mortgage amount from combined incomes
• Ability to include rental or investment property income
• Improved debt coverage with two incomes

Carefully look at your situation to decide whether a single or joint application makes more sense. Consulting a mortgage professional can provide guidance.

Tips for Successfully Qualifying on One Income

Here are some top tips for smoothing the mortgage process on a single income:

• Get prequalified first: This gives you a preview of what lenders will likely approve based on your finances.

• Talk to multiple lenders: Don’t give up after one rejection. Different lenders have varying risk appetites.

• Ask about low down payment programs: Options like FHA or VA loans require less down, easing DTI pressures.

• Consider a co-signer: Adding a creditworthy co-signer supplements your single income.

• Highlight assets and other income: Have savings, investments, or other income sources? Make sure lenders know.

• Improve your credit: Pay all bills on time, lower balances, and correct errors to boost your score.

• Adjust your home budget: Consider condos, townhomes, or fixer-uppers that better match your single income.

• Enlist professional help: Experienced mortgage brokers can help craft your strongest application.

Alternative Homebuying Options with Limited Income

If getting a traditional mortgage proves challenging, alternative options may open homeownership doors:

• FHA loans require just 3.5% down and allow higher DTIs up to 55% with compensating factors.

• VA loans offer 100% financing with no down payment required for veterans and service members.

• USDA loans provide 100% financing with no PMI for properties in rural/suburban areas.

• Down payment assistance gives grants for down payments and closing costs based on location, income limits, etc.

• Seller financing lets sellers carry the loan with a lower down payment. However, interest rates tend to be higher.

• Rent-to-own agreements let you rent a property for a defined period before buying it from the landlord.

Partnering Up Strategically Can Improve Approval Odds

As a single applicant, partnering up strategically with a co-borrower can give your mortgage a boost:

• A spouse with excellent credit but minimal income can be an ideal partner. They strengthen the application without household income needs increasing significantly.

• Similarly, a parent who is retired and debt-free makes a good candidate. Their stable Social Security income and flawless credit balance out your single earnings.

• Contrast this to adding a partner with high income but substantial debts. Their income inflates the mortgage amount you qualify for beyond what you can comfortably afford solo.

Carefully weigh the pros and cons of any co-borrower scenario before deciding if it’s the right move. An experienced mortgage broker can assess options objectively.

Key Takeaways

• Qualifying for a mortgage with one income is challenging but possible with careful planning.

• Critical steps include minimizing debts, optimizing credit, and potentially using a co-signer.

• While joint applications are often advantageous, single applicants should still explore their options.

• Consider alternative homebuying programs or financing strategies if traditional lending routes don’t pan out.

• Partnering strategically with the right co-borrower can improve your chances significantly.

• Seeking guidance from mortgage professionals ensures you pursue the optimal path to homeownership.

With persistence and the right approach, single-income households can achieve their homebuying dreams. Don’t let limited income deter you from exploring your options.