Buying a home as a single person
Many people start looking to buy a home after a major life event, such as a marriage or the birth of a child. But others are unattached and simply looking to get a place of their own.
Single home buyers are hardly a rare group. In its latest Profile of Home Buyers and Sellers, the National Association of Realtors determined that 18 percent of recent buyers were single women while 9 percent were single men. Richard Barrington, writing for the mortgage resource HSH.com, says that as the median marriage age increases, younger first-time buyers are increasingly likely to buy a home on their own instead of first waiting to tie the knot.
The main advantage married buyers have is that they can pool their resources when buying. Each partner can contribute money from their savings account and other assets, and if both are working they'll have a more favorable debt-to-income ratio. Single buyers applying for a mortgage will be relying on only one income, so it's likely that they'll qualify for a smaller mortgage than a married couple.
If you're struggling to come up with money for a down payment, research available programs to assist home buyers. Mortgages available through the Federal Housing Administration, for example, allow you to purchase a home with a down payment of as little as 3.5 percent of the purchase price.
You may also look to others for some assistance with the purchase. While a loan from a friend or family member will count against your debt-to-income ratio, someone may be willing to gift you some funds.
A co-borrower, or someone who puts their name on the loan to help another buyer with the underwriting process, can be especially helpful. Kurt says they should know about the potential consequences of lending this assistance, however; if you don't keep up with your mortgage payments, the lender can seek remuneration from the co-borrower.
Your credit score will also affect your loan application. Your credit report will likely be in good shape if you've been regularly making payments on credit cards, student loans, or other debts. However, your score may be poor if you've missed payments or haven't built a solid credit history.
Check your credit report to see if you need to improve it before applying for a mortgage. Daniel Kurt, writing for the financial site Investopedia, says you should avoid major purchases before visiting a lender, since this can affect how much you can borrow. You should also wait to cancel older credit cards, even if you aren't using them. Doing so will shorten the average age of your credit lines, and any spending you do on the remaining cards will take up a larger percentage of your available credit; both situations will make you seem like a bigger risk to lenders.
Before you decide to purchase a home, make sure you're prepared for the responsibilities of homeownership. Elizabeth Weintraub, writing for the financial site The Balance, says free homeownership classes are available to let you know what to expect.
You'll also need to understand what will be required in maintaining and repairing a residence. When renting, these responsibilities fall to the landlord. If you own the property, you'll need to complete these tasks on your own or hire someone to do them for you.
Getting pre-approved for a mortgage will let you know how much money the lender is willing to loan you. However, you should understand that this is the upper limit. Ilona Bray, writing for the legal site Nolo, says you should also budget for costs such as property taxes, utilities, maintenance, and fees. It is usually better to purchase a less expensive home, as this will help you manage these expenses and build up some reserve funds for unexpected repairs.
Put together a list of needs and wants, and consider how many features you'll really need if you're living on your own. A smaller home can easily accommodate you while providing an extra room or two for a den or home office.
On the other hand, you may consider a larger home if you can afford it and plan on staying in the area for a long time. The residence may be able to accommodate you and your family if you get married in the future, or you could earn some extra income by renting out extra bedrooms.
You should make sure you'll be comfortable in the home, though, especially when it comes to safety. Check with the police department to see if a neighborhood is safe, and see if the home is likely to deter intruders. Some beneficial features include strong doors and locks, windows located a significant distance off the ground, and an alarm system.
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