How lenders look at a single income
A lender's main question is simple: can this income comfortably cover the new housing payment plus your other debts? With one earner, there is no second paycheck to balance things out, so the numbers from that one income decide how much you can borrow.
Lenders want to see that your income is stable and likely to continue. That usually means a steady work history, often around two years in the same line of work. If you are self-employed, CapCenter uses your tax returns instead of W-2s.
Your debt-to-income ratio is the key number
Your DTI compares your monthly debt payments, including the new mortgage, to your gross monthly income. At CapCenter, DTI can be up to 50% for some loans, but a lower ratio gives you more breathing room and more options.
On one income, each monthly payment you remove has an outsized effect. Paying off a car loan or a credit card balance before you apply can lift your price range more than a small raise would.
- Pay down or pay off small installment loans first.
- Keep credit card balances low and avoid new credit before you apply.
- Avoid co-signing loans for others while you are house hunting.
Make your credit work for you
You need a credit score of at least 620 for a CapCenter loan. A stronger score can open more loan options and better pricing, which matters when one income has to stretch further.
Check your credit reports for errors, pay on time and keep your card balances low.
Down payment options that help
You may not need as large a down payment as you think. Some loan programs allow low down payments, and many state and local down payment assistance programs are open to first-time buyers, including single buyers. Rules vary by state and program.
A smaller down payment can mean mortgage insurance on some loans, so compare the trade-off with a loan consultant. With CapCenter's ZERO Closing Costs (restrictions apply), you also need less cash at closing, which can let you keep more of your savings in reserve.
Consider a co-borrower or co-signer
If your income alone falls short of the home you want, a co-borrower can add their income to the application. A non-occupant co-borrower, such as a parent, may be allowed on some loans even if they will not live in the home.
This is a serious commitment for both of you. The co-borrower shares responsibility for the loan, and it can affect their own credit and future borrowing.
Budget for life after closing
Your mortgage payment is only part of the cost of owning a home. Plan for property taxes, homeowners insurance, utilities, maintenance and repairs, and HOA dues if they apply.
Many single-income buyers aim to keep several months of expenses in savings after closing. If that income is ever interrupted, a cushion gives you time to adjust.
- Set aside money each month for repairs.
- Choose a payment you are comfortable with, not just the maximum you qualify for.
- Keep an emergency fund separate from your home repair fund.
