Should a Single Person Rent or Buy?

Posted on January 10th, 2022 at 8:39 AM
Should a Single Person Rent or Buy?

I’m single; should I buy a house?

The short answer: probably.

It’s no secret that there are many benefits to owning a home. From deducting mortgage interest on your taxes to building equity, homeownership has the potential to catapult you to a new way of living.

The problem is, buying a home is not a cheap date. After all, it’s not just the sale price you have to consider. It’s the closing costs, property taxes, and homeowner's insurance, along with a whole slew of other bills. Taking on this task as a single person can seem daunting, but it might be more doable than you think.

In a recent study conducted by Ellie Mae, a mortgage software and technology leader, 47% of millennial homebuyers are actually single. Single persons can transform their lives through homeownership with the proper knowledge, planning, and assistance. If you’re interested in making the move, Maleno is here to help.

Reading this piece could also affirm if renting is actually a better choice for you right now—and that’s okay if it is! Part of making a smart purchase is knowing the right time to do it, and that timetable is different for everyone. Thankfully, renting comes with its own benefits that are worth considering.

Woman in red blazer holding a cell phone

Know Your Options

Be it a single-family home or a quaint city condo, the type of home a buyer may choose can vary greatly. Ultimately, availability and your wants, needs, and budget will determine the kind of property you decide to purchase. For this reason, it’s worth asking yourself:

  • Why do I want to buy a house right now?
  • What do I hope to gain from the experience of homeownership?
  • Why is buying better for me than renting?

Maybe you want an independent lifestyle with a yard and neighbors more than a few inches of drywall away; perhaps you want the added financial security of a tenant renting the other half of your duplex. Knowing what options are available to you and understanding your own goals will help you make the best decision for the long term.

Once you know what kind of home you’d like to purchase, you should start considering what type of mortgage loan you may want to pursue. A fixed-rate mortgage or Federal Housing Authority (FHA) loan is often an excellent option for a single buyer.

Why? A fixed-rate mortgage maintains the same interest rate throughout the life of the loan. For a borrower, this means your monthly payment will never change, so you’ll always know exactly how much of your income to budget toward your mortgage. As a single buyer, that kind of stability can be vital. You’ll also be able to assess loan length options and choose a payback period that best fits your budget and lifestyle without depending on someone else in the mix.

Given your current finances, you might also consider an FHA loan. FHA loans allow buyers with lower credit and reduced incomes to purchase homes at competitively low rates. Those with credit scores of 580 and above qualify for down payments as low as 3.5%. However, because the downpayment is less than 20 percent, borrowers must acquire a Mortgage Insurance Premium and have a debt-to-income ratio of less than 43%.

In addition, most mortgage loans require proof that you can make a downpayment; lenders typically need to see bank statements to show that you have independent access to your down payment cost. However, down payments for FHA loans can come from many sources, including financial gifts from a family member, a subsidized grant program, or your own savings account.

Though loan length tends to be longer with FHA loans - usually between 15 and 30 years - their acquisition requirements make homeownership accessible to many potential buyers.

Woman holding house keys

Know the Benefits

If you’re getting serious about buying a home, it’s likely because you can imagine the benefits involved. As a single person, you have the potential to purchase a home that fits your specific tastes and lifestyle.

Though you’ve probably heard it many times before, it’s worth noting that homeownership is a valuable long-term investment. Monthly mortgage payments are a sort of forced savings. That is, every penny you put toward your mortgage builds equity and increases your overall net worth.

Homeownership also allows for more tax deductions on your annual filing. Homeowners can claim deductions on interest paid, so even if you have a high rate as a single buyer, you’ll likely recoup some of those losses when you file your taxes. Some buyers may be eligible for additional write-offs, including closing costs and moving expenses. You might consider talking with an accountant throughout your buying process to maximize your gain in the end.

Keep in mind that as a renter, the end of a lease allows your landlord the chance to raise your monthly rent payment as they see fit, making the affordability of your current situation hard to predict long-term. Mortgage payments, however, are a stable monthly expense.

Fixed-rate mortgages never change, so the amount of your first and last payments will be the same, no matter the length of the loan or changes in the market. FHA loans are subject to interest changes less than or equal to 1% at a time and must come with a 25-day warning from the lender. Regardless of how the market impacts interest over time, interest on an FHA loan will never change by more than 5%. FHA borrowers can calculate their maximum payment at the onset of the loan and budget accordingly.

Your first home could also become a source of income. For example, suppose you meet someone, have a family, and need more space to grow together. Rather than sell your house outright, you might consider turning your home into a rental property. Opening your home to qualified tenants can cover the cost of your mortgage while turning you a profit.

Aside from the financial benefits, owning a home comes with an increased sense of pride. For the single buyer, homeownership can give you a greater sense that you are in control of your life. From how you landscape to how you decorate the inside, owning a home allows you to get creative about how you live.

Plumber fixing bathroom sink.

Know the Challenges

Though homeownership has its rewards, it also has its challenges.

Single people have less buying power than those with two or more incomes. Lenders will approve borrowers for loan amounts they can realistically pay back, and for a single person, that typically means approval for a lesser amount. As such, single buyers may have to adjust their expectations of size and location to find a home within budget.

Though the freedom of homeownership is appealing to many, it’s also a lot of work. Many first-time buyers don’t consider the amount of maintenance and preparedness it takes to own a home.

For a single person, all tasks and catastrophes are yours to handle. Whether it’s dealing with a leaky roof or putting in hours of lawn care, there’s always a part of the house that needs your attention.

Be prepared to learn a lot about caring for a home, and give yourself the grace of some trial and error. Moreover, don’t be afraid to call on a trusted friend or family member to help you tackle projects around the house. What might seem overwhelming to you could be the chance for a loved one to build on a hobby or skill.

Woman looking at finances

Make a Plan

If you’re serious about owning a home, you need to start planning now. First, consider your current living situation, income, and goals. Know what kind of home you want to purchase and what type of loan best suits your needs.

Secondly, start paying down your debt. Paying down debt, particularly any debt attached to credit cards, is one of the quickest ways to increase your credit score. A higher credit score means a better interest rate on your mortgage loan, ultimately lowering your monthly payment and overall purchase cost. You’ll also have more credit available should your home need any major work.

Now is also the time to start saving. Aside from the necessary down payment and closing costs, having money available for projects and potential emergencies will make owning your home far less stressful. Come up with a realistic savings amount to put away each month and do it consistently. Following through with a consistent savings plan is also a good measure of whether you’re in the proper position to purchase a home.

Make the Move

So, are you ready to buy a house? Affordable homes for single buyers make their way to the market every day. If you’re ready to start seriously looking at homes, Maleno’s team of trusted, professional agents can help get you started.

Do you think you need a bit more time? That’s okay, too. If you’re looking to upgrade your current rental while still saving for a home, Maleno rentals are your answer. Contact our office to speak with a leasing consultant about available listings today!

Contributed by Ethos Copywriting

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