Why it's SO HARD for SINGLE PEOPLE to buy a home

Certified Mortgage Advisor
NMLS 1701021
September 16, 2021

Single and finding a home

Are you finding it difficult to find a home because most homes are out of your price range? If so, you're not alone. Most single people or people buying with a single income are struggling to buy home, mainly because everything is out of their price range. So, I'm gonna help you understand why it's so frustrating. Also, some solutions to help make it a little bit easier.

So if you're like me and dating hasn't worked out for you too well. You might be starting to get frustrated, especially if you maybe one day want to own home. And the thought of a single income mortgage payment sounds rough. And with each swipe, swipe, swipe your hope of happiness and buying home are dwindling.

Can a single person qualify?

Obviously the point of being in a relationship isn't so you can buy a home more easily but, it certainly helps to have more than one income. For example, let's take a person with a single income. Let's say they make $50,000 per year, and they have a couple of monthly that's around $500 per month. So using max purchase price calculator that solves that income math for us. That person with a standard conventional loan, 3% as a down payment would be able to qualify for home around $210,000. And with the median home price being at $347,900, that's certainly not enough income to qualify for the median home price.

Advantage of buying as a couple

Okay, well, let's fast forward a bit. Now let's say that person found their dream partner and maybe that dream partner makes $30,000 per year with $200 in student loan payments. Keep in mind, we're only talking about debt payments and not expenses. That's what lenders use to help you look at affordable. All of a sudden the affordability, according to the lender, the maximum purchase price that a lender would give to this couple goes up $172,000 to $382,000 as an affordable purchase price according to the lender. Again, this is not what you should budget, what you should take on as a home payment. This is just what a lender might qualify you for. This is just above the median home price in the US so even though the co-borrower on the loan has debt, their income helps increase the amount the two can afford tremendously, which is why it's so much easier with a double income household to be able to afford a larger mortgage payment. And you can try these scenarios for yourself using my free calculator in this website.

Single? What's holding you back?

So it makes sense why you might be increasingly frustrated as the median home price continues to increase. The housing market just isn't designed with single income mortgages. The two main things that will hold you back, if you are buying as a single person or with a single income are debt to income ratios that lower the amount that you can afford on a single income, this is the number that lenders use to determine the maximum loan, the maximum purchase price that they'll allow to have. And then also saving for a down payment and closing costs by yourself. Because with two people, it often goes a lot quicker.

Power of two credit scores

But also a lot of people don't consider that a mortgage with two credit scoring profiles is actually stronger than just one credit scoring profile. I can't tell you the amount of times I've worked with a client in the mid 600 range who couldn't qualify for a loan unless they had a co-borrower as well.

A single person need to consider

So how could buying a home as a single person be a bit easier? Here's some things I want you to consider, and then you'll want to come up with your own plan on how you're going to get what you want. So, unfortunately, there's no great solution to homes being out of your price range. And that's because lenders determine your maximum purchase price and maximum loan out based on your debt to income ratio.

What you need to change

This is only made up of two numbers, your monthly debts and your income. So one of those needs to change. So either the income needs, increase or debts need to decrease. There's really no good way around that.

Take your time

Also, you want to consider your timeline. You don't have to buy right now, just because you started on the process, it doesn't mean that you can't pause and take a break if you need to, because you want to consider what is the actual timeline that you're looking at? Because a lot of people, their timelines, a lot shorter then maybe the 5 to 10 year horizon that's better for purchasing.

Think of changes

Or is it possible your living situation could change? I know for me, there's no point in buying right now because I'm not even considering moving. So why would I want to buy, spend all the money up front on closing costs to then have to go sell, pay for closing costs again, and then move again after that? Buying for most people should be a five plus year decision. So if you have an expectation of moving within that time period, you might want to stick with the renting until you feel like you're in a much more comfortable space to do this longer term.

House hack fact

Also consider something like house hacking this isn't for everybody, but you could look at living with a friend. Again, this is not for everybody so don't freak out. If it's not for you, it's not for you... move on. But if you'd live with somebody, this can help you take on a higher monthly payment. Your friends income can't be considered on the loan unless they're actually on the loan with you, but you can choose to have somebody live in the home with you,  just as a roommate and they can help you take on a higher monthly payment. If you're looking at qualifying for homes, you're able to qualify for one, but it's just way more than you want to actually pay monthly. They can help with that.

Renting out can be an option too

Also you could look at buying a two to four units home. So this is an option where you live in one unit and rent out the other units. There's other things to consider here, but this is another way to help you look at affordability in just a slightly different way.

Manage your money

Also, you want to get really aggressive with your budgeting. I know you probably hear tons of videos talking about budgeting, budgeting, budgeting as a single person, but often most people do it really wrong. They look at an expense report of what they spend every month and then they don't do anything actionable about it.

You can try this apps

You want to use something called zero-based budgeting. There's an app that does this really well called "You Need a Budget", you can also use "Every Dollar", and I'm sure there are other ones out there as well. But sometimes a single person's budget can be a little too relaxed. I know that at least it is for me because I spend way too much money on Chipotle because there's nobody else using my money. So it's really easy to spend a little bit more than I probably should.

Look somewhere else

Also go with a home that no one else is looking at. So, anything that possibly has a potential for rehab, are there homes that you could do some work in or use a rehab

loan to help you find a home that not everyone else is competing against? So maybe the price could be a little bit lower. Also less pretty homes, I know we all want a home that looks great for Instagram. But a lot of people are looking at those homes too. You're going to find less competition in the home that maybe need some paint, maybe need to be updated,  just a little bit.

And don't go after the homes that everyone else is looking at. If you're seeing the home and it's this just shiny golden object and you're like, I want that home! The odds are, there are a lot of other people who do as well and the price for that's going to increase as multiple people bid on that home.

So are there homes that maybe are a little further up, maybe a little less than nice to look at, maybe need a little bit of work done that could help you get a lower price and a lower down payment on that as well.

Explore grant options

There are tons of local grant options that you can use like Bank of America. They recently came out with a down payment grant that is fantastic and you can learn more about that as well.

Talk with a loan officer
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Only for educational usage. All calculations should be verified independently. Win The House You Love LLC is not a lender, does not issue loan qualifications, and does not extend credit of any kind. This is not an offer to lend and should not be used to make decisions on home offers, purchasing decisions, nor loan selections. Not guaranteed to provide accurate results, imply lending terms, qualification amounts, nor real estate advice. Seek counsel from a licensed real estate agent, loan originator, financial planner, accountant, and/or attorney for real estate and/or financial advice. Read the full disclaimer here.