Single Homebuyers – Here's What You Need to Know - Now is an exciting time for homebuyers! Interest rates remain near record-lows, and home prices are still affordable. So, for someone looking to purchase a home, the housing market looks very promising. Yet, for one portion of the population, procuring a loan can be a difficult task.
Experts say single homebuyers – anyone not married or in a dual-income partnership – are experiencing trouble finding lenders who will approve their loan applications. Mortgage lenders do lend to singles, but far less often than they do to a couple. In fact, according to the National Association of Realtors, singles only account for 35% of all recent homebuyers.
Why is this the case?
Simply put, lenders usually only approve a mortgage loan if the monthly payment will be less than 41% of the household's income. Since a single person only has one income to draw from, it is harder for a single person to meet this criteria. Because of this, singles are often required to have a higher credit score, a nearly perfect credit history, and proof of at least two years of employment at the same job. So, what can a single person do to overcome the obstacles they face towards homeownership? Here are three tips:
1. Consider assistance programs
There are both non-profit and government assistance grants designed to assist single-income individuals get into their first home. When you meet with a lender, ask about these options, and see if you should consider them. If you're close to being approved, but need a little extra boost, these programs might be the difference between a lender saying you're approved or denied.
2. Rent before owning
By renting, we don't just mean renting an apartment. Chances are, if you're a single person currently looking to buy a home, you already live in an apartment! What we mean is consider renting a condominium near where you would like to purchase a home. This allows you to shop the area for the best home to fit your needs. Also, lenders are more likely to approve a loan if your job is located close to the property you want to buy. So, if you want to live near the beach, rent a seaside condo and get a job in that town. Establishing an employment history in a particular area proves that you want to settle down there. Renting-to-own is also an option you may want to consider, especially if you have had a foreclosure or short sale in your recent past.
3. Save towards a down payment
This is good advice for any prospective homebuyer, but especially for singles. The more money you have to put towards a down payment, the more likely it is that a lender will approve your loan application. We've already established that lenders are more apprehensive to lend to singles because of the one income factor, but you can ease their worries by coming forward with plenty of cash on the table. If you can put a 20% down payment on the home, the bank will only have to lend you 80% of the home's total price, which will significantly increase the chances of the loan officer saying yes.
This article is brought to you exclusively by RealtyPin.com