Become A Solo Mortgage Mogul
When you were growing up, there were probably certain milestones that you imagined you would reach in your adult life that would be momentous and important. Falling in love and getting married are on that list of milestones for most people, as is the dream of one day owning your own home. As the age at which Americans are getting married slowly creeps up, the question has begun to emerge: Is it better to buy a house after you get married, or should you try to get your foot on the property ladder earlier, in your single life? Like so many questions surrounding real estate decisions, there truly is no single correct answer. The best decision for you will depend on your life circumstances, your career, your plans and dreams — and, yes, your love life, too. Before you decide to buy a home (or decide not to buy a home) as a single person, think about these things and ask yourself how they apply to your life and situation. How stable is your career? Like it or not, your financial picture is going to be absolutely critical in your decision — or ability — to purchase a home. This is true for anybody who’s trying to buy a house, but it’s doubly true for single people seeking to buy because you only have one source of income: yourself. You don’t have a spouse with better credit or a higher-paying job to help you out — or even a spouse with a lower-paying job that’s still contributing to the household. This means that your finances, credit, savings, assets and liabilities, and everything else that you have to put together to apply for a mortgage loan should be in a squeaky-clean condition so you can get the best deal possible on a loan. This isn’t news to most people who are considering buying a house, but what they often fail to consider is the long-term stability and viability of their career. Or they might not even plan on staying in that career for much longer. If your master plan in life is to buy a house and then become an Instagram influencer while renovating it … well, that’s a lovely dream, but it also means that this most likely is not the best time in your life to be considering a major purchase with a loan that you’ll be paying off for well over ten years. Objectively assessing your own income and earnings — and the probability that your skills will still be in demand in the years to come — is never easy, but think about the alternative. The worst-case scenario is not that you won’t qualify for a mortgage loan; it’s that you will and will use it to buy a house, then lose your job. If you’re working in an industry where the hiring process is long and convoluted, or if there aren’t a lot of alternative employment opportunities near you, then you’ll want to face this worst-case scenario head-on. What would you do if you were to lose your job while you were paying off a mortgage loan? Do you have other skills you could fall back on if that happened? It may feel morbid to make a plan for how to handle a career tanking that never actually happens, but it’s so much better to be prepared and not need those plans than for life to catch you flat-footed and annihilate your ability to own a home in the near future. How happy are you in the area? Let’s say that your finances are in solid order and you know that you have job stability in your area for many, many years to come. Great! Maybe you’re ready to buy a place to live somewhere — the next question is, do you already live in the market where you’ll eventually want to buy? You won’t be locked into homeownership forever, of course; you can always sell. But if you want to sell your house before you’ve been living there for two years, you will likely have to pay hefty taxes on any profit you make from the sale. So if you don’t think that you’ll be in the same area in two years, it’s probably best to keep saving up your money and wait to buy a house somewhere else. That two-year window is far from a guarantee, however. Home prices generally rise over time, but that rise consists of pockets of peaks and valleys. If you happen to buy during a peak, two years later could be the midst of a valley, when you’re more likely to lose money — or at least not make as much as you could have on your home sale. Ideally, you’ll want to stay as long as it makes sense for you and your lifestyle, so if you’ve toyed with the idea of moving to a different metro area or an entirely different state, it might be wise to hold off on your home purchase. Do you have roots here? How strong are they? It’s not at all uncommon in the modern world for children to move across the country from their parents, siblings, and hometowns, and it’s also not uncommon for life circumstances to emerge that bring people back together. Think about the support network that you have in place nearby — and the support network available to your loved ones who live away from you. And think about what you would do and which options would be available to you if something were to happen to a parent, sibling, or someone else whose safety and health you’d want to prioritize. Alternatively, you might want to consider how you’d manage if something were to happen that left you incapacitated for a period of time. This could be as simple and impermanent but inconvenient as breaking a leg, or as serious as a newly diagnosed