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January 23, 2018 | home-buying

Single and Shopping for a Home? Practical Tips to Keep in Mind

While tradition may dictate that Americans meet, marry and buy a house together — in that order — a certain percentage continues to think outside the box when it comes to investing in their homes.

In 2016, 17 percent of all home buyers in the U.S. were single women, up from 11 percent in 1981. Seven percent were single men, though that number has dropped slightly from the 10 percent seen 36 years ago.

Analysts attribute the trend among women to low interest rates that make buying appealing, greater numbers of single women than before, and the fact single women are more likely than men to be parenting by themselves, reports the Pew Research Center.

“A lot of people in my circle of friends were women purchasing their homes when they got married, but I still felt like I wanted to build my own wealth and buy,” 30-something single woman Michelle Jackson recently told Bloomberg regarding her Denver, Colorado, home purchase. “If and when I met someone, it’s something that just added to what I bring to the relationship.”

All that said, qualifying for a mortgage as a single person isn’t necessarily easy. Though credit unions and banks are legally prohibited from discriminating on loan approval based on marital status, in some cases the mortgagor is hard-pressed to qualify based on one income and credit history.

If you’re considering buying a house as a single person — with or without another mortgagor — here are some practical suggestions to keep in mind:

Buying Alone

  • Before approaching a lender, get a free copy of your credit report and evaluate whether anything listed could be a hindrance to securing a mortgage. You may need to correct mistakes or pay down other debt before you’re considered a good credit risk.
  • Add up all the other expenses associated with home ownership — maintenance, repairs, insurance, property taxes, association fees, etc. — so you fully understand your financial commitment as compared to renting. You may want to have at least half your estimated annual expenses saved up before you take out a mortgage. “Homeownership is a big investment and a lifestyle change, so it's crucial to make sure you're financially prepared and have done your homework,” advises Meenal Vamburkar in Time. “It's better to wait than to find yourself over-stretched after committing to the major purchase.”
  • While you should always compare rates and lenders’ fees, FHA loans can be an excellent option for single buyers, offering lower interest rates and lower credit score requirements. Further, first-time buyers (which includes those who haven't owned a home for three years) may require as little as 3.5 percent down.
  • If you already have a specific property in mind, make sure you’re clear on whether expensive renovations may be necessary due to mold, insect infestation, dry rot, water damage, etc. Getting the home inspected is important.
  • Get a second opinion when choosing a house. You don’t want to make a rookie mistake, and a friend or family member can play devil’s advocate and draw attention to features or flaws you may not have considered.
  • Think about the future. How long is the house you’re considering likely to meet your needs? How likely are you to change jobs or significant others in the next decade? Will the house and neighborhood still be appropriate if you decide to expand your family, and will it be big enough? How saleable is the house if you decide to put it on the market in the coming years?
  • If you’ll be the only holder of the mortgage, but will be dependent on payments from significant others, tenants or others to make that work, ensure everyone is clear on how much they’ll contribute toward the down payment, mortgage payments, extra fees, property taxes, homeowner’s insurance, property maintenance, necessary upgrades and/or association dues. Regardless of how much you trust the others, you should draw up a cohabitation agreement establishing those exact commitments and legal rights, as well as a property agreement that establishes ownership of any possessions brought into the arrangement.

Buying with Another

  • When buying a house with another mortgagor who’s not your spouse, see an attorney about titling. Establishing “joint tenancy with rights of survivorship” provides you each 50 percent ownership in the home; if one of you dies, the survivor takes 100 percent ownership. Conversely, “joint tenancy in common” allows you to decide which owner is responsible for which percentage of ownership; if one owner dies, ownership is redistributed according to his will or the applicable probate process.
  • Anyone with whom you’re buying should be willing to share info about their incomes, savings, debt loads, credit scores, etc. All involved should be able to talk openly and honestly about impending financial challenges (e.g., is one of you a shopaholic?) and how much everyone is realistically willing to commit toward investing in a house. The last scenario you want is someone leaving a bad mark on your credit history because he can’t keep up his end of the bargain.
  • Understand what will happen should you need to dissolve the ownership arrangement. Basically, your choices are maintaining joint ownership or selling the property and dividing the assets.

If you take time to plan for the contingencies, buying your own home as a single person can be a turning point and a source of empowerment. If your finances are in order, there may be no reason to wait.

“I think buying a home is a way of living your single life fully” University of California professor Bella DePaulo recently told Bloomberg.

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