Homebuying Advice for the Single Mom

Dori is a 33-year-old single mother in Wisconsin. She recently emailed iVillage asking for advice on how to reach her goal of buying a house.

Wisconsin is a high-tax state, and it's been tough to pay taxes and save for a house on one income. Dori writes that child support is "non-existent," but she manages to save $50 from each paycheck for a college fund.

It's no wonder single parents such as Dori feel stretched thin. They are often the sole source of financial support for their children as well as responsible for most or all of the parenting.

Here are some steps Dori might take to reach her dream, plus a few tips for firming up her financial situation.

1. Figure out how much house you can afford. A general rule is to look for a house costing two to two and a half times your annual income. Mortgage lenders typically use three tests:

  1. The monthly house payment including property taxes and insurance should not exceed 26 percent of gross monthly income;
  2. All monthly debt payments plus the house payment should be less than 38 percent of gross monthly income; and
  3. The home buyer should have two to three months' worth of payments in an emergency fund.

Using these guidelines, Dori's $26,000 annual income would qualify her for a $60,000 mortgage. The monthly principal and interest payment would be about $400 a month; taxes and insurance would add another $100 to $150, depending on the area. If she puts less than 20 percent down, she'll have to pay private mortgage insurance as well for a total monthly payment of about $575.

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