Married couples can have a distinct advantage when it comes to buying a home. The bank looks at their combined income to determine the amount that they’ll loan, so it’s often easier to qualify for a higher mortgage.
While it’s a bit harder for a single person to buy a home, qualifying on your own is a definite possibility! Buying a home as a single person can be a smart move, and we’ll give you some tips that can help make it happen.
Get Your Credit Under Control
Banks heavily rely on credit scores when it comes to making mortgage decisions. When they evaluate a couple, they’re averaging the couple’s individual scores, so there’s an opportunity to smooth over any mistakes that one person has made. As a single person, you won’t have that luxury. Since the bank knows that all of the payments fall on you, they will take an even closer look at your credit score.
Order a copy of your report to check for any mistakes, and fix any you find. After that, make sure you’re paying all of your bills on time and working hard to reduce debt. Both of these actions will play the biggest role in increasing your credit score.
If your score is low because you don’t have a lot of credit, it’s time to get your first credit card. Make small purchases using the card, then pay them off right away. You don’t have to carry a balance to improve your credit score.
Save Save Save
It’s perhaps even more important for a single person to save up a lot of money before buying a home. First, you’ll have to save up the full amount of the down payment on your own. This has to be at least five percent of the cost of the home, according to Canadian law, but having a higher percentage saved up could help you qualify for the loan you want. You’ll also need to have the money needed for the closing costs. This is an amount that’s usually between 3 and 5 percent, and it’s in addition to the down payment you’ve saved.
Furthermore, it’s nice to have a fairly substantial emergency fund as a single person. Things like repairs or the loss of a job will have a greater effect on you than they would on a couple.
Talk to the Bank
Until you talk to the bank, you can only guess what you’ll be able to qualify for. Ask a mortgage lender to give you a pre-approval. This is a formal process that verifies your income and looks at your credit report. It’s far more accurate than a pre-qualification, which gives you an estimate based on stated income. During the pre-approval process, you’ll be able to work out any kinks. For instance, those who have freelance income or who receive a lot of overtime and bonus pay sometimes find that they qualify for less money than they think.
With a pre-approval, you’ll be able to comfortably shop for a home that you know you can afford.
Consider a Roommate
In buying a home, you’re probably trying to establish a more independent lifestyle, but you shouldn’t immediately discount the idea of a roommate. Whether you’re buying a townhome or a two-storey home, a roommate can help make things more affordable. And with the extra space you’ll have in a larger home, it’s easier to attract high-quality roommates.
This move may not be for everyone, but if you have a good friend you could live with for a few years, it’s a great solution. You can factor in rental income if you build a home with a secondary suite, making it even easier to qualify for a mortgage.
Many single people purchase “starter homes” that are smaller. They might only have one or two bedrooms along with incredibly affordable price tags. Aside from these benefits, most people also have this idea of the excitement of shopping for a family home with their future spouse. They don’t always picture themselves raising a family in this first home.
Often, this makes sense, but you should also think seriously about what you might want for the future. For instance, one- or two-bedroom homes have a very specific type of buyer, and when you want to sell the home to move up, you may struggle to find the right buyer. You’ll also need to live in your home for at least 5 years — and probably closer to 7 or 10 — for you to have enough equity to make the sale profitable.
If you choose an affordable three-bedroom home, you’ll have more options. There are more people looking for a home like this if you’re trying to sell it a few years down the road. It also may be all you need for your family once you start one. Your future spouse will probably be quite happy that you already have a home ready.
Buying a home as a single person can be a challenge, but the opportunity to build equity every time you make your monthly payment is quite attractive. Come see what we have to offer and talk to one of our New Home Advisors about the types of homes that could meet your needs and budget as a single buyer.