Are You Ready For Home Ownership?
By Gail Harlow
“The scariest moment was at closing, when I was signing the papers with all the zeros after the numbers,” says Bette Kaminsky, recalling the day she took possession of her nifty seaside cottage in Ocean City, NJ. “I couldn’t believe I was agreeing to pay that much money for one thing.”
The traditional notion that first comes marriage, then comes a house and baby carriage is being rewritten as women are staying single longer, earning more money, and investing in nests of their own. The National Association of Realtors reports that single women currently account for 21% of home sales, up from 14% in 1995. That makes them the second biggest category of buyers, behind married couples—and way ahead of single men.
Homebuilders are catering to them, by adding such amenities as home offices, more closet space, easy maintenance and security features. “I’m seeing a trend toward two-bedroom condos or smaller two-bedroom houses,“ says Nancy Alperin, president of Maxwell Realty in Philadelphia. “Either they want the room for an anticipated partner/husband and eventual baby, or they are skipping the partner/husband piece and going straight to the second bedroom for the baby!”
If you find yourself wistfully surfing Zillow.com, here are four questions to ask yourself to determine whether you’re ready to go home shopping.
1. Do I plan to stay put long enough?
Crunch the numbers. After you’ve added up all of the costs (count ‘em: closing fees, moving expenses, property maintenance, insurance, new furniture, possible renovation, etc.) and calculated the mortgage-interest and property-tax deductions you’ll gain, does it make sense financially in the short term? What if your career requires you to relocate in a year? Will housing prices increase enough in that time for you to recoup these expenses when you sell? A rent or own calculator will help you weigh the pros and cons.
2. Can I afford to buy a home?
That’s the $232,200 question (and the median price of homes today). Because the median income of single women is 20% less than it is for single men, single women often find it harder to come up with a down payment. Kaminsky borrowed money from her aunt for hers. “She co-signed with me. After a year, I refinanced and put everything in my name,” she explains.
If you haven’t saved enough, and you don’t have a generous aunt, parent, or fairy godmother, there are some creative financing options out there. They’re not all good deals, however, as the current skyrocketing foreclosure rates prove. For advice on how to find safe and affordable mortgage options, visit HomePath.com, which also has calculators to help you figure out how much house you can afford.
Even if you have enough money saved, think long and hard about what your future financial needs will be. “I always caution people against sinking too much into an illiquid asset like a house, if it means they won’t be able to afford to invest in other assets that might possibly appreciate more over time and that are more easily tapped into than housing is,” advises Eve Kaplan, a certified financial planner and founder of KaplanFinancialAdvisors.com. Ask yourself: “If I needed money fast, and all my savings were tied up in my house, where would I get it?” You don’t want to end up “house poor.”
3. Will I qualify for a mortgage?
There’s only one way to find out: Consult a mortgage broker, and go through the process of getting “pre-qualified,” in which banks check your credit score and financial history and estimate how much money they’d be wiling to lend you and at what cost.
4. What would I do if something breaks?
Yikes! No more landlords to call in case of an emergency! If you aren’t Ms. Fix It, will you be able to afford to hire a professional when the pipes—or the roof—spring a leak?
Still unsure? Spend a year just window-shopping. Research the value of homes in your area. If necessary, take steps to improve your credit score and increase your savings. Then make a date with a realtor who can help you find a “dream home” that won’t turn into a nightmare.
“From the minute I stepped across the threshold, I knew I was home,” says Kaminsky, who hasn’t regretted her purchase for a moment. Today, 15 years later, her house “is worth five times what I paid for it.”
Gail Harlow is the co-author of Making Bread: The Ultimate Financial Guide for Women Who Need Dough (Running Press) and the founder of MakingBreadMagazine.com.