How to Buy a House on One Income

Single-income families can still own a home.

Dual-income households have the advantage and security of two incomes to share the financial load of buying and paying for a house. However, it is still possible to buy a house as a single-income household. The most important thing is to buy a house with monthly payments you can afford on just one income. It is riskier than buying with a double income, because if you lose your income, then you need to scramble to find another source of income to continue making payments.

Step 1

Save for a down payment. Most experts advise paying 20 percent of the total cost as your down payment. Some banks or lenders require that you have at least 20 percent. However, you can still qualify for loans with 10 percent or even less in some cases, especially if you have good credit. With one income, it will take longer to save for a down payment than with multiple incomes, so start saving as soon as you can.

Step 2

Search for houses you can afford. With a 20 percent down payment, a good rule of thumb is to look for houses that cost no more than four times your annual salary. If you have a significant amount of other debt, you should look for a house that costs three times your annual salary or less. For example, if you make $50,000 per year, and have enough for a 20 percent down payment, you can probably afford a house that costs $200,000. If you have a lot of debt but have the 20 percent down payment, look for houses in the $150,000 range.

Step 3

Check your credit score. Your bank can check your credit score for you, or you can pull your credit report online for free. Check your score for errors and accuracy. If you notice any errors, file a dispute with the three major credit reporting agencies. Your credit score plays an important role in qualifying for a loan, especially if you are the sole applicant on a loan. Your credit score should be at 620 or above to be considered for a loan. If your credit score is lower than 620, you can improve it by paying all past due balances on other debt, and paying down balances on credit cards or other loans.

Step 4

Apply for a home loan through your bank or other lending institution. Shop around to see the best loan you qualify for based on the loan amount and interest rate. During the loan application process, you will find out exactly how much your monthly payments will be if approved. Before committing to the loan, ensure you can afford those monthly payments on your single income.

If you are married but your spouse does not work, you can still apply for the loan together. If your spouse has good credit, it may help you get a better interest rate on the loan, even though you are the only one earning money to pay off the loan. If your spouse has poor credit, it may be better for you to be the sole applicant.

Step 5

Make an offer on the home you want once you determine your budget based on your loan amount and monthly payments as compared to your single income. If the house has been on the market for a few months, then you have more buying power — make an offer significantly lower than the listed price and negotiate a final price lower than what the house is listed for.

Step 6

Arrange a closing date and meeting with the seller, lender, Realtor and closing company once your offer is accepted. Sign all documents, make your down payment and receive the keys to your new home.

Tip

Pay a little extra, even just $50, on every mortgage payment. A little extra each month saves you thousands of dollars in interest over time, and will help you pay off the loan faster.

The more money you pay as your down payment, the less interest you pay over the course of your loan.

Contact a Realtor to help you with the home buying process. A local Realtor can also help you find homes in your price range.

Warning

Do not buy a house you cannot afford. If the payments would eat up most of your monthly income, you should not buy the house, as you will struggle each month to make the payments and put food on the table. You should make at least twice as much as the amount of your monthly payments. If you begin to miss payments, your credit score will go down and you might lose the house to foreclosure.

Things You'll Need

  • Good credit score

  • Income verification from employer

  • Recent pay stubs

  • Down payment money

references & resources