More and more single women are purchasing homes alone. This is a guide to how to buy a house as a single mom.
Single moms might not have as much buying power as other home buyers, but we aren’t letting that stop us from home ownership.
A 2018 Zillow study says that even though single women can only afford to purchase 39% of U.S. homes on the market, we are buying them at a rate that far exceeds that of single men, who are able to purchase more than half of the homes currently for sale.
Eighteen percent of home buyers in 2017 were single women, according to the National Association of Realtors.
Meanwhile, only 7 percent of single men bought a home last year.
HOW TO BUY A HOUSE AS A SINGLE MOM
The Benefits of Being a Homeowner
Buying property helps build wealth.
A mortgage is a form of forced savings for many buyers, because it’s easier than trying to actually set money aside.
That’s why many of us prefer to buy rather than rent.
Becoming a homeowner is also a lifestyle choice. For example, a single parent could buy a house with a big backyard for their children, a playroom and a basement bedroom for their young teenager.
These things are harder to find in rental properties. And when you do find them, they can be very expensive.
Buying property lets you apply your own personal taste, and needs when choosing a home. In the future, the house you’ve chosen as a single person may not work for you if your relationship status changes.
The disadvantages of buying a house alone
Being a single homeowner also comes with it’s own set of challenges. But I’ll tell you from personal experience, you can do it.
One of those challenges is that it can be difficult to save up the down payment you need with a single income.
The amount that your bank or credit union is willing to lend you can also be lower.
You will also be the only person responsible for the upkeep and maintenance of the home. This is why many single people prefer to buy a condo. On the flip though, condos come with their own set of unexpected expenses.
Remember that this property will be all yours, and its value will likely increase over time.
In the long term, you will definitely come out a winner.
Step 1: Figure out how much you can afford
Buying a house as a single mom will be challenging, but it’s not impossible.
According to Zillow, it takes the typical single person nearly 11 years to save up the down payment for the typical U.S. home. More than twice the time it takes couples.
If you want to buy a home, the first thing you need to do is create a budget.
You’ll need to include all of your income and expenses, including debt repayment.
Then you’ll have a clear picture of your financial situation and how much you’ll be able to save. This step will help you figure out the maximum amount you can save toward your future home.
Online mortgage calculators can help you find your borrowing limit.
When the time comes to plan your purchase, think about all the additional expenses: notary fees, municipal and school taxes, maintenance, renovations, etc.
Step 2: Prepare your finances
After establishing your budget, you will be ready to prepare your finances to buy a home as a single mom.
Here are a few aspects you should carefully consider.
Improve your credit
If your credit has been damaged by hard times, there’s no better time to try to improve it.
You can do this by making your payments on time and avoiding maxing out your credit cards, for example.
Make sure that your credit report does not contain errors that could negatively affect you. If your mailing address is not up-to-date, your personal information is incorrect or a payment made on time has been marked as late, it could hold up your purchase.
Make sure that all the accounts on your file are actually yours. An account that shows up without your knowledge could signify identify theft.
Repay your debts
Because they can decrease the amount you’ll be able to borrow, you have to pay off your debts. When you buy a house alone, your finances will be less at-risk if you have less debt.
Save up your down payment
Before giving you a loan, your bank or credit union will require that you’ve saved at least 5% of the property’s purchase price. If you have less than 20% saved, you have to pay the insurance premium for the Canada Mortgage and Housing Corporation (CMHC). This price varies depending on the percentage of your down payment. The amount will be added to your mortgage loan.
If you have a Registered Retirement Savings Plan (RRSP), you can use it towards your down payment.
The Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 without being taxed. You could also accumulate the necessary amount in a Tax-Free Savings Account (TFSA) where your savings can grow, tax-free.
Factor in other fees
Buying a home involves a lot of one-time costs, like transfer rights (welcome tax), a notary, moving, landscaping and renovation projects, etc.
Step 3: Start searching for your dream home
We like to think of this as the ‘fun part’ of the process, but it can be really stressful.
Think about your needs, interests and lifestyle. Depending on how many kids you have, you will probably require more space.
Do you want to live in a particular neighborhood? Do you like the idea of renovating, or would you prefer a turnkey property? How far from the nearest school would you like to be? Are you planning to stay there for many years?
These are all things that you’ll need to consider, when thinking about how to buy a house as a single mom.
My old neighborhood was the absolute best; We were a block away from everything including a grocery store, bank, veterinarian, restaurants, coffee shop, etc.
A real estate broker can help you in your search and in your discussions with the seller. If you have already obtained a pre-approved mortgage, this may be an asset in your negotiations.
Before buying the home of your dreams, make sure that you have the property inspected by a professional. For a few hundred dollars, this step will keep your dream home from turning into a nightmare.
Choose an inspector who is a member of a professional association, and make that they have liability insurance. They will help you figure out what kind of major work needs to be done on the property, and whether it’s worth it to fix any ‘imperfections’.
Step 4: Choose your mortgage
When it’s time to choose your mortgage, your first instinct will probably be to go to your own bank. But they won’t necessarily provide you with the best rate. So it’s important to shop around. Here are the other things that you’ll need to take into consideration.
Fixed or variable rate
Because the responsibility of making payments falls squarely on your shoulders, you’d be better off with a fixed rate. If rates go up, so will your variable rate mortgage, possibly leaving you in financial dire straights.
If you feel like you’ll be in this home for the short term, it may be better to opt for a shorter duration. If you move or make changes to your mortgage, remember that you’ll have to pay a penalty if you break your contract.
If you’re planning major renovations, apply for a line of credit.
An advisor can guide you towards the best product for you, based on your needs.
Step 5: Protect yourself!
When you buy a house as a single mom, you don’t have a partner to count on in case of illness or job loss. So it’s important to properly make sure you’re covered financially.
Have a contingency fund
Experts generally recommend that you set aside three months’ worth of your salary in a contingency fund. As a single mom, I know firsthand that this is nearly impossible if you’re relying solely on your salary to do this.
This is where a side hustle can come in handy.
For self-employed individuals who may find themselves in more precarious situations, they recommend six months’ worth of your salary. This money can make up lost wages or even pay for urgent repairs.
Disability and critical illness insurance
If you have disability insurance through your job, it might be insufficient.
Normally, collective insurance doesn’t cover the entirety of your salary. It’ll benefit you greatly in the short run to get additional insurance to cover your mortgage during your invalidity.
As for critical illness insurance, the amount you receive after a diagnosis is helpful to compensate for a loss of income. It could also pay for expenses like a wheelchair or the services of a home care nurse if that becomes necessary.
Buying a house as a single mom has its own set of challenges, especially if it’s your first property.
However, don’t see your single parent status as a barrier between you and your dream home. The most important thing is that you’re prepared for this huge transaction.
The one additional piece of advice that I would give you (especially if you live in Canada), is to find a mortgage broker to help you get that mortgage loan. I used a broker to help me get the best mortgage that I could afford. I would say that it’s the best thing I did in that process.
If you still have doubts, consider discussing them with your advisor.