Buying a house

I bought my first house when I was twenty-three and sold it for a $100,000 profit at twenty-six. This is what I learned—and what I wish I knew. 

Sexy, clickable headline aside: let’s not bury the lede here. No two financial situations are the same. Mine, at twenty-three, was the result of immense privilege: I was employed, had no debt, and was sitting on a $20,000 cash gift from my parents. So, just so we’re clear—this is not a “look how smart and scrappy I am” post. It’s a “here’s how I played my easy card and what I learned along the way” post. 

Another disclosure: I’m neither a financial advisor nor a real estate agent. Just a twenty-nine-year-old girl writing this from her dream house that she renovated with the cash she made from a lucrative home sale. 

I purchased my first house in Nashville, TN in 2016. I was making $42,000 a year as a public school teacher. Here’s where I might lose you: the house was 1,200 square feet, on a half of an acre, about twenty minutes south of downtown, had just been renovated (albeit very cheaply), and I bought it for $150,000. Yep, I know. Pretty impossible to do that these days. 

Still, here’s how I did it: 

  1. I got incredibly clear on my budget. 

When you get pre-approved for a mortgage loan, your lender will give you a max number that they think you’d be able to afford. This is not your budget. Your budget should likely be much lower than what you’re pre-approved for. Why?

You won’t magically become more money-conscious when you own a home. The things you overspend on now will continue to show up on your monthly balance sheet. The only difference is, once you have a mortgage to pay, those expenses will likely become credit card debt. Your mortgage payment should easily fit within your existing monthly expenses. 

So, how do you determine your budget? Write down and categorize every purchase you made over the last three months. Unless one of those was completely out of the ordinary, something like an all cash car purchase, count it. Even large purchases like furniture or car repairs. Make a fake entry for monthly home repairs, which you’ll need to budget for as a home owner. I work in $300/month. Then, take the average of those months’ income vs. expenses. The delta, when added to what you’re already paying in rent, is what you can reasonably afford. If you want to be even more conservative, take 70% of that number and use it as your max budget. 

It’s really tempting to tell yourself that you’re going to make a lifestyle change and become more frugal once you own a home. Sure, that’s possible—but do it for three months first and see what your new expense averages are. Don’t try to make that change while also taking on a massive mortgage payment. This is called “house poor.” It’s also called “bankruptcy.” 

  1. I found an awesome real estate agent. 

Your real estate agent will recommend a lender (see step 3) and will start pulling houses for you as they come on the market. In a competitive market, you need an agent who is on top of it. Don’t be afraid to shop around. And do not think that sites like Redfin or Zillow can replace an agent. They can’t. Most of what you see on those sites is already sold. 

  1. I contacted a lender and got pre-approved. 

You’ll need this in hand before you start looking at houses. To get pre-approved, you’ll need to have your recent paystubs and W2 ready to go (this is more complex if you’re self-employed), and they’ll run a hard credit inquiry. Your credit score might drop a few points. 

  1. I was patient. 

You’ll probably make quite a few offers before one is accepted. Don’t let it get you down. Even if your offer is accepted, if you’re financing the house (meaning not paying all cash), the home has to appraise at or above the price you offered to pay. It also has to pass inspection. If it doesn’t, the seller might cancel the deal and choose to sell to someone who can pay all cash. Stick to your guns and play the long game—you won’t regret it. 

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