The number of young single adults purchasing homes is on the rise — as many as 47% of Millennial homebuyers in the United States in 2020 were unmarried. Single applicants can find it more of a challenge to secure a mortgage with only one salary and credit report. Fortunately, there are a number of ways young single professionals can successfully look more impressive to lenders.
Check your credit score
You need to have a strong credit score to impress lenders when you apply for a mortgage. If you have no or limited borrowing history, your student loan payments (if made regularly and on time) have likely built up a positive credit score for you. Also review your credit report to make sure it’s free of any errors; if you do spot mistakes, inform the credit reporting company to have them fixed. Mistakes can make you appear a greater risk to lenders than you actually are. Ultimately, the stronger your credit score, the lower the interest rates will be on your mortgage. It’s therefore essential to practice being financially responsible and start building credit early-on in life.
Consider government loans
You’ll normally have to make a 20% down payment on your mortgage. However, this amount can be difficult to save from just one individual’s savings, so be sure to carefully research mortgage types and interest rates to ensure you get the best deal possible, The Home Loan Expert advises. If, however, the down payment is just too expensive, you could opt for a more affordable government-insured loan instead of a conventional mortgage. For example, the Federal Housing Administration mortgage program only asks for a 3.5% down payment. Alternatively, if you either belong to the military or are a veteran, you may be eligible for a Veteran’s Administration (VA) loan. A VA loan comes with appealing terms — there’s no mortgage insurance, down payment, or prepayment penalties, and there are smaller closing fees.
Get a co-borrower or guarantor
If you can get either a co-borrower or guarantor on your loan, this can help increase your chances of qualifying, as well as help you obtain better loan terms. The credit history, income and assets of your co-borrower will be judged alongside yours by lenders when evaluating your mortgage application. It’s important, however, that your co-borrower is aware of what they’re signing up for by helping you out. Specifically, this means if you end up falling behind on your mortgage payments, the bank will also chase up your co-borrower, who is regarded as equally responsible. If this doesn’t sound like something you want to deal with, it’s best to leave it and wait until you’re in the position to qualify for a loan without help.
Securing a mortgage when you’re single can undoubtedly be more of a challenge. However, by building a strong credit score, considering using a government loan, and securing either a co-borrower or guarantor, you’ll be in a better position to afford your first home.