6 Things To Know When You’re Single and Ready to Buy Your Own Home
Building wealth is part of building stability, not just now – but for your future. As a single, independent person, you too can own a home. Together, let’s take a look at some steps you can take to make homeownership a reality on your own. We also have some surprising statistics about other single people already taking the leap.
For starters, regardless of someone’s relationship status, one of the most common hurdles to owning a home is pulling together a down payment.
As a single person, it might feel like not having the added benefit of a partner’s second income may prevent or significantly delay you from accomplishing your goal of homeownership. However, the fact is, as noted by The Wall Street Journal, single-person households are on the rise and “one of the biggest demographic trends of the past 50 years.”
To put this in perspective, it’s estimated single-person homes account for a whopping 28% of all households—35 million homes—in the United States. Plus, these numbers are expected to rise, as homeownership continues to take priority over things like marriage and having children.
Something else you might find interesting:
Single women currently outpace men when it comes to owning a home, despite women statistically making 20% less per year. According to a LendingTree report, the numbers work out to be that on average, single women own around 22% of homes, compared to less than 13% of single men.
Bottom line: there are plenty of single people already becoming homeowners and you can, too!
So, let’s take a look at some of the benefits of buying a home while single, as well as tips to make this milestone your reality.
1. The Benefits Of Buying A Home vs. Renting
If you’ve settled into a location you love, have a stable income, and are financially responsible, investing in a home is a great way to build wealth and work toward a nest egg for your future self.
Other benefits include:
You rule the roost!
Enjoy the hustle and bustle of city life instead of a more suburban setting, or vice versa? Want a minimalist decor or something more eclectic? No matter what your preferences for your home are, the only opinion you have to contend with is your own!
Tax deductions, and more tax deductions!
Sure, married people and those with children get some tax breaks that single people and those without children do not. However, as a single homeowner, you can reap tax benefits when it comes to property taxes and, currently, mortgage insurance premiums as well.1 Check with your trusted tax professional to discuss what you could possibly start deducting after a home purchase.
Property taxes are currently deductible up to $10,000 per year. Mortgage insurance is currently deductible as well. As a single person, this deduction applies to loans all the way up to $750,000. If you were married, it would be capped at $375,000 (if married and filing separately).2
Your rates are your own.
Simply put, if you have solid credit, you don’t have to worry about anyone else’s score impacting your interest rates or overall ability to qualify for a loan.
Think before you post anything too personal on social networks. Avoid posting pictures that could reveal your home address, and be aware of posting something that could be used to reset a password, such as a pet name, mother’s maiden name, or high school attended.
2. Finding The Best Mortgage Type For You
As mentioned, saving up a down payment is usually one of the biggest concerns for anyone looking to buy a home, especially if you’re only working with one income.
Although putting as much down as possible will help make your monthly mortgage payments lower (and save you on interest), keep in mind that you don’t have to wait until you have the often-cited 20% saved up before you can buy your home.
For example, FHA loans typically require a low down payment, as little as 3.5%. They’re also less strict in terms of what your credit score is. This makes them an ideal option for first-time home buyers, or anyone who happens to have minimal cash to work with.3
3. Keep Mortgage Insurance And Other Extra Costs In Mind.
Affording your home isn’t just about the mortgage, of course.
If putting less than 20% down, you may be required to pay for mortgage insurance each month as well.
As someone working with a single budget, it’s especially important for you to remember this, and other “extra” costs such as:
- Closing costs like home inspection(s), title fees, running credit reports, etc.
- Property taxes
- Home owner’s insurance
- Homeowner’s Association (“HOA”) fees, depending on where you settle down
- Maintenance / repairs / renovations
4. Crunch Your Current Numbers.
The reality is, buying a home is a serious commitment, relationship or not. But as an independent person with only one income to fall back on, homeownership can really put some serious strain on your finances and budget. However, this is only true if you’re not careful or realistic.
That’s why it’s important to take a hard look and be aware of:
- Your current financial stability – This could include thinking about things like is your current job stable? Will you be living in an area with enough employment opportunities within commuting distance, if you were to be laid off? Do you have an emergency fund set aside for unexpected emergencies and repairs?
