Is it wise to buy a home alone?
With only one income to tap for a down payment, a mortgage and upkeep costs, a single homebuyer takes a bigger risk. At times, though, the rewards are worth it.
In a lot of ways, Gabriel Martinez is a typical 25-year-old guy. He likes to hang out with his friends, and he raises holy heck on the weekends in the downtown club scene. He has a girlfriend and a steady job as an engineer for IBM.
But unlike most of his friends, Martinez is a homeowner.
"There were a couple of reasons (for buying a home)," Martinez says. "Monetarily, it was the right thing to do, and I knew I wanted to be in the downtown area for a while."
So Martinez bought a one-bedroom condominium near Coors Field in Denver, home of the Colorado Rockies baseball team, which endeared him to many of his friends when the team played in the World Series in 2007.
"I had a lot of guys surfing my couch that week," he says.
In this area, Martinez is atypical. Although single people were responsible for roughly 30% of total U.S. home purchases in 2007, single men accounted for only about 9% of total buyers. Women accounted for twice as many single homeowners, according to the National Association of Realtors.
Research shows that this disparity between the genders has been pretty stable since 1997. As far back as 1981, statistics indicated single women were more likely to purchase homes than single men. Some experts attribute the trend to a purported female "nesting instinct" -- I'm not sure that hypothesis would bear up in the lab -- and an equally dubious male inclination to roam.
If you've ever discussed the subject with a single homeowner, you might be tempted to believe the difference in behaviour has less to do with evolution and more to do with math.
"It was the best investment I ever made," says Kathryn Bernstein, a buyer for the Trader Joe's supermarket chain. She bought a one-bedroom condo in Boston five years ago. "I was throwing money away on rent; the housing market was getting really strong; rates were low; the economy was good. I got in at a good time."
Martinez uses a similar rationale to explain his decision: "It was a buying-versus-renting question. Once I did the number crunching on the financial aspect and I looked at the tax benefits of buying, I realized that not only will I pay the same price as renting, but I'll build equity."
Do women do the math differently than men? In a way, yes. For one thing, they probably don't spend as much on beer.
"Guys my age, the majority of their disposable income goes to booze," Martinez concedes. "One of your biggest assets literally goes down the drain. I can't afford to do that as often as my friends do. I wish I could. But it's a good trade-off to not do it now. I have my more responsible aspects."
More on homeownership:
Despite downturn, Canadians still focused on home ownership
Is it the right time to buy a house?
Saving your house from foreclosure
Canadians most 'exposed' to recession since the 1930s: report
Live off the land -- in the city
Blog: Get rid of your mortgage faster
Responsible or footloose, male or female, singles have as much financial incentive as couples to purchase real estate. But because a single person's entire existence is funded by one income, he or she takes on a greater risk when committing to a mortgage. In addition, single people aren't as good as couples at reckoning the cost of owning a home.
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"The No. 1 mistake that all buyers make is underestimating the cost of homeownership," says Kim McGrigg, a spokeswoman for Money Management International, which has branches of the non-profit Consumer Credit Counseling Services across the U.S. "Everyone understands the cost of a mortgage, but there are many other costs that are long term, including the maintenance of the home."
Roofs leak, walls crack, and water heaters break. And when you are the owner, you and only you are responsible.
When those unexpected costs arise, two heads can be a lot better than one. "As a single person, you're making a large decision on your own," McGrigg says. "You don't have that other person to bounce ideas off of."
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Another big problem for singles is coming up with a down payment on one salary, especially now that no-down-payment mortgages have largely gone the way of the dodo. Lenders now are much more demanding in regard to credit history than they had been in recent years. If you're thinking about buying for the first time, start taking care of your credit rating today.
When they can't save enough for a down payment, singles sometimes borrow down-payment money from family or friends. Some plan to make ends meet by renting part of their homes. "I would urge caution when taking that income," McGrigg says. "You need to ask yourself, 'What if I lose my renter? What if I get sick or can't find a job?' If you have a backup plan for these occurrences, then you're ready to buy. If you don't, renting might be a better choice for you."
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Renting might also be a good idea if you move a lot. Buying and selling homes is expensive.
But enough caution. If, after a thorough, honest, conservative assessment of your finances, you decide to buy, you'll enter one of the best buyer's markets in a long time. A mix of dropping prices and low mortgage rates has set the stage for some very good deals.
Don't let the temptations of this market send you rushing into an ill-advised decision that could end up ruining your credit for years to come. On the other hand, if you have the resources, now is a good time to go for it.
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