4 tips for single, female homebuyers

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Buying a home today takes a certain confidence — in the market and in your own financial strength. A lot of single, female homebuyers are taking that bold step in high heels, with no one at their side.

Nationally, single women accounted for 21 percent of all home purchases in the year ended this past June, while single men accounted for just 10 percent, according to the National Association of Realtors.

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Experts say female homebuyers share characteristics and concerns that set them apart from male buyers. Following are four tips single, female buyers should keep in mind when purchasing a home.

Buy with confidence

A variety of factors — such as a greater likelihood of working at jobs that offer paltry retirement and other benefits — keep single women from achieving their financial goals, says Mariko Chang, a consultant who recently completed a report on the wealth gap for women for the Insight Center for Community Economic Development in Oakland, Calif.

Although the nation has witnessed a housing bust, homes should still climb in value over the long haul, leaving longtime owners with a valuable asset, Chang says.

Chicago-based Certified Financial Planner Leisa Aiken says it is a mistake to expect a quick run-up in property values, especially since there’s still an abundant supply.

Still, Aiken agrees with Chang that owning a home can help women enter a more secure retirement if they pay down their loan balance over time.

“You shouldn’t think of a home as an investment that will make you rich,” Aiken says. “But if you buy a home that you can afford to pay off, maintain and live in over a long period of time, you’ll have a low-cost place to live in retirement.”

Don’t stretch your budget too far

Mortgage lenders may approve borrowers with good credit and other favorable factors for a home mortgage that — combined with their other regularly occurring debts — takes up one-third or more of the borrower’s gross pay.

However, experts caution it could be a mistake to borrow as big a home loan as a lender will approve.

A woman who earns $50,500, makes a 10 percent down payment on a $149,000 house and carries a mortgage loan for the rest at 5.375 percent would have a monthly home loan payment around $750.

On the surface, that’s well below one-third of gross income, says Jeri Lynn Fox, president of the Illinois Association of Mortgage Professionals in Lombard, Ill.

But that payment amount covers only the principal and interest. The buyer would also have other home-related expenses, including property taxes, homeowners insurance and private mortgage insurance.

Add in other debts — such as a car loan and credit card payments — and the homeowner could find herself pushing against the upper limit on a prudent monthly debt load.

Annette Simon, a Bethesda, Md.-based Certified Financial Planner, says it’s a mistake for single women to overextend when making a purchase.

“Diversification is the cardinal rule,” she says. “You should not have a mortgage that’s so big you still don’t put at least 10 percent of your income in a retirement plan.”

Shop aggressively for financing

A Consumer Federation of America study in 2006 found that women received an outsized share of subprime mortgages, says Barry Zigas, director of housing policy for the Washington, D.C.-based CFA.

Zigas worries that mortgage lenders may not provide women with all loan information and options because of stereotypes about women’s alleged lack of financial sophistication.

“Have the loan officer lay out all the options,” he says.

Check rates with several mortgage lenders, and don’t simply select a lender based on a recommendation from a friend, adds Zhenguo Lin, assistant professor of real estate at Mississippi State University.

Lin co-authored a recent study that found women head of households pay 40 basis points — nearly 0.5 percent — more on home mortgages than other borrowers.

When controlled for income, credit score and other factors, that difference dropped to 8 basis points. But that’s still significant, says Lin, who believes the cost variance is due to the fact that 41 percent of women say they relied on a recommendation, while only 25 percent of men did.

Try to get seller concessions

One of the most misunderstood aspects of ownership is how much money is needed to maintain the home.

“You can expect anywhere from about 1 (percent) to 3 percent of the home’s value” paid out each year to cover fixes and projects, says Durham, N.C.-based Certified Financial Planner Jennifer Lazarus.

Today, many buyers are able to get concessions from sellers upfront to fix any imminent problem an inspection turns up. That helps cut maintenance, at least in the near term, says Benjamin Clark, president of the National Association of Exclusive Buyers Agents in Avondale, Ariz.

Moreover, buyers frequently ask for one-year warranties that cover repairs on appliances and major systems, and sellers are providing and paying for these policies, Clark says.