If you’re a single woman buying a home, affordability can be a significant hurdle to clear. While saving for a down payment with a single income can present extra challenges, it’s still possible to buy a home. Here’s a closer look at how to do it. Whether you’re applying for a mortgage as a single person or with someone else, a good credit score is essential. For example, most lenders require a credit score of at least 620 for conventional mortgages.1. Build Your Credit
As you prepare to buy a home, you’ll need to make sure your credit score is good. If it’s not, now is the time to build credit. Strategies to build credit can include making on-time bill payments and paying down credit card debt. To maintain your credit score after applying for a mortgage, avoid taking on new lines of credit while you wait to qualify for a home loan.
2. Save For A Down Payment
You likely know that you need to save up for a down payment. But how much should you save?
There was a time when 20% of the purchase price was the standard, but that’s no longer the case. You can qualify for a home loan with 3% down for a conventional loan or 3.5% down for a Federal Housing Administration (FHA) loan. If you’re an eligible veteran, active-duty service member or surviving spouse, you may not have to put anything down with a Department of Veterans Affairs (VA) loan.
Take some time to explore your loan options. If you can afford it, put down more than the minimum down payment to decrease your monthly mortgage payment.
Once you know how much you want to save for a down payment, it’s time to get creative with building your down payment fund. Consider setting up an automatic transfer from your paycheck to a dedicated savings account, cutting back on discretionary spending or picking up extra income with a side hustle.
3. Set Your Budget
While it’s tempting to browse home listings before setting a budget, stop scrolling. It’s critical to determine how much house you can afford first. You can use one of many affordability rules to land on an estimate. According to the 29/41 rule, Americans shouldn’t spend more than 29% of their gross monthly income on housing costs. Housing costs are more than your mortgage payment. You’ll also be responsible for property taxes, homeowners insurance and a homeowners association fee if a homeowners association (HOA) manages the home.
It’s recommended to keep your total monthly debt costs under 41% of your monthly gross income. You can use a home affordability calculator to run the numbers and figure out the home price you can comfortably afford.
If the home price you can afford is smaller than anticipated, it’s time to get creative with your housing search. You may have to eliminate “wants" and prioritize “needs” to whittle down your house shopping list.
4. Get Preapproved For A Mortgage
Before you tour any homes, it’s important to get preapproved for a mortgage.
Preapproval broadcasts to real estate agents and sellers that your home purchase offers are serious. A mortgage preapproval can give you the edge to move quickly when you find the right property.
