At a time when house prices are continuing to rise, buying a home as a single person can feel like a daunting process. Single mortgage applicants rely on just one salary and one credit profile in order to secure a loan, so getting through the mortgage underwriting process can be a bit trickier than with two incomes. However, the more you understand about what the process entails, the better your chances will be of getting a lender to say “yes.”
Here are four crucial things that can help buy a house on a single income.
1. Clear debt and save hard for a deposit
Any debt you hold will reduce the amount a mortgage lender will lend to you, so it is important to consider clearing any outstanding loans and credit cards before you start saving for a mortgage deposit.
A student loan is the one debt that is less likely to affect your mortgage application, and should not concern you when you apply for a mortgage. Paying off your student loan in full will allow you more disposable income, making you a more attractive applicant in the eyes of lenders. However, student loan debt is cheaper than most other debt, so you’re likely to be better off clearing all other loans first. Even then, it is typically better to save more for your mortgage deposit than pay off a student loan. A larger deposit can provide you with less mortgage debt and access to a better mortgage rate, saving you more money in the long run.
In terms of a deposit, you will need at least a 5% of the value of the home you want to buy. Saving into a Lifetime ISA if you are eligible is worth considering. A Lifetime ISA is a government initiative to help first time buyers get onto the housing ladder and offers a 25% government bonus when the money is withdrawn and used to purchase a home.
2. Check your credit rating
When you apply for a mortgage on your own, lenders will be looking at just one credit profile: yours. Needless to say, it has to be in great shape.
It is always a good idea to review your credit report beforehand, and this is especially true of solo buyers. Companies like Experian and Equifax let you check your credit score and give you an insight into what you look like as a potential borrower to a lender underwriting team.
Make sure that your credit report does not contain any mistakes that will make you look like a bigger risk than you really are. If you see anything amiss, contact the credit reporting company right away so it can investigate on your behalf.
You should avoid doing anything that could hurt your credit, such as making big credit card purchases right before or during your application for a mortgage. And think twice before cancelling any old credit cards. You might think you’re helping your cause, but you’re actually reducing the average age of your accounts and lowering your credit utilisation ration, two things that could hurt your application.
3. Be realistic about your buying goals
Affordability is key when buying property. Whilst buying the most expensive home you can afford may be appealing, being tied to a very large mortgage that significantly limits your lifestyle may not be the best decision.
Start to budget now, understand how you currently spend your money and plan for how your bills may change. Many people assume that when they buy a property they will be better off because they will stop having to save for a deposit, but property ownership comes with maintenance costs which can sometimes be large and unexpected. There are also initial move costs, such as decorating or replacing appliances which are significant spends. Planning ahead, knowing your budget for a property and sticking to it is sensible.
4. Think about protecting your income
As single home buyers rely on one source of income to pay the lender, it’s a good idea to have some financial protection. If your employer doesn’t provide enhanced protection for long term sickness, you might consider looking into more robust coverage on your own. That way you’ll get help paying your bills should you experience an illness or accident.
If you would like to find out more, speak to our dedicated mortgage adviser by calling 0116 269 6311 or email info@furnleyhouse.co.uk
Your home may be repossessed if you do not keep up repayments on your mortgage.
