How I bought my house
Why we need transparency in our financial journeys
I’ve had this newsletter simmering on the back burner for a few months. In January,
hosted a conversation at Culture Study to demystify the home-buying process:Maybe you know so much about what it takes to buy a home. Maybe, like me, you knew very little until it actually became a possibility — and were somewhat blindsided by the complexity of the process. Maybe you feel like it doesn’t make sense how so many people you know have homes (especially since they’re not talking about it) or need some reassurance that a whole lot of home ownership is rooted in 1) systemic advantages and 2) luck.
She asked readers to share in the comments the very detailed stories of how we bought homes — not just the when and where, but the how we got the money for the down payment and the circumstances that let us qualify for a mortgage kind of details.
I loved the call for transparency. I agree with Anne that we’re not talking about this stuff enough, and it makes so many people feel like they’re doing everything wrong.
It prompted me to start drafting the story of my own home buying experience from last year… and then I stopped because it seemed sort of boring and non-urgent. Until a couple of weeks ago,
at shared her reaction to the Culture Study thread:When I read those comments, I was feeling like a victim. So much generational wealth ~ how dare everyone else thrive when they were subsidized by their parents or an inheritance or a massively well-paying job when I have none of that!
As a way of delving into identity, Katy shared her 2004 house-buying story — one, she says, that also includes good fortune and privilege, but that wouldn’t be possible in today’s market. Katy’s post reminded me of why I wanted to share my boring house-buying story in the first place: We only learn by knowing each other’s experiences.
We need to talk about our home-buying experiences
Just after I bought my house, I wrote for Business Insider about how miffed I was by the process of getting a mortgage. It’s completely baffling to me that there’s truly no one with the proper, comprehensive knowledge and incentives to explain and guide you through this extremely common, highly encouraged and wildly consequential process. We’re all just groping our way through it — including the professionals!
No professional you'll encounter while buying a house or borrowing a mortgage is dedicated to helping the borrower truly understand the process or the product.
Mortgage brokers, loan officers and real estate agents are sales people. A financial advisor could offer guidance on the impact of a home purchase on your long-term wealth-building plan, but they can't walk you through what to expect during the mortgage application and closing process.
Even most financial educators aren't prepared to help people understand complex products like mortgages…A financial ed course might teach you how to rearrange your resources to pay down your mortgage debt faster, but you won't learn how to read the loan agreement or what kinds of questions to ask a loan officer to ensure you get the right product for your circumstances.
This kind of nonsense — this industry-wide ignorance of the support people need when they’re buying a home — perpetuates the silence around home-buying experiences.
How can you talk to anyone about your experience if you’re not even sure what you just went through? How can you appreciate the privilege of a family-provided down payment if you don’t know how much people typically pay to get into a home? How can you comprehend the privilege of inheriting property if you’ve never been taught what others go through to purchase a home? How can you advocate for your financial needs if your only guide in the process is a bank rep whose job is to sell you the mortgage that makes the bank the most money?
This is what keeps me obsessed with personal finance. These processes shouldn’t be allowed to be shrouded in mystery! This is the reason I rail so hard against budget culture — because it prefers conversations like this to start and end with “it’s smart to buy a house” with no honest discussion of the enormous impact this kind of decision has on your finances and life.
This combination of ignorance and secrecy feeds shame into our relationships with money.
Owning a home isn’t inherently ‘right’
One comment in the Culture Study thread jumped out at me. Katy wasn’t the only reader who was shaken by the privilege, fortune and ease in a lot of the home-buying stories shared. Someone else said:
The instant gut reaction I've had to so many of these comments is "Wow, I'm so far away from this reality of buying a home, or a condo, or even a car, or even adopting a cat. Where did I mess up? What's wrong with me?"
“What’s wrong with me?”
That’s the sentiment budget culture breeds in our relationships with money. What an awful way for a society to do money.
This reader shared more of their situation, too: They work at a nonprofit organization, rent a small New York apartment, make student loan payments and pay for health care out of pocket.
It’s worth asking: Why does their situation feel like “messing up”? Why do we hold up homeownership as the gold standard of adulthood and financial responsibility in this culture? Why are we all expected to aspire to this?
Part of me envies this person’s ability to live in New York. Why don’t we all lionize that as the American dream? What’s so special about owning a plot of land and — usually — making monthly payments to a bank instead of to a landlord? (Do not come at me with “equity.” I cannot.)
I finally bought a house last year, at age 36, but I’m still an ardent defender of renting. (And, to be honest, a little envious sometimes. Greener grass and all that.)
Owning and renting each have their pros and cons. Owning a home isn’t, on the whole, inherently better than renting one. It only feels like the “right” path in our culture because of the systems created to prioritize and reward this way of life. Homeowners have access to tax breaks, loans and credit, and dignities our culture withholds from renters. Those are choices we’ve made, and the way we’ve built our systems perpetuates that shame people feel when they can’t or won’t follow this path.
It’s tough to hear someone owns their home outright because of a big inheritance. (Though, don’t forget someone’s family member usually has to die for them to receive an inheritance, so appreciate their struggle too!) It’s tough to know your friend’s parents took care of the first down payment that put them on a path of building wealth through buying and selling several homes.
