If you are single and thinking about buying your first home, make sure you do your research and take your time. Start learning what you need to know now so you are ready with a plan before you start viewing properties. The real estate market is fast-paced. When you find the right home for you, moving quickly with an offer to purchase is necessary in this competitive market. The more you know ahead of time and the better prepared you are, the more successful you will be securing your new home.
Here are a few important considerations for single home buyers (women and men):
Know What You Can Afford
This includes not only affording the mortgage, but also the taxes, insurance, and maintenance. It also includes having enough money set aside for emergencies (they are bound to happen). The conventional wisdom is that you should have 6 months of expenses set aside as your emergency fund. You also don’t want to be ‘house rich, cash poor’. You need to have enough money left over to enjoy your life, buy the things you need, and put some money aside for saving and investing.
For guidance on how much you may be able to reasonably spend on housing, consider the 28 percent rule. Most financial professionals recommend that you allocate no more than 28 percent of your gross (pretax) monthly income toward housing-related costs, which includes your mortgage payment, property taxes, insurance, and any housing association or condo fees. So someone making $5,000 per month could potentially spend a total of $1,400 on housing expenses each month without compromising other financial priorities.
Keep in mind that the 28 percent rule is not one-size-fits-all. The amount you may be able to spend may be more or less depending on your current debt level, income stability, and financial goals. The important takeaway is to set a financial limit that makes sense for you—and stick with it.
There are many different types of loans, and some with as little as 3% down payments. You should contact a trusted loan officer early in the process to advise you what kind of loan program best suits your cash requirements as well as your housing and lifestyle goals. After discussing all the options with your loan officer, you will know how much you need for a down payment, and approximately what your monthly mortgage payment will be at a given home price.
Be Sure Your Financial House In Order
Check your credit report so you’ll know what your credit score is, and how you may appear to potential lenders. Are you staying on top of your monthly payments and are all of your accounts in the clear? If you see any glaring issues or adverse accounts, you’ll need to resolve them before moving forward with a purchase.
While most homebuyers are shopping as a duo, you’ll make your case to lenders as a solo applicant so your salary, savings, and credit history will do all of the talking. You need to make sure your financial house is in order.
Protect Your Assets
When you are buying a property alone it is very important that you have adequate insurance coverage for life, disability. and healthcare. You might also want to look into setting up a trust so that the proceeds from your insurance policies go to your independent beneficiary if something happens to you.
As to naming the person who will receive your home when you die, a validly executed Will or Revocable Living Trust should accomplish your objective. A Will requires probate for real estate, a properly drafted, properly funded Revocable Living Trust would allow the house to pass to your designated survivor without going through probate first. We would recommend working with a qualified estate planning attorney who can answer your legal questions and ensure that your goals are met.
Make a Priority Checklist
Before you start looking at homes, make a checklist of needs versus wants. It will help keep you focused as you encounter nonessential amenities that might tempt you to compromise on your priorities.
Those with children might put a playroom and a good school district on the top of their list. Others may need a spare bedroom to rent out for extra income, or an in-law suite if they are caring for elderly parents. And older buyers may wish to narrow their search to a condo near public transportation and/or medical facilities.
Remember that you can always change things you don’t like about the house, but you can’t change where the house is located, so make sure the location fits your lifestyle needs and wants.
Consult Experts and Take Your Time
Since buying a home may be one of the biggest financial decisions you will make, it is important to work with people who can provide you with expert guidance. Choose a real estate agent and lender early in the process so you have trusted advisers that you can ask questions of who can point you in the right direction.