Budgeting for Homeownership: Mortgages for One Income Households
Key Takeaways
- Old bank statements settle the question of which expenses are frivolous, and a hard look back through a few months of them is where your weekly spend budget comes from, the one that has to prepare a single paycheck for both the down payment and the mortgage payments to follow, though the budget should still set aside something for the eating out and the occasional shopping spree, tempting as those can be, on the principle that managed money works harder for you.
- You are not the rare case that budgeting for a home can make you feel like when only your own income is there to work with, since more than one in four homebuyers were single at the time of writing, according to the National Association of Realtors, and although dual-income homebuyers tend to have more financial resources, options remain open to single-income buyers, with homeownership possible for couples and singles alike regardless of relationship status.
- If what you are trying to pin down is how much house one income can carry, the general rule of thumb is that your housing payment should not be more than 25% of your take-home income, and the calculators here can estimate a down payment and a monthly mortgage payment that you can adjust until the figures look accurate, and since other expenses will arrive on top of those two, knowing both before you negotiate increases your purchasing power.
- Check an agent out before you let one negotiate on your behalf, since a buyer's agent is the one bringing your best interests to the table and fighting for them, and talking with recent clients is how you find out whether that is how it goes, while the licensing, the credentials and the years spent in the business can be verified rather than taken on trust, as can the listings the agent is working now - the checks Bankrate suggests before you pick one.
For many in the U.S., budgeting for homeownership can seem especially overwhelming for singles that only have their income to work with. Don’t worry, you’re not alone. According to the National Association of Realtors (NAR), more than one in four of today's homebuyers are single. Even though dual-income homebuyers tend to have more financial resources, there are some great options available for single-income homebuyers.
Calculate homeownership costs
Know what you’re getting yourself into. As a general rule of thumb, your housing payment should not be more than 25% of your take-home income. You can use calculators to help determine how much to budget for your home. Use our down payment and monthly mortgage payment calculators to estimate initial costs. You can make adjustments with your calculations to get accurate figures. Of course, there will be other expenses. But, knowing your down payment and monthly payments will increase your purchasing power going into negotiations.
Spend smart, not hard
Plan a weekly spend budget that will prepare you for your initial down payment and mortgage payments. Crunched the numbers, now what? For starters, take a hard look at old bank statements and determine which expenses are frivolous. We’re all human. It can be tempting to eat out, go on a shopping spree, etc. so set aside some of your budget to those guilty pleasures. Find other ways to cut costs that make sense for you. Mint provides a variety of free budget templates to track your finances. Remember, managed money works harder you!
Speak with a mortgage consultant
Make sure to speak with a mortgage professional who understands the current housing market and can give you helpful advice. At American Financing, our mortgage consultants provide stellar service backed by thousands of customer reviews. Once you’ve completed your research, give us a call or fill out an application. We’ll be more than happy to guide you on your journey to becoming a homeowner.
Find the right buyer’s agent
Now that you know your very own recipe for homeownership success, it’s time to go out and get the most for your money! All you need is a negotiating wizard by your side to stretch your single income further. A buyer’s agent brings your best interests to the table and will fight for them. Bankrate provides excellent tips for picking the right agent.
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Talk with recent clients.
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Look up the licensing.
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Pick a winner.
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Select an agent with the right credentials.
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Research how long the agent has been in business.
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Look at their current listings.
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Ask about other houses for sale nearby.
Regardless of your relationship status, homeownership is possible for both couples and singles. What it boils down to is knowing how much home you can afford, budgeting to maximize your single income, working with the right individuals, and choosing the best mortgage program for you!