chronic condition. Of course, you don’t want to make major life decisions on a series of what-ifs, but if you already know that you have a family member in poor health and may need to move nearer to them (or move them nearer to you) sooner or later, then you should definitely take that into consideration as you’re determining whether or not to buy a home today. What does your ideal living situation look like? Some people enjoy having roommates while others prefer to live all by themselves. And some only want to cohabit with romantic partners or family members. Think about what you want out of an ideal living situation; it might not be possible to achieve immediately, but if you’re going to buy a house, then you should try to get as close to that ideal situation as you possibly can. The easiest scenario to navigate in many situations is living alone; you just have to determine how much room you need, where and what you can afford to buy, and move forward from there. If you want roommates, things get a bit more complicated. Do you already have those roommates identified, and if so, how long-term are they? If there’s a chance that you may have to look for new roommates while you’re living in your residence, then you should think about the areas that are most attractive to the types of people you’d most like to have as a roommate and target them for your purchase. How about your love life? Even if you’re not married or partnered up yet, that doesn’t mean you won’t be at some point in the future. Do you already have a significant other? How serious are things? If it’s possible that you might be moving in together in the next couple of years, then you might want to consider looping them into the decision-making process in your home purchase so that you’re choosing a place that appeals to both of you. On the flip side, don’t let your partner fully dictate your choice; if you’re the person who’s securing and paying the mortgage, then this house needs to work for you first and foremost. Buying a house when you’re single can be a smart investment if you think through the decision and make sure you’re choosing a home that will work for you for at least a few years. Once you are ready to partner up, you’ll have equity built in your home and can use your first purchase as a foundation for a family home where you’ll live for years to come.
Boost Your Credit & Your Monthly Mortgage Payment
Some people are under the mistaken impression that you must have good (or even great) credit in order to buy a house. That’s truly not the case — there are plenty of opportunities for people with poor credit to start on the journey toward homeownership and end with a set of keys to their very own home in their hands. But it’s true that buying a house with bad credit can be a challenge that not everybody is equipped to face. If your credit isn’t exactly shiny and pristine, there’s still hope for your dream of owning your own house. Assess your situation, do what you can to improve it, and you’ll be working on the fun part of home buying (the shopping part) before you know it. Face the music Maybe you don’t know your exact credit score or what’s on your report ... you just know it’s, you know, not great. That’s perfectly understandable and nobody is judging you for shrinking from the truth a little bit, but the first step toward fixing the problem of a poor credit score is understanding exactly how bad the situation is so that you can start addressing the low-hanging fruit and easy-to-tackle issues first. So if you don’t know what your credit score is or have access to what’s on it, now is the time to procure a copy of your credit report, which you can request for free. You might be nervous about what’s on the report, and that’s entirely natural, but refusing to look at it isn’t going to solve any problems — so if it helps, just tell yourself that your score is as low as it could possibly be and you owe millions of dollars on your credit report. Maybe that’s true, but if your situation is even a little bit better, you’ll feel pleasantly surprised! Check for errors Believe it or not, there are mistakes on credit reports just like any other document, and if you haven’t been paying attention, then you might find some on your report. Getting mistakes removed can feel tedious and time-consuming (and, let’s face it, it is), but you’ll be improving your credit without having to spend any money doing it, and that can be a solid payoff all on its own. Take that copy of your credit report and run down it line by line to see if you can find anything that’s worth disputing. Obviously, larger line items are going to be worth more time than smaller ones, but everything that doesn’t belong on your report is worth disputing. It might take some untangling to get there, but it’s going to make a difference in the end on how quickly and easily you get in the door of a home of your own. Do what you can to improve where you can You can still buy a house even if your credit isn’t perfect or very good — and we’ll get to the specifics of how in a minute. But the fact of the matter is that you’re going to get the very best deal on your mortgage loan if your credit is in decent shape. That’s important because it affects how much money you’re going to pay overtime on the house; the lower your