- Your current credit score – Naturally, it’s important to know what your credit score and history is like. This will play a considerable role in the loans and interest rates you qualify for.
- Your current spending – Taking a look at your monthly expenses. This will not only give you an idea of what your future utility costs maybe, but also help you identify areas where you might be able to cut back on spending to help you save up a down payment or put extra toward paying off your mortgage!
5. Give “Future You” The Gift Of Financial Stability.
This was briefly touched on above, but it’s worth repeating:
As a single person, there is no partner’s second income to fall back on, in the unfortunate event, you temporarily lose your income or life happens in some other way.
That’s why it’s important to build an emergency fund to create a buffer for these kinds of events. If nothing else, you want to have some extra security so that if the need for repairs or replacing, say, a major appliance comes up, you won’t have to stress.
Tip: Consider a Home With a Second Bedroom.
You may already want this extra space by default, but if not, there are several reasons why looking for a home with at least two bedrooms may benefit you in the future.
First, it helps you “future-proof” your investment, should you decided to settle down and have children later. You will already have the extra space and won’t feel an immediate need to upgrade or relocate.
Second, if your financial situation changes, having this extra space will allow you to take on a roommate who can help split the cost of your mortgage by paying you rent.
As an alternative, especially if you live in an area where tourists are common, a second room allows you to make some extra cash to put toward your mortgage by renting it out on home-sharing sites like Airbnb.
Finally, should you decide to move later, it’s helpful to think about who your future buyer(s) might be. That second bedroom expands your list to include single-family buyers.
6. Enjoy the hunt for your new home!
Although there are many things to consider in the home buying process, this is an exciting time in your life.
Remember to enjoy the fact that you get to make all the decisions that go into your home and the location you’ll live in.
And now that you’re ready to take the plunge and turn the key on a home all your own, it’s important to think about what you should be asking during the process. Here are six questions to ask before buying.
If you’re looking to purchase a home and would like a professional to help craft a mortgage solution that works for your unique situation (and future goals), we’re here to help you get started. Contact one of our mortgage advisors today to see how we can help you turn the key to your new home.
1 Please consult your tax advisor.
3 FHA Loan example scenario, rate 3.426% with an APR of 4.578% as of 2/25/2020 10:09 AM EST. The APR calculation is based on a 30-year fixed-rate mortgage in the amount of $240,000 for the purchase of a single-family, primary residence with 96.5% loan-to-value (LTV) or 3.5% down payment, minimum borrower credit score of 740, estimated points of 1% of the loan amount, and origination fee of $1,295 plus 1.75% FHA funding fee with 360 payments in the amount of $1,086. Payment amount does not include taxes and insurance, which means your monthly obligation will be greater. Actual payment amount will vary based upon credit history, rates in effect at the time of consummation, LTV, mortgage insurance premiums, and other credit factors. Program terms available may vary based on the state and county in which the financed property is located. The APR is subject to change at any time prior to consummation, and individual APRs may vary for loan purchases and loan refinances due to loan programs being offered, loan volume, or other factors. All borrowers are subject to qualification, underwriting approval, and lender terms and conditions. Terms, conditions, and rates are subject to change without notice.
This is not a commitment to lend. Programs available to qualified borrowers. Subject to credit approval, underwriting approval and lender terms and conditions. Program terms available may be based on the state or county in which the financed property is located. Programs subject to change without notice. Additional restrictions may apply. Important information will be provided to you in the disclosures you receive after your loan application has been received. Please consult your tax advisor regarding the deductibility of interest.
While Opes Advisors, a division of Flagstar Bank, Member FDIC, Equal Housing Lender, uses all reasonable efforts to ensure that this information is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, a division of Flagstar Bank, therefore, cannot be held liable for any loss arising or indirectly from the use of, or any action taken in reliance on, any information appearing in this.
Opes Advisors, a Division of Flagstar Bank | Member FDIC | Equal Housing Lender