But isn’t there a bit of relief in hearing these stories, too? It’s so easy to be ashamed of where you are when everyone else seems miles ahead of you — but it makes a lot more sense when you learn they started that far ahead in the first place. You can’t judge yourself against the standards of someone who’s not running on the same track you’re on.
My (boring) home buying story
I shared my debt stories last year because not talking about debt feeds the shame we feel about it. So I’ll take my cue from Katy O. and Anne Helen Petersen and share my home buying journey in the hopes that you read it and feel less alone or less ashamed about your housing choices.
(And I’ll let you decide for yourself whether it’s boring or not.)
I never dreamed of homeownership, but I bought my first (and probably last) house last year because the rural town I wanted to live in near family doesn't have a lot of rental options. Despite a deep discomfort with the dominant religious and political views in this town, I can move through the community safely as a cis, white, straight-passing person, all privileges that broaden the pool of housing I can choose from.
Home price: $130,000 (two village lots and a 750-square-foot Cape Cod house)
Monthly mortgage payment: about $850 (less than 25% of income)
Down payment: $18,000, paid with $5,000 from comfort fund and the rest from an early IRA withdrawal. (I get a $10,000 tax deduction for the IRA withdrawal as a first-time homebuyer.)
Mortgage qualification: The two-month-ish process was fairly easy, except that we dropped my partner from the application after learning he couldn’t qualify because he’d been self-employed for less than two years (despite several years of stable income that included employment before that). The mortgage is in my name only, even though we own the house together.
Credit: My credit score was excellent by this time, because I’d had several years of stable income between a full-time job and freelance writing. It had been in the mid-500s before that, but the comfortable income for years made it easy to get my debts back on track.
Interest rate: 6.13%, because 2022
Other monthly commitments: Mostly discretionary. No major debts, except student loans, which are in income-driven repayment plans with current monthly payments of $0.
Repayment: We deposit a little extra into the house-payment fund each month so we can make an extra principal payment every few months and pay the loan off slightly faster. At the planned 30-year pace we’ll repay the bank the full loan twice over.
Financial assistance: I didn’t get any help from family buying this house or any major financial contributions for getting started in adulthood in general. But my parents were there to occasionally lend a few hundred dollars when money was tight in my 20s, and I fulfilled my millennial obligation to move back in with them for a few months when I was 26.
Your turn
What can you share about your home buying experience? What feelings come up when you learn about someone else’s experience? What do you think is missing from our conversations about homeownership in this culture?
I’d love to hear your thoughts on any or all of this in the comments!
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I appreciate your transparency and willingness to share on this topic!
In my late 20's my husband and I bought a "fixer-upper" in 1999 which was also facing a possible foreclosure so the owners needed to sell quickly, and we were able to meet their timeline. I think it was around 99k and we put down only 5% in down payment. Some of this money came from family, and some from savings.
Then in 2003 we sold that house, partly due to our debt situation (ex-husband's job challenges and our schooling were putting pressure on us). In those days, homes were "hot" in terms of appreciation, so I think the sale price was 140k. Fortunately the proceeds were enough to cover our debts before we divorced, so it reduced the stress of that process.
In 2004, I rushed into buying a condo on my own because I was worried that my savings would be frittered away after divorcing. Later, I realized that wasn't wise. When I struggled due to an unstable job market in 2006 as I was finishing my grad degree, I wished I'd kept the savings rather than rushing into buying again. In 2007 I struggled to sell it, but fortunately did so with a short sale just before the markets started collapsing in 2008. Though my mortgage company negotiated me for different payment terms, that process did a number on my credit, and took about 7 years to recover after that.
Very few people talk about closing costs! There are many fees like appraisals, inspections, title costs, mortgage origination fees, etc. This typically adds another 5-8% in costs relative to the purchase price for a home buyer. This is one reason why, unless you intend to stay in a place for at least 8-10 years, it might not always be a wise investment, and you may not recover your initial investment. There's also some complexity to the buying process, so I suggest working with a realtor and a mortgage officer who you trust, perhaps recommended by a friend in your local area.
Thanks for opening up the discussion on this. We definitely don't talk about this process nearly enough to help people weigh their options.
On renting versus buying…over the last 14 years we have done in basic maintenance:
Resided: $27k
A/C replacement: $5k
Chimney cleaning/inspections: $1k
Electric work: $2k
Replaced rotting bathroom floor: $1k in materials and hours of our own labor
Roof: $12k
Hot water heater: $2k
We’ve spent hundreds of hours staining the deck, trimming trees, fixing the fence, painting the garage door, fixing the sprinkler system and blowing it out each year.
And even more on cosmetic work like adding a patio, gardens, replacing lights, painting the inside, etc.
The only reason we come out “ahead” is due to the obscene market that we were very privileged to be able to buy in 14 years ago.
I tell my sister she should stay renting as a single person. She has a LOT more time and money for non house related hobbies, can travel easier, etc, with renting a nice townhouse.
(Comment below with house buying story)