For most moms, your housing is your biggest expense — and if you own, your biggest investment.
If you’re in the market for your first — or a different — home to buy, the price, of course, is one of the biggest considerations. My friends at Owners.com wrote a great post about what to consider: How Much House Can You Afford? 3 Key Questions to Ask Yourself. To summarize:
Being unrealistic about the price.
You know how to find all those mortgage calculators, and a pre-approval will tell you what a bank is likely to extend. Don’t forget:
- Taxes Related post: What single moms and dads need to know about taxes
- Mortgage insurance, or PMI (if you’re putting down less than 20 percent)
- Homeowner’s association fees
- Savings for repairs
- Maintenance, like the cost of a lawnmower and/or landscaping service, pool upkeep
- Heating and cooling. Depending on the climate and type of heating or cooling system, these utilities can add thousands of dollars to your bottom line each year.
- Wiggle room. Because, you never know.
My Takeaway: Do your research, be realistic, and get real about your monthly out-of-pocket for this prospective pad.
Including child support and/or alimony in your budget
Less than half of child support owed is actually paid, and the average sum is less than $400 per month. Even if your ex pays faithfully, he could lose his job or business, become disabled, pass away, have another child (and therefore be required to pay you less) or simply go MIA without warning. Happens every day. As for alimony, that is being phased out gradually with law reform in almost every state in the country.
Even if those checks come like clockwork every month for the rest of your life, I still advocate strongly for women to build financial futures independent of men. For one, it is wise financial sense. Second, it feels fucking awesome not to be dependent on anyone. Third, when there is no money to come between you and your children, there are fewer things to cause conflict, which vastly improves co-parenting — all of which I elaborate on extensively in my bestselling book The Kickass Single Mom (Penguin).
My Takeaway: When creating a budget for your new digs, do not include child support or alimony. Budget for what you can afford on your own.
Ignoring your credit score.
Whether you pay your bills on time, use credit responsibly and have avoided delinquencies, can make a big difference in your credit history — and the mortgage rate lenders will offer you. Even a quarter-point in interest can add up to tens of thousands of dollars over the history of a typical 30-year mortgage. Get your FREE credit score at CreditSesame now.
Related post: Should you pay for credit repair?
My Takeaway: Check your credit score. Ask prospective lenders the difference in rates based on your current score, and a higher score. If the difference is significant, consider waiting six months or a year while you diligently take steps to improve your credit rating.
Possible vs. realistic price.
Remember the 2008 housing crisis? That was largely about lenders extending mortgages that were way, way bigger than people could afford — and subsequently defaulted.
My Takeaway: The bank is not the boss of your finances. You are. Just because a lender offers a big mortgage does not mean that you can afford it — or should accept it.
Here are my things to consider for finding a home that you really, truly can afford.
How far is the address from your work? Best friends and family? Kids’ schools and activities? Commuting not only drains your time and energy, but your pocketbook, too. In addition to fuel and wear-and-tear on your vehicle, when you have a long commute, you are likely to spend more money on conveniences like restaurant and prepared food, opposed to cooking at home, because you are so tired and time-crunched at the end of the day. If you are far from recreation, you might stop going to the gym or your favorite hikes, which affects your health and wellbeing.
My Takeaway: A home is a life. It is not just about the floorplan and countertop material. Careful not to get swept away with good looks, and consider carefully the lifestyle you are buying.
Trying to maintain your lifestyle pre-divorce / breakup
I don’t care whose fault it was that the relationship ended, or how horrible he or she was. Time to move on, and create a life of your own, on your own terms. That likely means downsizing, at least temporarily. If you open your mind and heart, let go of anger and any sense of entitlement, you may come to adore your new lifestyle, no matter what it is. You deserve this.
“Starting from nothing was daunting, but it was also completely liberating. I didn’t have to ask anyone else their opinion. My choices were mine, and mine alone. It was a huge adjustment for my kids moving from a fancier home into a quite spare rental house. But it was a very valuable lesson in what actually makes a home: people, feelings, and memories, and not granite countertops and spiffy bathrooms.
“A year ago, I purchased a home just a few blocks from our rental house. We had grown to love our neighborhood and neighbors. Our new home is still small, and we still have only one bathroom, but the girls now regard this as their home. Their dad is now under contract with his latest girlfriend on a six-bedroom, five-bath stately Tudor on a very fancy street about a mile from us. The contrast between my house and that house could not be greater. And though I know we would all like more bathroom space, I have no doubt that this will continue to feel like my kids’ home, however spacious and upscale his new digs are.”
My Takeaway: Your life is your own. The sooner your lifestyle reflects your own values, budget and decisions, the quicker you will move on to happiness.
The bigger the house, the more furniture you need to make it homey (not to mention heat and cool and maintain!). If you need to invest a lot of money to furnish and decorate a new home, be prepared to either have cash-on-hand immediately, or live in a near-empty home for the foreseeable future until you do have that cash.
My Takeaway: Rent-to-own is not a good look.
Not calculating in renovations.
If you’re like me, you can’t walk through a home older than 7 years old and not spot a slew of structural and cosmetic changes you feel the place “needs.” All those changes are usually pretty pricey. Even if you and/or your brother/boyfriend/cousin/best friend can do the work, if you’re not paying them, don’t count on it happening — at least on your time table.
My Takeaway: If it really is a rehab, make sure financing covers those costs, including the option for a line of equity. Otherwise, expect to live with dark walnut kitchen cabinets and cracked bathroom tile for a while. Credit card debt is a slippery slope.
Avoiding the unexpected.
Life is full of all kinds of surprises — including the really, really bad ones. Unemployment, chronic illness, death, divorce, natural disasters and accidents. I could go on, but this list is bumming me out. Bottom line: When bad things happen, money typically becomes an issue. When creating a home-buying budget, get serious. Think about the insurances and cash savings you have to cover various scenarios.
My Takeaway: Plan for the worst, thank me later.
Related posts on mortgages and home ownership for single moms:
What was your experience in home shopping as a single mom? Share the good, bad and ugly in the comments!