There is one question that constantly pops up in our Instagram messages: “How did you get started?” in which we typically respond “Oh you know, one step at a time!”
The truth is slightly more complicated– we started out of necessity. In 2012, we were living in the Fenway neighborhood of Boston and rent was on the rise. The letter came from the management office with a strict renewal policy– every week we delayed our renewal the rent would increase. The new rent would equate to a reasonable mortgage payment (we thought without any hard facts) and within a couple of months we were closing on our first home. Looking back, I am amazed that we pulled it off, and so happy that we did.
P.S., we’re participating in a live YouTube panel with Homes.com this Wednesday at 4pm EST. If you can’t make it live, don’t worry! It’ll still be uploaded to YouTube afterwards so you can tune in to hear your questions answered.
I am not using the word “amazed” lightly here. We started searching for a house immediately (more on this later) while figuring out what we could afford. I was one year out of school with a decent salary, $200k in student loans, and spent the last 12 months trying to pay off credit cards. Stephen was still a full-time student, and besides a weekly shift as a server, had no consistent income. We went to a bank anyway – just to confirm what we already knew – we had no money.
As it turns out, going to the bank in search of a pre-approval was one of the best things we could have done. Yes, we were denied, but we learned why we were denied, and a few other little nuggets along the way:
- Banks want to give you a mortgage and will take the time to walk through your options.
- Banks don’t care about the amount of debt you have, only what that debt cost you each month. My student loans were $2,400 a month– a number that still makes me sick.
- It’s really helpful if your co-signer has a job.
- As a first time homebuyer (FHA Loan) we needed a 3.5% down payment.
We left the bank a bit defeated but not without hope. I couldn’t stomach paying another year of rent as the internet meme of the Little Rascal throwing cash out of the window replayed in my head… if I could just solve each individual problem we would be approved!
Here are the steps I follow to try and solve those problems.
Step 1: Decrease my monthly costs. I contacted my student loan holders and negotiated lower monthly payments.
Step 2: Find a cosigner. I convinced my college roommate of five years, who recently got a job in the area, to cosign the mortgage for nearly free rent. It was wild, but he said yes.
Step 3: Find a downpayment. Stephen cashed in a few childhood bonds and received a gift from his recently passed grandmother. We now had just under $10k to put down and it changed the trajectory of our life.
My now mother-in-law still describes me as someone with “gumption”.
Long Story Short
There is never an ideal time to make a purchase as big as a home. If you dream of homeownership then go talk to a bank and get a feel for where you stand. It will take a lot of work, and time, but it can be done. Given our new circumstance, we were pre-approved with a monthly PMI of $200– we decided it was just the cost of playing the game.
Our First House
Quick reality check: Single income, <$10k in cash, a pre-approval for $285k (that we hacked with a college roommate), and we were looking to buy a house in the Boston area. It’s actually laughable thinking back on it.
The key was figuring out what we were willing to tolerate. We knew that we needed to have access to the city, but we didn’t need to be in it. We knew we needed a functional kitchen, but it didn’t have to be a (remotely) nice kitchen. Copy paste bathroom, copy paste bedrooms, copy paste, copy paste. We actually needed something that may appear overwhelming for the average family. We needed a fixer-upper.
We set our search criteria to “on market for longer than 5 months” and started there. After a few false starts we found the one, a sturdy 1910 American Foursquare in massive need of attention. The house was 45 minutes from the city by commuter train and owned by a trust consisting of six adult children who were starting to get on each other’s nerves. We negotiated updating the electric, agreed on a sale price, and became homeowners.
Our vision was to live in this home and repair it over the next 10 years. Ten years then became five years, and five years became two years. The acceleration of plans were fueled by a drive to return to the city, abandon our commutes, and spend more time with friends. We buckled down and worked on the house every night and weekend for two years.
Did you know… If you live in your home for two of the last five years you do not pay federal income tax on the sale of the home? After almost two years of ownership Stephen created a beautifully designed yard sign that read “Preparing for Market June 2015” with a gmail address. Seven-hundred thirty days of homeownership and we sold the house ourselves resulting in the biggest check we had ever seen in real life. My gumption had paid off.
The Boston Victorian
We used the proceeds from our first home to pay down student debt, have a wedding, a honeymoon, and purchase a small rental property in Western Massachusetts. By the time we stumbled across our current home, we were once again stretched a tad thin. Although the details were different this time around (and a bit more expensive) the theme was exactly the same. We needed to pull it together and figure it out.
Our house had sat on the market over the winter and was fully gutted by the previous owner. When we say fully gutted we mean it; no walls, no plumbing, no electric. The project scared off average homebuyers and was likely too much work for the quick flip contractors. Moreover, we were able to tolerate all of the inconveniences in order to get our foot in the door. This included moving in with only primed walls and a single toilet/sink under the stairs. We showered at the gym for a while and ate only what could be cooked on the grill outside.
Because of the state of the house and our lack of downpayment we used the FHA 203k loan. This type of loan is used for homes that are in desperate need of rehabilitation by bundling the purchase price and the rehab price into a single mortgage payment. The loan fees were quite high and it came with a $400/month PMI payment. Again, all the cost of playing the game and nothing that couldn’t be fixed by a refinance in a year or so. The 203k is complex but without it there would have simply been no way to buy this house without it. If you’re interested in learning more about 203K loans, I’ve written a post all about it on our blog.
While living in our first apartment, we did exactly four DIY projects. We converted a coffee table into a tufted ottoman, we spray painted a table black, we hung a shelf in the kitchen, and we painted the walls. Now, thousands of projects later, I see that those projects were the start of the foundation for our skills. It is also where we learned that we love to problem solve together.
Because our first house was technically fine, there were no immediate fires to put out. We started with “quick wins” like deep cleaning, removing decades of old blind and curtain hardware, changing the harsh daylight bulbs to something a bit softer, purchasing new trash cans and writing the number of our new house on them, replacing light switch covers that were once called “white.” These were wins after wins after wins.
Quick wins were, and still are, our key to success– they are easy, quick, and often inexpensive. They make an impact, give you a sense of accomplishment, and keep you moving forward. They are the building blocks that allow you to feel like you can take on more. Whenever we are feeling worn down by a “big project” we revert back to quick win mode.
Anything bigger– a bathroom renovation perhaps– is not something you can learn from a book. You just need to get in there, roll up your sleeves, and do it. Ripping up a floor doesn’t take a huge set of skills, so start pulling the layers back and see first hand how everything fits together. When it comes time to put everything back, look things up, ask questions, and dive in. I use the bathroom example because it was our first big project and I remember trying to fall asleep while thinking “How am I going to know where to build the shower if all the pipes are gone?”
A Tip to my Past Self
If I could go back and tell my past self one thing it would be this: The proper tool is worth the money. As you could imagine, we were on a budget, and I often shied away from buying expensive tools. This became especially apparent when we purchased a pneumatic nailer (air nailer) our last week of owning the home for a siding project. I was blown away by how easy it was and how much time it saved me. Two years of hammer and nail use still haunt us whenever we bring it up.
Whenever we look for a potential project we have followed the same principle. We look for something that is below market value and that we feel we are able to improve with our own labor and time. This is often called “sweat equity.” We squeezed our way into three properties that we probably couldn’t afford because we knew that if we worked hard we would increase the value. This allows us to make back our initial investment, and then some, all the while learning so many lessons along the way.
If you want to follow along, we document all of our projects on Instagram.
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