Through the 21st century, the number of Canadians buying a home on a single income is steadily growing as more remain unmarried. Since single mortgage applicants rely on only one salary and one credit profile, it can be trickier to obtain a mortgage. However, there are many instances in which buying a house on a single income is the best thing to do, and it is possible to get a mortgage if you plan ahead and ensure that you are in a good financial position.
When Buying a House on a Single Income Makes Sense
There is no “right” time to buy a house, and it can be even more nerve-wracking to purchase a home on a single income. However, there are times when buying a place on a single income does make sense.
If you are nervous about buying a house on a single income, remember the things that home ownership will help you achieve. Buying a small home is a big commitment, but it gets you on the road to equity and sets you up for the ability to buy a larger house later on. If you think of your home as a financial asset, then the money you put into your mortgage will work for you instead of a landlord.
Above all, if the perfect home in your price range becomes available on the real estate market and your finances are in good shape, take the plunge. If you wait, you may find that someone else has already snatched up your dream home.
How to Buy a House on a Single Income
Owning a home on a single income is possible and, in some cases, this can be the best course of action. Here’s what you need to do to make it happen:
Check Your Finances and Credit – Relying on one income for a mortgage means that your finances need to be in exceptionally good shape. In the time leading up to when you try to get pre-approved for a mortgage, try to reduce your debt and build savings. Also, review your credit score, make sure it doesn’t contain any mistakes and avoid doing anything that could hurt your score, such as making large purchases on credit.
Look into Government Programs – Saving up for a down payment can be challenging on only one income. A mortgage requires a down payment of at least five percent. Take some time to investigate government programs, such as the First Time Homebuyers Incentive, Home Buyers Plan, and tax rebates.
Arrange a Co-Signer if Necessary – Having a co-borrower or guarantor on your mortgage can sometimes help secure a mortgage and get a better rate, especially if you do not have a long credit history. The lender will look at the guarantor’s income, assets, and credit history in addition to yours when assessing the application. Make sure your guarantor knows the risks of co-signing since they will be responsible for making your mortgage payments should you fall behind.
Get Pre-Approved – Once you are confident that your finances are in order, contact your lending institution for pre-approval. Getting pre-approved gives you an amount of money you can borrow for your mortgage in writing so that you can begin looking for a home within that range. From there, you can start to budget and decide whether you want to get a house with the full amount, a smaller amount, or hold off for a while longer.
Have a Plan – As you budget for buying a home, it is always good to have a strategy for when things go wrong. Make sure to include all the expenses for your home, such as closing costs, property taxes, utilities, regular bills, and any renovations needed. Ensure that you have a solid emergency fund in place in case a large appliance breaks down or there is damage from the weather. It also helps to have a list of local tradespeople like a plumber and electrician in case there is an emergency.
Try to avoid letting the long process and possibility of obstacles keep you from securing the home of your dreams. Owning a home has many benefits, and living on a single income should not stop you from having choices. Having a home on a single income is entirely possible if you plan for it. Let the real estate agents at RE/MAX help you find the perfect home and secure a mortgage on your single income.
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