Is Being Single the One Biggest Challenge to Homebuyers Today?: Massachusetts HomeBuyers HomeOwnership

With only half of adult Americans married today, it stands to reason that many aren’t waiting to get hitched before buying a home. In fact, the latest figures by the U.S. Census Bureau found that 38.4 percent of homeowners lack a partner.

 Yet while buying a home alone is hardly a rarity these days, single homebuyers face a tougher road in today’s seller’s market. The competition for homes is ferocious, so many single homebuyers are scrambling to have the financial means to get an edge.

 “If you are the single source of income, you typically don’t see the same type of earning power or aggregation of wealth. That can prove challenging in such a hot market,” says Katie Thurber, licensed real estate salesperson at Serhant.

Why single homebuyers might struggle today

 While a competitive housing market might favor buyers with two incomes rather than one, that isn’t stopping single buyers from entering the fray. “A lot of single people are looking to buy homes these days,” says Elizabeth Sugar Boese, a real estate broker with Coldwell Banker Realty. Many are “younger people who delay getting married until later in life, but still want to move forward investing in a home.”

 Another big group? “Recent divorcees who need a home after the split,” she adds. “With the interest rates as low as they are, individuals can often afford a home without the second income,” says Melissa Dorman, a real estate broker with Living Room Realty in Portland, OR. “This is especially true for folks who have bought homes previously and have equity to buy their next home with a larger down payment. Most of my single buyers are locking in long-term financing that competes with monthly rental prices.”

 Indeed, with fast-rising rental rates across the U.S., renting is not as appealing as it used to be. “The single people I know of who are buying homes are older millennials and Gen Xers who are tired of renting and having their monthly charges increase year over year,” says Jameson Tyler Drew, president of Anubis Properties.

Why single homebuyers might face higher interest rates

 Yet despite the many market forces enticing Americans to hop on the homebuying bandwagon right now, mortgage lenders could prove to be another hurdle for singletons, who will have to push hard to prove they can swing a large loan on their own. With inflation whittling people’s earning power, some lenders may worry single borrowers lack a buffer (that is, a spouse or partner) to help pay the loan if hard times hit.

 “Single homebuyers are at a higher risk of foreclosing on a home because they won’t have another person to fall back on during tough times,” explains Jason Gelios, a real estate agent with Community Choice Realty in Birmingham, MI, and author of “Think Like a Realtor.” In some cases, lenders will extend a loan to a single borrower at a higher interest rate to compensate for the potential perceived risk. This is what happened to Matt Wooldridge, founder of Invision Roofing in San Antonio, TX, when he applied for a mortgage.

 “The biggest challenge I faced when buying a home as a single person was a higher mortgage rate. Since I am a single-income household, it was much harder to convince lenders that I’ll be able to pay back the loan,” he says. “It took me quite a while to find a lender who was willing to offer me a mortgage, and even then, I was charged with a much higher rate than average. This has been quite a burden to pay back.”

How single homebuyers can find success

 While single homebuyers may face unique challenges in a competitive market, there’s plenty they can do to strengthen their stance and land a home they’ll love. Here are some strategies that can help.

Know how much house you can afford: Lenders typically will want a homebuyer’s debt from all sources (mortgage, credit cards, student loans, etc.) to account for no more than thirty six percent of their gross (meaning before taxes) income.

 “Usually the difficulty buyers encounter is that, with a single income, their debt-to-income ratio can often be tight,” says Dorman. “We have to be very mindful to stay within their purchasing range.” So the first step for single homebuyers (and all homebuyers) is to get a handle on their income, debts, and how a house fits into this picture. You can do this by plugging your numbers into an online home affordability calculator, which gives you your debt-to-income ratio instantly so you know how much house you can afford.

Get a guarantor to co-sign on your loan: Just because you’re on a single income doesn’t mean you can’t fortify your purchasing power in other ways. Getting a guarantor to co-sign on your mortgage application can give you the added financial boost you need to appear more attractive to lenders and sellers alike.

 “This helps you qualify for better terms, larger loans, and significantly ups your chances of approval,” says Cliff Auerswald, president of All Reverse Mortgage. Just make sure to choose your guarantor wisely, sticking to trusted friends or family, since they’ll be on the hook if you can’t pay your home loan.

Home in on houses larger families won’t want: One big advantage singletons have over couples is that they may be fine with a two-bedroom house or other size configuration that may not be big enough for a family. So let the couples get into bidding wars over the typical three-bedroom, two-bath homes while you home in on more downsized and affordable options.

“Or focus on a tenant-occupied home, which other people may overlook,” adds Dorman.

Team up with friends or family to buy a home: Have a close friend or family member you’d like to live with? Then it might make sense to purchase property together as co-borrowers.

 “You can go in with a friend and invest in a house together,” says Khari Washington, broker and owner of 1st United Realty & Mortgage. As with guarantors, though, you will want to make sure that your relationship is solid. “Keep in mind that, while a guarantor doesn’t have any claim to your title, the co-borrower holds a joint title with you,” Auerswald explains. “This could be problematic if your relationship degrades.”

Prep your down payment: Another way to fortify your standing with lenders is with a larger down payment. The more money you put down, the more likely you will be to qualify for a lower interest rate, since the lender sees you’re prepared and committed to homeownership.

 “Commit to saving twenty percent of your monthly salary, and collect a substantial down payment to reduce your loan-to-value ratio, qualifying you for better mortgage products,” advises Auerswald. Similarly, “single homebuyers who might not qualify for a loan on their own can possibly look to family for down payment help.”

Don’t get bid up: Even once you know your ideal price range, in a market where bidding wars are common, you may want to aim lower yet.

 “Single homebuyers really need to be aware of what their budget is and even shop in the lower part of their price range,” says Gelios. “This allows them to handle an unforeseen emergency.” You definitely want to have a little financial cushion for home repairs and upkeep costs.

Be flexible: Single or not, you can make your offer stand out by finding out what the seller actually needs.

 “In this market, cash isn’t always king, even if it’s the highest offer,” says Chris Cerrone, a real estate agent as well as a single homebuyer and seller in Las Vegas. “I just accepted an offer on my other home because the buyer structured it to my needs.” Things like being willing to lease back to the sellers while they figure out their next move can make a difference.

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