Buying My First Home (And How You Can Do It Too!)
Buying a home can be scary, but it doesn’t have to be. There’s a lot that goes into the house buying process. Applying for the home loan (mortgage), building your credit score, and saving for a down payment are only a few pieces of the puzzle. There’s only one time when you buy your first home. It’s helpful to remember that you don’t have to know everything about the process to successfully buy a house. I certainly had no clue what I was doing and didn’t know where to start. Yet I was able to purchase my own home while single and begin to multiply my net worth is a way I didn’t know was possible.
Changing My Mindset
I never saw myself buying a home by alone. I always pictured myself signing the paperwork alongside my husband and us purchasing a home together. But as I hit 30 years old and still living at home with my mom, not sure of the timing of marriage for me and my boyfriend, I found myself questioning my future, financial or otherwise. In 2018 I was in a car accident that resulted in me receiving a settlement at the end of 2019. My little Mazda 3 had a 16% interest rate from a credit union because my credit score was in the 500s when I purchased it. I didn’t know where to start to improve my credit score, but I knew that credit score wasn’t gonna get me far with anything. I would always be paying higher for anything I bought. Something had to change.
It never even crossed my mind the possibility of purchasing a home. I couldn’t start there. The starting point was using my settlement to pay off my car and any remaining credit card debt. My student loans were still there, but it wasn’t a priority to pay those off. As long as I was making at least the minimum payments I was ok with that. The interest rates were low enough. Telling my family was interesting. Everyone had an opinion. My brother thought I should wait until COVID had passed, but it was unknown in 2020 what would be that timeline. My mom wanted me to help her refinance her home, and I wanted to leave. But after several conversations with my boyfriend, I came up with a game plan to get on the house hunt. But where do I start?
Finding My Team
When talking to my family, my sister shared a real estate agent that she recommended. Both she and her mom had used this agent and were really satisfied with her team. Although the real estate agent is the most popular person involved with helping to buy a home, they’re not the only one. I had no clue! It wasn’t until I had a consultation with my agent that I found out in addition to her, I would also have a a mortgage lender, a home inspector, an appraiser, and a title company. But for me, since I planned to use a first time home buying program, I was assigned a consultant to help me through this application process, too.
I have to admit that having all these people in place was quite overwhelming, especially since I didn’t know most of them even existed. I started to question if I even wanted to move forward with this process. Renting seemed so much simpler. But I told myself I would so I continued to move forward. One step that made it easier was that I didn’t feel rushed at all by my agent to start the house hunt quickly. She asked me when I wanted to start looking and I said 6-12 months. She didn’t even start sending me places to look at until 5 months into the process. My stress levels were happy about that.
Beginning with the End in Mind
I’m an HGTV nut. I love watching House Hunters and all the house-flipping TV shows that glamorize the house-buying process. It seems like so much fun! And while they show some of the challenges involved, it overall seems to be worth it for the profits received. I had no intentions of flipping the home, especially when using a first-time home buyer program, but it planted a bug in my ear to eventually use this property for rental income after a few years. It also had me thinking that I didn’t need to have a new home, either. I could buy an older home and renovate parts of it strategically to make it what I wanted.
This process revealed to me how naive I was about the types of properties that could be purchased with a home loan. I was blessed to live in single family homes most of my life. My parents had mortgages on their homes. For about a year we lived in an apartment, and I know that as only for rent. I didn’t realize that condos and townhomes were a part of that, too. That opened up for me the possibilities when I felt my options would be limited.
What Could I Afford?
At the time I was making about $65k at a local healthcare system as a product analyst, but had been reassigned to a call center role due to the COVID-19 pandemic. Since I was not in my hired role, my hopes of receiving a promotion were slim to none. The leftover funds from my settlement were split into two buckets: savings and investments. This is when I was introduced to high-yield savings accounts (HYSAs). HYSAs allow you to save at a higher rate than traditional banks with an annual percentage yield (APY) of at least 3%. The typical APY of a savings account like Bank of America is 0.01%. I opened an account at Discover, which currently has an APR of 3.70%. That’s a difference of 370%!
Let’s put this into numbers. You have $3k as your initial amount and don’t add any funds to the account. Your Bank of America account would provide you with about 30 cents in compound interest in one year. However, with the Discover account you would have an additional $111. This was a game changer for me to save for my down payment. I saved about $5k in the Discover account, and only added to it. My closing costs were covered by the first time home buyer program. After applying with a lender, I was approved for up to $300k. However, this was the top end of my budget and I wanted to stay well below that. Being that I live in the DC, Maryland, and Northern Virginia (DMV) area, I knew a single family home was well outside of my price range. I was now filtering my search to only condos and townhouses.
The Home Search
If you know anything about the DMV, homes are more expensive the closer you get to DC. Baltimore isn’t nearly as expensive. My mom lives in Prince George’s County. I wanted to stay within that county, but my budget wouldn’t allow for it. My goal was to have at least 2 bedrooms and 2 bathrooms, and that started around $275k. that was way too close to comfort for me. As I explored other areas, my agent suggested Anne Arundel County, which includes the Maryland capital of Annapolis. That was my sweet spot. With the Naval Academy nearby, my options didn’t seem so limited.
I was blessed to only tour two homes before I found a home where I wanted to place an offer. The first was a townhome in Bowie. The home felt a little small, but the real kicker for me was were the homeowner’s association (HOA) fees. Although the home was around $250k, the HOA fees put me into an uncomfortable monthly budget. Something inside me told me not to do it. So the search continued. Then my agent sent me a listing for a condo in Annapolis that was older, but had high ceilings and more than enough space than I needed and was listed at $210k. It was a no brainer. I had to see it. Even with condo fees I could safely make this work. Once I toured the space, I knew I wanted to place an offer. Within 24 hours, and with some negotiation due to multiple offers, my offer was accepted at $220k. Now I was on the clock.
The Buying Process
No one tells you that once your offer is accepted that’s when the real clock begins. I had 45 days to close. First, within 24 hours, you must make a “good faith” deposit of about 1% of the purchase price of the home. This confirms for the seller of the home and the lender that you are reliable for the rest of the money for the down payment to move forward with the purchase. For me that meant $2,200. One key is that you must provide the amount in cash, a cashier’s check, or a money order and hand it off to your agent. This was tricky part for me was that my offer was accepted on the Sunday before a holiday weekend. Banks were closed. I ended up going to the Western Union of a grocery store to get a money order. Even then I had to receive multiple money orders since the limit was $1,000 per money order.
From there I had to make sure there was an inspection and appraisal on the property within the time frame and that I was comfortable moving forward with the process. All these must be completed within a certain time frame of the offer acceptance. This is where having a clutch agent with an awesome team is key. My agent provided me with multiple referrals and continued to walk me through each step. The toughest part was receiving approval from the first time home buyer program. It was difficult getting someone to respond to my calls to understand where I was in the process. All of a sudden 45 days seemed like a blip in time. Only about 20 days out did I start to receive communication from the program. They ended up being very helpful and we closed on time.
The day of closing was so exciting! I’ve never signed so many papers at one time in my life! I chose the title company recommended by my agent and they were great! They had experience working with other first time home buyers like me, making me feel much more comfortable about moving forward with them. I was so happy that first night in my new home I just walked around in complete disbelief that it was mine. I had not only survived, but thrived in the process.
How You Can Buy Too
There isn’t one type of person who’s able to buy a home. It only takes saving, planning, and the right team to make you a homeowner, too. Check out the list below to see how you can get started with your home buying journey today!
Define your budget.
Research any home buying programs available to you.
Pick your location.
Find your team.
