Statistically speaking, more and more young people turn to their parents for help buying a house, but what if you don’t have that as an option? Buying a house at all seems like a pretty daunting experience, let alone the often-prohibitive price tag.Buying a house completely on your own can seem flat out impossible. But, here’s the thing. It’s not impossible. There’s hope!
We spoke with three women in their 20s and 30s who have saved up for a down payment, gone through the process of getting approved for a mortgage, and moved from renting to home ownership all by themselves. Here’s how they did it.
Shelby ChambersDigital content manager, Highland Park, LA
I was always a little bit obsessed with saving. Ever since I was little my mom taught me about saving and opened a savings account for me. She kind of instilled in me that when you got a chunk of money always put a large chunk of that into savings and one day I’d be happy. So when I started saving in my early 20s I put about half my paycheck in savings every week.
I knew I had to save about a quarter of it for taxes because I was a contractor and then I just threw another quarter in to save. Transferring the money was the first thing I did each week, which took some discipline.
When I decided that money was going to be for a house I got a little more aggressive with the percentage that I would put away. Knowing that there was a goal and that every little bit helps, helped me to do that. I also turned on automatic saving. So, in addition to what I would consciously move to my savings account, I also had my checking account move like forty dollars a week over. Just doing that got me another $2,000 over the course of the year.
“I got a little more aggressive with the percentage that I would put away.”
People usually say, “Stop buying your daily coffee,” but I still spent money on the things I wanted. All the time I was saving for the house, I never carried a balance on my credit card. Staying within those boundaries allowed me to go on vacation, go to dinner, buy avocado toast, without having to tap into the savings for anything other than emergencies.
I was actually on vacation when I decided to pull the trigger on buying a house. I realized that the market was low, but it was going up. As soon as I started looking seriously, I knew that the bank was going to start looking at the cash I had, so I aggressively started to sock it away in those three months. Just to get that down payment as high as possible. So I was pretty good about no longer buying clothes. I cut going out to dinner and spending on little things. And that’s because of the system I had where I automatically saved about a quarter from each paycheck.
It was confusing; one bank said I could afford up to one amount and another bank mortgage broker would say I could afford even one hundred thousand dollars more than that. And the calculators that are on sites like Redfin and Zillow don’t take a lot of things into account. I benefited from talking to a lot of different banks and mortgage brokers and luckily a family friend was a mortgage broker and he was able to give me a lot more advice about what I could actually do and afford. So going somewhere a little bit different than one of the big banks was helpful.
If I were going through the process again, I would have probably put down more cash in the six months leading up. Not to contribute to a down payment, but because I wish I had saved more for things like updating the fence, getting it painted, re-landscaping, all the things I knew I wanted to do. I felt really overwhelmed by how much I spent as soon as I moved. And I had never had so little savings. So that was kind of a scary feeling and I’d probably advise people have more “cushion.”
Lina AbascalAdvertising creative and freelance writer, Boyle Heights, LA
So, my approach was a little bit more about making extra money than people extra frugal. When I first started saving I was earning about $40,000 and I was putting $300-$400 a month of my salary in savings. But, I’m a writer and I would freelance a lot and saveallof the freelance money. Sometimes that was only something like $200 a month writing a blog, but it all went in savings.
“I Airbnb’d a room in my apartment for a while.”
I Airbnb’d a room in my apartment for a while. My boyfriend at the time, and I lived together and split the money from renting it out. He hated it, but in the moment I was tunnel vision—in one year we made $10,000 on just that.
I was also a bit stingier than the average person in a major city. For example, my housing situations tended to be a bit below my means. I never lived alone during this process. I rarely even lived with one roommate. Before my partner, I was always in a three bedroom apartment, three girls paying well under $1,000 each type of situation. That meant I could save about $700 to $800 monthly.
I also didn’t have a car in LA, which sucked, but saved me money on insurance etc. Little sacrifices like that added up in tandem with freelancing, though it wasn’t very sustainable; I would get home from my 40-hour a week job around 7 p.m. then eat, shower and work on other stuff until 11 p.m.
Once it got to the $10,000 mark I remember calling my parents and saying, “I think I want to buy a house, how do you do it?” I learned that even if I thought I could buy a $600,000 house, the bank might only let me spend up to $475,000. I had to learn what percentage I needed for a downpayment. So, I had a number in my mind that I needed: $50,000.
I kept saving over the next three and half years until I had it. When I eventually found my house I ended up having to put $47,000 down. After I bought the house I had $2,000 in bank and then I got laid off, which was terrifying.
Looking back on the process of buying a house, I’m really happy with how it went. Part of me thinks that if I had waited longer I could have saved more and gotten something better but the pace at which I can save is so much lower than the pace the market is growing. So I’m happy to have gotten in at all.
Bounlay BounleuthChemical engineer, Chicago, Illinois
Out of college I was stressed about student loan debt, so I made a spreadsheet that showed, this is how much money I’m taking home, these are all my monthly expenses and then all the extra money went toward paying off my debt first. Once I was able to do that, the goal became to build wealth.
Looking at the amount of money I was bringing in and spending, I realized I was able to save $400-$500 a month. So I said my goal is to save 50 percent of that go toward buying a house.
I looked into every government incentive program. There were incentives for first time homebuyers that helped with how much I needed to put down for my down payment. I also found it very helpful to talk to a financial professional who does mortgages. They’re always willing to sit down and talk to you about how much this isactuallygoing to cost and how much you really need to save.
“When you’re getting ready to buy you have to document your life.”
When you’re getting ready to buy you have to document your life. They’re going to need your paychecks, your taxes, your W2s, any kind of employment history. All of that documentation needs to be digital so I kept everything in PDFs in a folder on my computer.
Then, when it came time to look at houses I told my real estate agent I want to stay with in my budget, but if you see anything that’s been on my market for months that just a little bit higher I want to see it so I might make a much lower offer on it. I don’t believe in pay for things full price, so I relied on my realtor and her ability to bargain down the price for me. Also, I’m a pretty handy person so I knew I could look at fixer upper houses. With a fixer upper I felt like I could get more value for my money and potentially afford more in a nice neighborhood I normally wouldn’t be able to afford.
My biggest advice would be: Don’t fall in love with the house too soon. You need to be able to walk away if something isn’t right with the appraisal or inspection because you don’t want to put financial stress on yourself when you buy a house. You don’t want to be penny-pinching the whole time you have the house. And you want to be able to maintain a savings account and continue to save the way you’ve been saving the last two to three years.
Looking back, I would have been more aggressive than I was about buying a house. I was not willing to sacrifice certain things in my budget. I could have done without going out to eat or going to the movies as often. I also wish I had bought sooner because I ended up paying less for a mortgage than I was in rent. So once you’ve saved even $200 on your rent versus paying your mortgage that money adds up and you can put it toward something fun.