Are You Financially Ready To Become a Homeowner on a Single Income?
For some, the idea of the “American dream” involves becoming a homeowner. And although this can be harder to do on a single income, it’s certainly not impossible — but it’s also a decision you need to think about carefully before making. In today’s “Financially Savvy Female” column, we’re chatting with Charlotte Cowan Geletka, CFP, managing partner at Silver Penny Financial Planning, about how to know if you’re financially ready to become a homeowner.
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What are some signs that a woman is financially ready to buy a home?
If you have a down payment and you’ve saved six months of living expenses, you might be ready. [You should also] have additional cash flow and be able to be in your home for the long term.
It may seem like everybody around you is buying a home, but is it right for you? Do you plan on moving in two years? Then it’s not right for you. Do you have a down payment saved up? No, then it’s not right for you. Do you have additional cash flow saved up? Do you have a plan if you lose your job to pay the mortgage? Do you have a repair fund in addition to your emergency savings fund?
Is it ever advisable to put less than 20% down?
Before you consider [putting less than 20% down], speak with a financial advisor. I would speak to someone outside the mortgage and real estate [profession] because they have a vested interest to get you into that home. You need to get an objective opinion from somebody who’s not going to benefit from you being in that house.
Outside of the down payment, what costs does a prospective buyer need to be prepared for?
Moving. You can spend thousands of dollars moving and getting set up — [buying] furniture and all that kind of stuff. “Move-in ready” is an interesting term that never seems to be the case.
What are some ways to build savings now to put a woman in a good place to purchase a home in the next two to five years?
Get your down payment savings. I’ve had clients do it successfully, and it’s exciting to watch. If you have a goal in mind, get the goal. Target it, write it down, say how much you want to have in a down payment and then work towards it. Figure out how much you need to save a month. Keep that money liquid if you’re going to potentially purchase a home because you want that money ready when you find the home you want.
What advice would you give someone who is not financially able to buy a home on their own?
You can build wealth withing buying a home. The “American dream” has [changed, especially for] younger women. You don’t have to own a home to build wealth.
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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