A Guide to Purchasing a Home on a Single Income
In a housing market that increasingly demands dual incomes, navigating the path to homeownership on a single salary can feel like climbing a mountain with one leg. Yet each year, thousands of solo earners successfully unlock the door to their own homes through strategic planning, financial discipline, and creative approaches to the traditional buying process. Whether you're single by choice, recently divorced, or supporting a family on one income, this guide will walk you through steps and strategies that can transform the seemingly impossible dream of homeownership into your lived reality – without requiring a second paycheck to make the numbers work.
What steps should a single homeowner take in order to be financially prepared to purchase a home on a single income?
First, figure out what you can afford. Ask yourself, what amount will my cash flow allow me to put toward a mortgage each month? It’s important to also ask yourself, how much do you want to put toward a mortgage payment each month? Maybe you can afford a mortgage larger than you are willing to spend. Start saving the equivalent to a mortgage payment each month and determine whether or not you are still meeting your other expenses.
What percentage of income should someone realistically expect to spend on a mortgage?
Your monthly housing expenses should be no greater than 28% of your monthly gross income. To solve for this, add up all of your monthly housing expenses (mortgage, including interest, property taxes, insurance, and HOA fees if applicable) and divide that amount by your monthly gross income. This your income before taxes are taken out. Some experts have increased this ratio to 30% given the recent increase in home values.
How much should someone save for a down payment vs. other homeownership costs?
Remember that your down payment and your monthly mortgage payment are inversely related. So, if you increase your down payment, your monthly mortgage payment will be reduced. 20% is still considered a solid down payment, but many buyers cannot afford a 20% down payment. The average percentage of first-time home buyers in the US is 8%. Keep in mind that a larger down payment may allow you to finance the remaining a slightly lower interest rate. If you put less than 20% down, some mortgage lenders require you to purchase private mortgage insurance (PMI). This is not homeowners’ insurance. This insurance protects the lender if the buyer defaults. While purchasing a home has historically been more cost-effective than renting, there are costs that come with homeownership in addition to mortgage payments, such as repairs, upkeep, maintenance, and even renovations.
How can someone determine if they are financially ready to buy a home as a single homeowner?
You can determine if you are ready to purchase a home by calculating the amount you know you can afford to put toward your mortgage payment each month and making sure have stable income. Do you also have a sizable lump sum for a down payment and closing costs? Take a look at your credit score. The closer your score is to 800, the more opportunities you will have. Mortgage lenders take the debt of a potential buyer into great consideration. Try to get your non-housing debt manageable. As a rule, your monthly debt payments should be no higher than 36% of your gross monthly income.
Are there tax benefits for single homeowners?
Like any homeowner, single homeowners can deduct their mortgage interest and property taxes as long as your total itemized deductions exceed the standard deduction.
If you have any further questions on purchasing a home, feel free to reach out to the team of experts at Braun-Bostich & Associates.
