Sarah Gage set out to buy a home in 2022. As a single person who was self-employed, purchasing a home of her own seemed daunting. Would the income from her business be enough to qualify for a mortgage?
“I wasn’t sure if buying a home would be an option for me,” says Gage, a senior editor on Bankrate’s Credit Cards team.
Buying a home on one income
While mortgage lenders can’t discriminate based on marital status — and there are no income requirements for a mortgage — having a single income might make it more difficult to qualify. Compared to a two-income household, it’ll likely take longer to save for a down payment, and your income might not be enough to afford the home you want.
The annual household income of the typical homebuyer was $107,000 last year, a record high, according to the National Association of Realtors (NAR).
“Relationship status shouldn’t matter,” says Dr. Jessica Lautz, deputy chief economist and vice president of Research at NAR. “That being said, we do know that single buyers have lower household incomes than married couples or even unmarried couples.”
That lower income not only affects your homebuying budget; it also impacts your debt-to-income (DTI) ratio, the measure of gross monthly income that goes to debt payments, including the mortgage. Lenders use this calculation to determine whether you qualify for a loan and how much you can borrow.
If you’re balancing debt — like credit card bills and a car payment — against one income, your DTI ratio will be higher. If it’s too high, you might not be able to borrow as much as you need, or get approved for a loan at all.
Whether borrowing as a single person or married or unmarried couple, most lenders look for a DTI ratio of 36 percent or less. Some allow up to 45 percent, or even 50 percent, if you have compensating factors like excellent credit or a larger down payment.
“You’ve got to keep that credit score up, and that will open the doors,” says Beth Jaworski, Realtor and associate vice president of Shorewest Realtors, a real estate brokerage based in Wisconsin. “If you have a very high credit score, lenders will overlook things like a higher debt-to-income ratio.”
Suzanne De Vita was nervous about taking on a mortgage when she purchased her home in 2022. She repeatedly crunched the numbers to ensure she could afford payments on a single income.
“I’ve never had such a large debt before, and when I first got the loan, it ate up a bit more than half of my take-home pay,” says De Vita, a senior editor on Bankrate’s Home Lending team.
With her sole income, De Vita couldn’t get approved for the mortgage she needed at a big bank, nor a regional bank.
She then connected with a community-based lender. After meeting with a loan officer — who patiently walked her through the mortgage underwriting system — she was preapproved for the loan amount she needed that same day.
“I was so happy to have someone willing to work with me, who understood that yes, even with one income, I can in fact afford a home,” De Vita says. “It was eye-opening.”
Leading with strong credit
To be sure, your credit score is the biggest deciding factor for a mortgage. You can qualify for a conventional loan with a score as low as 620, but you won’t get the best mortgage rate unless your score is at least 740. If your score is below 620, you might instead be eligible for an FHA loan, which allows as low as 580.
You’ve got to keep that credit score up, and that will open the doors.
— Beth JaworskiRealtor/Associate Vice President, Shorewest Realtors
The typical mortgage borrower isn’t struggling with low credit, though. The median credit score for a new mortgage was 770 in the first quarter of 2024, according to the Federal Reserve Bank of New York.
If credit isn’t an issue for you, a co-borrower with equally good credit could help bridge the income gap and improve your chances of loan approval.
“Co-borrowers are a great way to have a single borrower secure a mortgage, especially if you have a parent that might have a mortgage that’s paid off or close to being paid off,” says Nicholas Taylor, vice president and head of Better+, a division of mortgage lender Better. “If you have someone with a very low debt-to-income ratio and great credit, they can apply on that mortgage with a single borrower.”
Getting down payment help
A potential upside to having a one income: You might be eligible for down payment assistance, which is often geared toward lower- or moderate-income homebuyers.
“Down payment assistance programs largely are unknown and underutilized,” Lautz says. “In many areas of the country, people are not aware that these products exist. They can help homebuyers get into homeownership sooner than expected.”
“I’ve found that those programs tend to help people on the lower rungs of the income ladder, which is what it’s meant for,” says Ralph Herrera, Realtor and senior real estate advisor at Engel & Volkers Atlanta. “But it’s tougher when you’re making less to save what you need for the down payment.”
Gage was referred to a lender experienced with self-employed borrowers. She was able to secure a mortgage with a 5 percent down payment, thanks in part to a bonus she received from her business.
“I don’t think I would have even started talking about [buying a home] if I didn’t have that ready,” Gage says.
Before long, she moved into a 1960s ranch house with her son.
“I feel very grateful to be able to afford a home,” Gage says. “It’s a huge blessing for me to have been able to take the bonus from the company and to be approved for a mortgage in the first place. I feel very grateful for it to be an option.”
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