Buying Property Alone
If you’re living on your own and looking at buying a home, know that you can make your dream a reality with thoughtful planning and the right team of experts. Research from Freddie Mac shows 28% of all households are sole-person, and that number is growing. Over the past 40 years, the number of sole-person households has nearly doubled, and that’s a trend that’s expected to continue. Let’s take a look at some tips to help you achieve your homeownership buying goals.
Though going it alone can sometimes be a little more challenging than buying a home with a partner, sole purchasers can benefit from owning their own home just as much as anyone else.
The key is to be aware of challenges for single home buyers and make a plan. Often, the main challenge that single home buyers have to overcome has to do with income and buying power.
If you’re using a mortgage loan when buying a home, the lender will approve you for an amount they believe you can reasonably afford to pay back.
Having a significant amount of debt can add to your difficulties, as having a high debt-to-income ratio (DTI) limits the amount you’ll be able to borrow when buying. If your DTI is very high, you might not be able to get approved for a mortgage at all.
It can also be harder to find houses within your price range when you’re buying a house on a single income.
Your down payment is another important factor in the mortgage approval process and can also prove to be a hurdle for buying with only one income. After all, it’s generally easier to reach a savings goal when you have two people working toward it rather than just one person.
While many of the challenges sole buyers often face have to do with finances, there are additional factors that should be taken into consideration when buying, even if you are able to comfortably afford to buy a home on your own.
The mental and emotional impact of buying and owning a home, for example, is something that can hit harder for those who are handling every aspect of the buying process themselves. The home buying process can be stressful, and being a homeowner comes with a lot of responsibilities. Not having someone to share those responsibilities with can make homeownership more challenging.
Now, Let’s go over some strategies you can use to help overcome these buying challenges and become a homeowner. While these tips are aimed at sole buyers, these pointers are useful for anyone who’s considering buying a home.
Create A Savings Plan For Buying
To create a savings plan for your homeownership goals, you first need to figure out how much money you’ll need for buying a home.
If you’re using a mortgage when buying a home, you’ll need to save for a down payment and closing costs. It’s also generally a good idea to have some additional money tucked away in the bank for emergencies, so that you’ll be able to afford unexpected repairs to your home or keep up with your mortgage payments if you lose your job, for example.
In fact, many lenders require that borrowers have at least a couple months’ worth of mortgage payments saved up in case you have an interruption in your earnings.
To start saving, it can be helpful to create a plan that details exactly how much you’ll put aside each month and how long it will take you to reach your goal for buying that home.
Not sure how much you should be saving? Reach out to a professional real estate agent and lender team who can help you navigate how much you’ll need for buying.
Know Your Credit Score
When you’re buying a home on your own, you have to qualify for your loan based solely on your own finances and credit history. Needless to say, it has to be in great shape. It is always a good idea to review your credit report beforehand, and this is especially true when buying solo.
It’s important to find out your score so you know where it falls. If you’re not sure if it’s strong enough or where to focus your energy to improve it, meet with a professional for expert advice on your individual situation.
Explore your loan and Down Payment Options
Next, look into down payment programs so you can get a feel for what you’ll need to save for buying a home. Discuss program options with a loan officer and real estate agent to make sure you choose the program best suited for your financial situation. In this step, lean on the pros to determine what you’re eligible for and what’s right for your buying situation. The down payment can be the biggest hurdle for cash-strapped home buyers, but fortunately there are programs that make saving for a down payment a little more realistic.
FHA loans, for example, are popular among many first-time, low-income and single home buyers thanks to their more lenient credit requirements and low down payment options. When you get an FHA loan, the minimum down payment is just 3.5%. It’s also possible to get a conventional loan with a down payment as little as 3%, if you’re able to qualify for this option when you’re buying. If you’re eligible for a USDA loan, you won’t have to make a down payment at all, you’ll just be responsible for closing costs. The same is true if you qualify for a VA loan, which is available to U.S. military service members, veterans and some surviving spouses.
Pay Down Debt Before Buying
If you have a significant amount of debt, you might have a hard time getting a mortgage or saving for a down payment, especially if you’re buying on a single income.
Instead of trying to jump into homeownership right away, you might want to consider focusing all your efforts on paying off any debt you owe, including student loans, auto loans or credit card debt.
Paying off debt lowers your debt-to-income ratio, which typically increases the amount of money you’ll be able to borrow when buying and makes you more attractive to lenders, which can translate to a more affordable interest rate.
Plus, when you have smaller debt payments each month, you’ll have more money to save for your down payment.
Find A Co-Signer For Your Mortgage
If you’re having trouble getting approved for a loan on your own, it may be possible to have someone co-sign the mortgage with you. This means that they’ll also be legally responsible for the loan you’ll get for buying, and that their financial and credit information will be used in helping determine your eligibility for the loan.
This can be helpful if you have poor credit or insufficient income to qualify for buying on your own. However, it comes at a big risk for your co-signer. When someone co-signs a mortgage, they’re just as responsible for paying it back as the primary borrower, even if they don’t live in or own the home your buying. If you miss a payment, that can affect their credit just as much as yours. If you stop paying the mortgage altogether, they’re on the hook for the entire thing.
Depending on your loan, your co-signer may need to be someone you have a familial relationship with.
Think About Your Future Home and Your Needs
Buying a home isn’t something that should be rushed into, it’s something you need to be fully prepared for. If you’re unsure of whether homeownership makes more sense for you and where you’re currently at in life, take some time to think about why you’re considering buying a home and reflect on whether you’re ready to take on the responsibility of being a homeowner.
For example, are you willing to take on the additional housework (such as shoveling snow, mowing the lawn or making repairs) that comes with buying your own home? Do you plan to stay in the home for at least several years? What will you do if you want to leave but are unable to sell your home?
You should also spend time thinking about what you want. What type of home do you picture yourself in?
Think about your lifestyle, what you want out of your home and your needs. Think about how a home fits into your future goals. Is being close to work important? Do you need extra bedrooms in case you plan on expanding your family in the coming years? Do you need a lot of yard space? Lots of space for entertaining? If you have kids or plan on having them, do you want to only search for homes in highly rated school districts? It’s all up to you (and your budget) when buying a home.
Again, a professional can help you balance what you want and how much you should spend on your monthly housing costs to determine what type of home is right for you.
While buying a home solo can feel like a big challenge, it doesn’t have to be. If you lean on the professionals, they can help you navigate these waters and make sure you’re able to take advantage of the great opportunities in today’s housing market (like low mortgage rates) when buying your dream home.
Lean On Others For Inspiration And Guidance
When it’s just you, having a community to rely on can make a world of difference in ensuring that your home buying process goes smoothly.
Do some research and read stories from those who have already purchased a home while single and see what worked for them. Reach out to acquaintances who are also going through the process as a single person buying. Ask home-owning family members for their advice or invite a knowledgeable friend to come along with you on house showings to provide their input.
Just because you’re going it alone doesn’t mean you have to, well, go it alone.
Bottom Line When Buying
Buying a home as a single person can be challenging in a lot of ways, but it can also be incredibly rewarding. Owning your own home provides a lot of freedom and stability. If you’re looking at buying a home on your own, be confident that the dream is achievable. When you’re ready to begin your search, work with the professionals so you have expert advice each step of the way.
For more information about developing a strategic plan for buying your home, contact us here at The Old Mill Group. We are ready to make your dreams of buying a home a reality.
Buying Property With a Single Income?
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