Single Homebuyer: You Can Be Young, Free, And A Homeowner
The Single Homebuyer Is Not Crazy
Buy a home on your own when you're a widow or widower, or are divorced or separated, and nobody raises an eyebrow. But choose to be a single homebuyer when you're young and unencumbered, and you're an object of curiosity.
Not in a bad way, you understand. It's just your friends are likely to see you differently -- as if you'd announced you don't own a smart phone. Others will admire and even envy you.Verify your new rate (Jan 16th, 2018)
You'll Be Exceptional ...
There's a reason people will look at you differently: you'll no longer be one of the herd. In the National Association of Realtors' 2016 Profile of Home Buyers and Sellers, only 17 percent of those purchasing were single women, and a measly seven percent were single men.
Furthermore, most of those buyers were older and had owned homes before. The median age for single female purchasers was 50, and only 36 percent were first-time buyers. For single men, the same figures were 47 years and 37 percent first time buyers.
... But Not Too Exceptional
It's good to stand out from the crowd, but nobody wants to be a freak. And a young, single homebuyer won't be.
Ellie Mae is a company that monitors mortgage applications, and its Millennial Tracker program focuses on those born between 1980 and 1999. The Tracker's latest quarterly report shows that 46 percent of those in that age group applying for mortgages were single.
Do You Fit The Profile?
Ellie Mae's Millennial single homebuyer has some interesting average characteristics:
- Gender: 57 percent male, 40 percent female, three percent unspecified (bet you weren't expecting so many men)
- Age: 28.1 years
- Loan amount: $170,084
- Appraised value of home: $203,345
- FICO credit score: 722
Ellie reckons the average debt to income (DTI) ratio in this group was 36 percent. Your DTI is important, especially as a single earner. The ratio equals< your total monthly debt payments divided by your gross monthly income, and lenders look at that carefully.
You Don't Need An Expensive Home
According to the Mortgage Bankers Association, the nationwide median price of existing homes in the third quarter of 2016 was $239,100. Single Millennials paid on average $203,345 -- not that much less.
Probably the most important factor you need to remember when buying is affordability, so go for something that's not going to break your budget. After all, it's not like you need acres of living space when you live alone.
You May Not Need A Fixed Mortgage
One characteristic of younger, single people is that they move more often and keep their homes fewer years than older folks.
If you expect to be on to bigger and better things within a few years, why pay 4.32 percent for a 30-year fixed loan when you can pay 3.30 percent for a 5/1 ARM?
Chances are good you'll be selling up by the time the loan begins adjusting in five years.
Borrowing Caps Are Up!
However, if you are a high flier and want a big loan, there's good news for you. From Jan. 1, 2017, for the first time in more than a decade, the amount you can borrow with government-backed and conforming loans has increased.
For a single-unit home, the maximum you can borrow with Fannie Mae or Freddie Mac mortgage is now $424,100 in most places. This also applies to VA home loans with zero down. In high-cost areas, the limit is as high as $636,150.
For FHA loans, the "ceiling" is now $636,150, while the "floor" has risen to $275,665.
Down Payments Are Smaller
There are plenty of adults under 37 who are prosperous. But while the $6,000-$7,000 needed to buy an average home is just beer money for some, it's still a lot of cash for many younger people.
It's generally tougher for Millennials to find financial security than it was for their parents and grandparents. Today's high levels of student debt only worsen the problem.
But saving a down payment is not impossible today. Fannie Mae's HomeReady and Freddie Mac's Home Possible programs allow 97 percent financing. They require no down payment from you if you qualify for a loan with a Community Second mortgage, grant, or gift.
Owning your own home involves more expense than mortgage payments. You face -- with your single salary and remaining savings -- occasional maintenance and repair costs, homeowners association fees, property taxes, insurance premiums and utility bills.
If you can't comfortably save for your mortgage down payment, you may later struggle to meet those obligations.
On the other hand, if you wait until you're 100 percent sure you can cope with any possibility, you could end up renting for the rest of your life.
It's not just normal to be nervous before purchasing; it's a good sign. According to Evans' Law, "If you can keep your head when all about you are losing theirs, then you just don't understand the problem."
So become a single homebuyer when you're ready. Don't be overconfident, but don't be unnecessarily scared either.
What Are Today's Mortgage Rates?
Today's single homebuyer has many mortgage options to choose from. These include low down payment loans, ARMs with low rates, and government-backed programs. The mortgage you're offered depends on many factors, including how aggressively you shop for your loan, and how many quotes you get from lenders.Verify your new rate (Jan 16th, 2018)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.