Buying a Home When You're Female and Single

by Stacy Francis, CFP®, CDFA

Are you thinking about buying a home? Here's some expert advice

A lovely little house with a white picket fence and a husband to buy it for her used to be the average little girl's fantasy, or so goes the stereotype. But these days, the average woman is more than likely dreaming about buying her own home. And according to statistics, she and her savvy single friends are setting records doing just that!

In fact, over 52% of women-headed households in the U.S. own their own homes and single women constituted the fastest growing demographic of first-time home buyers recently.

Nonetheless, the prospect of buying a home on your own can be daunting. In order to purchase the home of our dreams you need to get real about your finances. Here are some questions you need to ask yourself before you purchase a home.

Can you afford to buy a home?

Consider these two guidelines:

1) Your monthly mortgage payment, including principal, interest, real estate taxes, and homeowner insurance, should not exceed 28% of your monthly income before taxes.

2) Your total amount of debt (mortgage, credit cards, car payments, student loans, etc.) should not be more than 36% of your gross income--this is referred to as your debt-to-income ratio.

Sadly, due to low interest rates many individuals are buying more home than they can afford. They strap themselves with mortgage payments that stretch them to the limit and forget to budget for maintenance. When the first thing goes wrong with the home, they're in over their heads. Ladies, if you can't afford the sort of place you want to buy — with a loan that does more than just pay your interest — you may want to wait until you can pay a more substantial down payment.

Should you buy?

Are you planning to stay put for three years or more?

If you're not planning on living in the same place for at least three years, buying is not a good idea. You need to consider the cost of moving and the cost of buying and selling makes renting a smarter move if you plan on living there only for a short time.

Are you willing to maintain it?

Owning a home is more work than renting. No more calling the landlord when the plumbing breaks, the refrigerator stops working and the air conditioner dies.

Is your credit in decent shape?

Be sure to check your credit score at www.myfico.com before you decide to buy. Unless you have a credit score of 700 or above, you could pay above average rates to finance your purchase. That can be costly!

You are ready to buy!

By and large, whether you're single or divorced, the toughest part of buying a house is coming up with the down payment. However, the following resources are a good place to look for mortgages requiring low down payments.

Fannie Mae: This type of mortgage features a loan-to-value ratio of 97%, meaning you need only come up with 3%. Only people with modest incomes will qualify for this type of loan, and a pre-purchase homebuyer education class is required for approval.

Federal Housing Administration (FHA): This government agency doesn't offer mortgages, but it does insure residential loans provided by private lenders. This means that once you qualify for FHA insurance, you may buy a home with only 3%-5% down. FHA-backed mortgages have a maximum loan limit depending on the average housing cost in each region.

USDA Mortgage: 100% Financing No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage, too. The program is formally known as a Section 502 mortgage, but, more commonly, it's called a Rural Housing Loan.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

The Benefits and Risks of Owning a Home

by Stacy Francis, CFP®, CDFA

With all of the excitement in real estate lately, you might be wondering if you should take the plunge and buy a home. Homeownership has many advantages – both financial and personal. But there are many things to consider before you jump in and make your purchase. Here we take a look at some of the benefits and expenses of owning your own home.

Firstly, the differences between renting and homeownership are:

Tax savings There are possible tax savings to be derived because you can deduct mortgage interest and property taxes from your federal income tax and many states’ income tax if you itemize your deductions.

A more stable monthly housing expense Depending on the type of loan you choose, you may be able to budget your finances more definitely. If you choose a fixed rate, your monthly housing loan or mortgage expense can remain the same for the life of your mortgage.

Equity Equity is the difference between the fair market value (appraised value) of the home and the outstanding mortgage balance. It is possible to build equity in your home over the life of your loan. This will allow you to plan for future goals like your child's education or your retirement. But be careful, there are advantages and disadvantages to using the equity.

While there are advantages such as tax savings and equity, owning a home can cost a lot. Homeownership may not be right for everyone. You may not be in a situation in life where you are able to make the big commitment that is associated with owning a home.

So what are the risks of homeownership?

Monthly housing expenses can increase If you’re not careful, your monthly mortgage payment may be larger than your rent. While these higher monthly payments may be offset by a tax benefit at the end of the year, it is still a lot of money to let go at the time. It is recommended that you talk to a tax professional to understand your particular situation.

You become your own landlord This may sound like a good thing, and it certainly has its advantages, but being your own landlord means more responsibilities. If an appliance breaks, you will have to pay for its repair or replacement. You are also responsible for the maintenance and upkeep of your home and your property.

You must sell your house to move Owning a home is a big deal. If you decide to move one day, it isn’t as easy as packing up and leaving. Depending on the local real estate market, you might not be able to sell your home quickly.

Property values can depreciate Like with most products, the minute you purchase it, its value could depreciate. You can lose value in your home for a number of reasons, such as a recession, the condition of your home not being kept up, or a drop in a neighborhood's home values. If your home loses value and you have to sell it for less than you owe, you will be required to repay the full mortgage.

Overall, homeownership is a good investment for most people, but there are risks. If you understand the benefits and risks of homeownership, you can make the best decision about when to buy a home.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.