The Ultimate Guide to Buying a Home and Mortgage for Singles

Many people might imagine homeownership as an event that only occurs after two people have married and a financial partnership begins. Some mortgages are still structured to reflect this idea. But nowadays more and more single people without children are investing in their own home.

In fact, the share of single homeowners in the United States is the highest in more than 100 years, according to an analysis of US Census Bureau data by Haus.

With the rising costs of the home, the reduced purchasing power associated with a one-time income, and the way mortgages are structured, owning a home can not seem like easy. But he is quite doable.

We reached out to real estate and finance professionals for advice on how a single person can buy a home within their budget. Read on for their tips and ideas.

Tip # 1: Consider Government Guaranteed Loans

Even though it is substantial, having just one income to pay the bills inherently increases the risk for a lender.

“A single person cannot rely on a partner’s income for a mortgage, so if something serious happens, such as a medical emergency or a significant reduction in income, it will be difficult to make mortgage payments.” , Explain Kris lippi, a licensed real estate broker in Connecticut. “It can also be difficult to make that initial down payment. Government insured loans are a good option and also have a lower down payment requirement. “

One example is the mortgage program administered by the Federal Housing Administration (FHA). While a conventional mortgage requires a 20% down payment, an FHA loan only requires 3.5%.

Additionally, veterans should consider a VA loan, backed by the Department of Veterans Affairs, which can help borrowers secure lower interest rates with no down payment required or monthly mortgage insurance premiums.

Tip 2: don’t see (too) big

Consider the space you need as a single owner without a partner or children.

“Look for smaller houses with one or two bedrooms and a bathroom,” advises Martin Orefice, CEO of Rent To Own Labs. “This will end up with a much lower mortgage. “

Having a more manageable space will also reduce all your costs and bills.

Tip # 3: Improve Your Credit Score

Focus on your credit before trying to get a mortgage.

“If you are heavily in debt, it will be next to impossible to get a mortgage,” says Michael Dean, real estate broker and co-founder of Pool Research.

For most loans, you will need a credit score of around 600, but a rating of 700 or higher will help you get lower interest rates. According to Federal Reserve, 90% of mortgages in 2019 were taken by people with a credit score above 647 and 75% of mortgages were taken by people with a credit score above 700. The median credit score was 759.

You will need to pay off all major unpaid debts and pay your credit cards and bills on time to increase your credit score. (Payment history makes up about a third of your credit score).

Keep in mind that higher scores also mean that you will be able to make a lower down payment, which may be necessary if you want to acquire your dream home.

Tip # 4: Beware of Large Mortgages

Just because a lender will approve you for a bigger mortgage doesn’t mean you should dive in and accept it. Remember that only you will carry the nut, so be very careful about your monthly mortgage payment amount.

You need to think carefully before opting for an adjustable rate mortgage (ARM). ARMs start at a fixed interest rate that is typically lower than a comparable fixed rate mortgage. But an ARM rate will change after three, five, seven, or 10 years, and the rate will adjust based on market indices. Sometimes this means that your initially low ARM rate will go up and increase your monthly mortgage payment.

“If you go with a fixed mortgage rate, you will be able to plan ahead and budget your expenses accordingly,” says Dean. “You have to know where you are putting your money and what is expected in terms of payments if you are the only one paying the bills. “

Tip # 5: Consider a co-signer

If bad credit or other issues are interfering with your dream of owning a home, consider adding a coach to your mortgage, whether or not they plan to live with you.

Co-signing or getting a loan is a great option, says David aylor, the founder and CEO of David Aylor Law Offices in Charleston, SC

“If you have family members who can lend you money to make your down payment, it may be worth it,” adds Aylor. “But you should only go this route if you come to a reasonable deal, figure the numbers, and determine that you will all be able to make the budget work.”

Tip 6: Make a comfortable down payment

Down payments can be a tricky business. Saving for someone can be difficult, but if you can put down a substantial down payment, your monthly bills will be lower and you will have a good chunk of the equity in your home.

“You will pay 100% of the monthly payments yourself, and the larger your down payment, the lower your monthly bills will be,” says John Li, co-founder and CTO of New York’s Fig Loans. “You don’t want to go ‘poor house’ and struggle month after month to keep up with your high payments. “

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