mortgage rate, the less you’ll pay, and you won’t be able to get a low rate with poor credit. So instead of throwing your hands up and accepting your fate, start looking for ways to improve your credit score right now. First and foremost, if there are any bills you can pay automatically, sign up to do so; late payments will wreak havoc on your credit score. Once you’re paying all your current bills regularly and on time, start tackling the highest-interest debts first. If you’re in default, see if you can set up a payment plan with whichever entity now owns the debt; that may take some investigating to figure out. But any efforts you can make to improve your financial situation and your credit now will benefit you later when you’re actively looking for a house. Meet with a housing counselor and take classes The Department of Housing and Urban Development offers resources for buyers (especially first-time buyers) who are struggling with credit issues and affordability. It’s well worth checking out because they can often direct you to additional resources (even grants and loans for down payments) that could make all the difference in your ability to reach the finish line. Visit https://www.hud.gov/buying/localbuying to see if HUD offers any programs in your area. Know your loan options There are a few different types of loans that are specifically geared toward buyers with poor credit or financial struggles, including FHA loans, USDA loans, or VA loans. If you’re a veteran, then it’s a good idea to contact the Veterans Administration and ask for information about VA loans, which require a credit score of 620 and often offer very good rates even for borrowers with credit challenges, and you can get a loan with no down payment at all and with no private mortgage insurance (PMI) penalties. If you have a credit score of at least 580, then you can qualify for an FHA loan, which is a loan with a lot of flexibility — it’s not restricted to first-time homebuyers, for example, and the loan requires just a 3.5% down payment (although if you can put more down, you’ll get better terms. Employment qualifications for an FHA loan can also be looser. A USDA loan is available only in some rural areas for some borrowers who have a low-income range for the area. These also require a credit score of 620 and don’t require a down payment or PMI, so depending on your income and where you’re buying, they can be a good option for some borrowers. Private mortgage loans are also available even to borrowers with poor credit, but you may need to make one or more of the concessions listed below. Pay upon PMI If you don’t have a full 20% down to bring to the sale, it’s standard procedure for the lender to charge an additional mortgage insurance every month on top of your payment. This is usually calculated as a percentage of the total loan; it can be well worth it for buyers to pay PMI if it means building equity and working up the homeownership ladder. Offer a bigger down payment Alternatively, if you have poor credit but you happen to have good access to a lot of money, then it might make sense for you to offer a larger-than-average down payment to offset your lack of credit. Some lenders will accept a riskier borrower with more skin in the game, so to speak, so it’s worth a shot if you’re able to come up with those large amounts of money before your home purchase. Bring a co-signer to the table Borrowers whose credit isn’t good enough to get a loan on their own also have the option of bringing a co-signer to the table who can also be financially responsible for the loan. This is a big deal, and most co-signers will be family members — all of the normal advice about entangling yourself financially with family members applies even more stringently here, but if there are no other options, bringing a co-signer in can get a deal to close that was otherwise lost for good. Be realistic about your price range It’s incredibly important for homebuyers who are more financially challenged than they would prefer to be ultra-realistic about the budget they can afford and how they plan to pay for it. The last thing you want on your credit report is a foreclosure, and the best way to avoid one is to make sure you’re not getting in over your head in the first place by shopping aggressively within your price range and aiming low if at all possible. You aren’t obligated to stay in the home you buy with poor credit forever; it can be a jumping-off point to something better, but you have to get your foot in the door first, which might mean compromising here and there. Refinance when you’re settled Homeownership can help boost your credit in a big way; that financial stability and equity building will only benefit you over time. And after some time, you can take advantage of your newly polished credit to refinance. Depending on what mortgage rates are doing, you might even spend less money every month on your mortgage, be able to get rid of your PMI, or otherwise tweak your payment to your best advantage. There’s no reason why you can’t buy a house with poor credit. It just is going to require a little extra work and planning on your part, but the end result — a home of your own — will be worth all the sweat and tears you put into it.
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