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Buying a Home on One Income: What You Need to Know

Single women are buying homes at nearly twice the rate of single men, according to the National Association of Realtors.1 Here are some tips if you’re in the market.

 

BUYING A HOME is a smart move, says Lorna Sabbia, Head of Retirement and Personal Wealth Solutions, Bank of America. “Owning your own home can offer financial and personal stability, and it’s an asset that may potentially appreciate in value.” The equity you accumulate can help to boost your retirement readiness.  “You can build wealth and save for retirement all at once,” Sabbia says.

Lorna Sabbia headshot
“You can build wealth and save for retirement all at once.”

—Lorna Sabbia, Head of Retirement and Personal Wealth Solutions, Bank of America

 

Home prices in many markets have increased dramatically in the past couple of years, so buying on a single income may take extra planning. Here are some key questions to consider if you’re in the market:

 

What kind of home do you want?

When it comes to location, women overwhelmingly cite proximity to friends and family as a priority, according to the National Association of Realtors (NAR). They also purchase condos and multi-family homes at a higher rate than single men and tend to buy in more urban areas. “I have a group of women friends in the South Jersey area who are buying homes next to each other,” says Merrill Financial Advisor Patricia Barksdale. “They’re building their own community.”

 

 

The title of this infographic is “Single Women Get Real (Estate).” It has four statistics that are listed as follows: “8.7% -- It’s a growing trend: Increase in home purchases by single women in the fourth quarter of 2020 from a year earlier—despite the pandemic;” “Preferred type? Single women are more likely than men to buy condos or townhouses,” with an icon of two townhouses to the left; “19% -- Percentage of first-time home purchases by single women in 2020, compared with 11% for single men”; “17% -- Once is not enough: Percentage of repeat homebuyers who were single women in 2020, compared with single men (9%).”

As you begin your search, consider whether you’d rather sacrifice space for a well-maintained condo community. Are you willing to pay more for a renovated or newly built property, or are you a DIY-er who relishes the challenge of a fixer-upper? If you opt for a single-family home, keep in mind that you’ll need to budget for regular maintenance costs, typically one percent of the purchase price per year, according to home improvement website HomeAdvisor.

 

How much home can you afford?

While mortgage rates are still close to 30-year lows, they are often a little higher for condos and multi-family houses, compared to single-family homes. Your financial advisor can help you estimate how much you can comfortably spend on housing each month, including mortgage payments, property taxes and insurance.

 

Though pulling together the funds for a down payment on one income can sometimes be challenging, you may have more options than you think you have, adds Barksdale. For instance, when one of Barksdale’s clients who had been married for 25 years got divorced, she was able to borrow against her investments using a Loan Management Account® (LMA® account) from Bank of America to obtain the money for a down payment on a house of her own. “She was subsequently able to sell that house and buy the real home of her dreams.”

 

How does homeownership fit into your long-term financial plan?

“Because women tend to live longer than men, financial security is especially critical for us,” says Nevenka Vrdoljak, senior quantitative analyst in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. For a homeowner, “the monthly mortgage payment acts as a type of forced savings.” While there’s no guarantee that a home will appreciate in value, “on average homes have appreciated three to four percent per year over time,”3 adds Vrdoljak, who is the author of “Debt and Homeownership,” part of the CIO’s Women and Financial Security series.

 

“The equity you build up could end up being one of your most valuable retirement assets,” notes Sabbia. “That’s why it’s essential to consider the role it will play in your finances.” A financial advisor can help you think through how home equity might fit into your asset mix along with stocks and bonds, cash and other investments.

1National Association of Realtors, “2020 Profile of Home Buyers and Sellers”

2 Redfin, March 2021

3Federal Reserve Economic Research, “Median Sales Price of Houses Sold for the United States, 1965-2020”

 

The Loan Management Account (LMA account) is a demand line of credit provided by Bank of America, N.A., Member FDIC. Equal Opportunity Lender. The LMA account requires a brokerage account at Merrill Lynch, Pierce, Fenner & Smith Incorporated and sufficient eligible collateral to support a minimum credit facility size of $100,000. All securities are subject to credit approval and Bank of America, N.A. may change its collateral maintenance requirements at any time. Securities-based financing involves special risks and is not for everyone. When considering a securities-based loan, consideration should be given to individual requirements, portfolio composition and risk tolerance, as well as capital gains, portfolio performance expectations and investment time horizon. The securities or other assets in any collateral account may be sold to meet a collateral call without notice to the client, the client is not entitled to an extension of time on the collateral call and the client is not entitled to choose which securities or other assets will be sold. The client can lose more funds than deposited in such collateral account. The LMA account is uncommitted and Bank of America, N.A. may demand full repayment at any time. A complete description of the loan terms can be found within the LMA account agreement. Clients should consult their own independent tax and legal advisors. Some restrictions may apply to purpose loans and not all managed accounts are eligible as collateral. All applications for LMA accounts are subject to approval by Bank of America, N.A. For fixed rate and term advances, principal payments made prior to the due date will be subject to a breakage fee.

 

Before taking out any mortgage or line of credit, borrowers should consult their tax advisor to understand the implications of each of their options.

 

Banking, mortgage and home equity products offered by Bank of America, N.A., and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation. Home Icon for Equal Housing LenderEqual Housing Lender. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.

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