Homeownership isn’t just for married folks. Though going it alone can sometimes be a little more challenging than purchasing with a partner, single people can benefit from owning their own home just as much as anyone else.
Married couples make up the majority of home buyers (61%, according to the National Association of REALTORS®), but 100 loan singles collectively make up the second-largest share, with female buyers making up 17% of recent home buyers and male buyers making up 9%.
Wondering about the process of buying a home as a single person and what hurdles you should look out for? Here’s our guide for anyone looking to pursue the path to solo homeownership.
Be Aware of Challenges For Single Home Buyers
Often, the main challenge that single home buyers have to overcome has to do with income and buying power.
When a couple buys a home together, mortgage lenders will typically include both of their incomes when calculating how much they can afford to borrow. So, if one spouse makes $40,000 a year and the other spouse makes $60,000, they have a combined household income of $100,00, giving them a lot more buying power together than what either of them would have as an individual.
If you’re using a mortgage loan to purchase a home, the lender will approve you for an amount they believe you can reasonably afford to pay back. For single middle- to low-earners, this can make mortgage approval more challenging.
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. 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 buy a house on a single income. If you’re only approved for a loan for $100,000, for example, that can seriously limit your home search, depending on average prices in your area.
Your down payment is another important factor in the mortgage approval process, and can also prove to be a hurdle for single buyers. 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 single buyers often face have to do with finances, there are additional factors that should be taken into consideration, even if you’re 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 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.
Additionally, something that every potential home buyer should think about is whether it makes sense for their lifestyle to own their home. If you prefer to have the freedom to move around more frequently, or if you just aren’t sure if it makes sense for you to settle down in one place at the moment, renting may be a better option for you.
Tips For Overcoming Challenges
Let’s go over some strategies you can use to help overcome these challenges and become a homeowner.
While these tips are aimed at single home buyers, they’re useful for anyone who’s considering purchasing a home.
Create A Savings Plan
To create a savings plan for your homeownership goals, you first need to figure out how much money you’ll need to purchase a home.
If you’re using a mortgage to purchase 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.
This can add up to a lot of cash.
Say you want to buy a $200,000 home. You plan to put down 10%, or $20,000. You also need money for closing costs, which, in this scenario, end up costing around $6,000. Then, your mortgage lender asks that you have 3 months of reserves saved up. If your monthly payment is $750, that means you’ll need an additional $2,250 leftover in the bank when all is said and done.
At the bare minimum, you’ll need to save a little over $28,000 to make it happen. If that sounds like a lot, you can also look into loan options that allow you to go lower on your down payment (more on that in a minute).
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.
Not sure how much you should be planning to save? Using a home affordability calculator will help you figure out your price range, which can give you an idea of how much cash you’ll need.
Explore Your Loan Options
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%. On that $200,000 home, that’s $7,000.
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. A 3% down payment on a $200,000 home is just $6,000. Still a considerable amount of money, but a bit easier to save for than a 10% or 20% down payment.