Fewer single men and women are buying these days, thanks to crimped finances, student debt, and tougher lending standards. Before you take the plunge, consider whether you’ll be able to handle the costs on your own. The transition from renter to homeowner can prove much more complicated than expected. As a single buyer with imperfect credit (and if you’re young, without a long job history) you can face several hurdles throughout the lending process before eventually finding and closing on a Nashville home or condo.

buying a home while singleBuy What You Can Afford – Really!

When qualifying for a home mortgage as a single guy or gal, you only have your own income to bring to the table — no spouse or significant other help out. Sure, you could cite a possible rental income from posting a spare bedroom on Airbnb or Craigslist, but not all lenders will count that ‘expected’ additional income.

Not only is the amount the bank will loan you going to be less than it would lend to a couple with a larger shared income, but you need to make sure it’s a mortgage payment you can afford if there could be a brief or long-term blip in your financial profile. If you lose a job, have a health issue, or anything else happens which might affect your ability to cover your monthly costs, you won’t have help to cover the additional monthly costs. So, while you are on your own, don’t overextend.

Use Programs That Will Save You Money

Singles getting a mortgage with only one income should look at FHA loans, which typically offer lower interest rates and require lower credit scores to qualify. First-time buyers, which includes those who haven’t owned a home for three years, can make a down payment as low as 3.5% of the purchase price. FHA loans require more underwriting and more documentation, so lenders may not offer the program at first; be sure to ask. They’ll also make finding the right home harder, because sellers will be more likely to take offers from people using traditional loans.

If you do go the FHA route, the Homeowners Armed with Knowledge (HAWK) program will cut you a break on mortgage insurance costs if you go through housing counseling. And even if you CAN get a home loan with only 3.5% down, always put down 20%. Why?

Always Put Down 20%

Almost all financial advisers recommend putting down at least 20 percent of the purchase price to make sure you can sell the house in the future, even if prices fall. The less you put down, the greater the probability of being underwater (owing more than the value of the house) at some point. But that’s not all!

You’ll also have a smaller, more affordable monthly mortgage payment. But most important today, many banks won’t give you a mortgage without 20% down. Bottom line: If you can’t scrape together the 20%, then you probably can’t afford to buy just yet. Keep shacking up with your old college roommate for another year or two.

Compare owning to renting.

You can’t necessarily afford a mortgage payment that’s the same as your rent bill. There’s homeowners’ insurance and taxes to consider, and additional utilities and maintenance costs. Ask the existing homeowner what she pays for gas, electric, water, sewer, garbage removal and lawn maintenance. Remember extras like condo or neighborhood association fees. Build it into your budget. Ask colleagues and friends to recommend vendors who can help you keep the house in shape.

Consider moving costs.

At a minimum, you’ll spend time away from work and shell out for packing supplies. Then you’ll need money to fix up and furnish your new home. Abbott set aside $20,000 for moving, painting, and furnishing her new guest bedroom and dining room.

Keep in mind you’ll be in charge of long-term repairs.

During your home inspection, ask the inspector to explain everything that will need to be replaced or repaired, and make sure you know the age of each major system in the house. That will form the basis of your to-do list for the coming decade. “The biggest mistake people make when they buy a home is not to consider the non-routine expenses,” says Jason. “You’re probably doing one major project a year.”

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