For a single mother like Heidi, being able to own her own home through Habitat means a lot. “It means control over my environment and creating a community. I have stability for my family. I’m building equity and feeling financially independent.” Without the support of programs like Habitat for Humanity to give single moms like Heidi a hand-up, purchasing a home with traditional financing is frequently difficult, if not impossible.
The conventional mortgage process begins with a lender looking at a borrower's credit profile. Based on the borrower's credit report and history, the lender will determine whether or not to approve the borrower for a loan and if so, what their interest rate will be. Single women or single women with children, in particular, tend to have weaker credit profiles. While it is easy to place the responsibility entirely on the borrower, as we have seen when talking about the wage and wealth gap, single women often face barriers that others do not, like the wage and wealth gap and having to balance being the sole provider and sole caretaker for their family.
With a weaker credit profile, single women are classified as riskier and are typically subject to higher interest rates. In addition, single women experience higher rates of subprime lending compared to single males, even when controlling for factors such as credit, income, and neighborhood location. Subprime loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk. These higher interest rates and more expensive mortgages put single women, especially women of color, who as we saw are less likely to accumulate any type of wealth or savings to use a safety net in times of crisis, in a position more likely to default on their mortgage, thus making them an even riskier investment.
Ironically though, a study by the Urban Institute found that as actual homeowners, women are better at paying their mortgages then men. But because of their greater perceived risk, single women must pay more on their mortgages than men. Thus women who are perfectly capable of paying back a mortgage may be denied loans simply based on their perceived riskiness.
In addition, women are also more likely to be older when they purchase their homes, and the properties they purchase tend to cost less. As a result of women buying less expensive homes in less nice areas, single women's homes appreciate more slowly then men's.
But programs like Habitat's can change all that - Habitat partner families only need to demonstrate that they are capable of repaying an affordable loan - a loan that is set at 30% of the partner's income. By being able to substitute volunteer time for a down payment, women who partner with Habitat are not denied access to homeownership because they have not been able to accumulate wealth, and instead, are able to take the excess savings from their affordable mortgage and begin to set aside money for future emergencies and future purchases.