At 24, I thought I had it all.
I had an entry-level job with a Fortune 500 company.
One course separated me from my MBA.
I had some money in savings.
And I was going to buy my first house.
After a few months of online searching, I had found the perfect house.
I knew from the second I walked in the front door, and the sunlight from the front windows lit up the living room.
This was it.
This was my first home.
And this is the moment I have cursed myself about for years since.
Unfortunately, everything went wrong from there.
Problem #1: I Didn’t Know How Much Mortgage I Could Afford
Remember that great job that I had? My starting salary was $47,000.
Now that sounds like a great number when I was used to making $10/hour working part-time jobs around my university.
But it doesn’t go as far when I was trying to buy a house.
Thankfully, this was a reasonable salary for a single person to buy a house in Cincinnati that year.
My budget was around $150,000.
If you’ve read post about 3 ways to calculate the mortgage you can actually afford, you can see that I was already in a bad spot here!
With a salary of $45,000, I should never have looked at a house that cost more than $141,000.
I made an offer for $145,000 on my dream house.
Problem #2: My Down Payment Didn’t Make Up for The Gap
If you’ve been doing your research, you’ll know that I could have been okay here if I had a 20% down payment.
But I didn’t.
I had $8,000 to my name and thought that would be enough.
I only had a 5% down payment.
And no one had ever told me that closing costs aren’t included in your down payment.
Turns out there are government fees, lender fees, and escrow come due when you sign your mortgage papers.
And they cost about $3,000.
So I was ready to put a $5,000 down payment on a $145,000 house.
And then I learned what PMI is.
Turns out, when you can’t make up 20% of your home’s value with your down payment, the bank thinks you’re a bigger risk!
Since I was considered risky, I had to pay them an extra $92 each month.
Yep, $92 each month for the remainder of my mortgage to prove to the bank that I could pay my mortgage.
You thought that PMI fell off when you reached that magical 80% loan-to-value ratio that my down payment should have covered?
Turns out that only works with a conventional loan, not an FHA loan.
The only way to get rid of PMI on an FHA loan is to refinance or pay off the mortgage.
Add that to the list of things I didn’t know about until AFTER I signed my mortgage papers!
Problem #3: Despite a 700 Credit Score, I Needed a Co-Signer
After some back and forth, I was set with a $140,000 mortgage.
I was under my $141,000 limit for 3x my salary, so I was fine.
The extra $92/month for PMI would hurt, but I could afford it.
For a minute, everything looked fine!
And then my lender pulled my credit report.
My mom had the forethought when I was in high school to add me to her credit cards as an authorized user.
Thanks to her, my credit score was 700 when I was 24 years old!
But there was one tiny detail I had missed.
Your lender pulls your credit report to identify what your debt obligations are each month.
They use this to calculate if you can afford your mortgage payment each month.
According to my credit report, being an authorized user on my mom’s cards also made me responsible for her balance transfer payments.
My lender added the balance transfer payments to my monthly debt calculation.
And just like that, I couldn’t afford my house!
After some panicking, I got my lender on the phone and explained that I was an authorized user on my mom’s cards.
Those weren’t my charges, so I couldn’t possibly be responsible for them, right?
Thankfully, my lender agreed and removed the payments from my monthly debt calculation.
And then he told me that he was removing the cards from my credit report list, since I wasn’t responsible for paying them off.
And just like that, my lender told me that my adjusted credit score was 540.
This meant that my interest rate skyrocketed, and I couldn’t afford my mortgage.
If I had read the signs, I would have stopped there.
Instead, I asked my mom to co-sign, and she agreed.
I took this as a sign that everything was great, and I finally signed my mortgage papers!
The problems were all behind me, and I could move into my dream house and start my dream life!
Problem #4: I Picked the Wrong Home Inspector
I was an elated homeowner for one month!
I had picked the perfect paint colors, made plans for buying furniture, and started my first DIY project to redo the kitchen cabinets.
My boyfriend (now husband!) moved in, and I had asked him to start tearing down the wallpaper in the master bedroom.
When he was halfway done with the room, I came upstairs to see cardboard staring back at me.
As it turns out, one of the previous owners had renovated the bedroom and put up ALL of the wallpaper incorrectly.
Over the next few days, we found more problems around the house.
There was nothing in our inspection that indicated that anything would be wrong in our house.
How could something be wrong? How could SO MANY things be wrong?
So… I cried.
And then I did what any rational person would do.
I bought a sledgehammer.
And then I used it to smash the fake wall I disovered in our guest room.
Over and over and over again.
And when I wiped my tears, calmed down, and asked friends to recommend their contractors.
The first contractor came over, and he let me know that I had two options: skim over the problem and paint it OR do it the right way, take every wall down, and start from scratch.
Knowing that the problem existed BECAUSE someone had taken the easy way out, I decided to do it the right way.
Of course, I couldn’t afford it.
I was already at the top of my budget, thanks to the mortgage payment.
So, before I had even slept in my bedroom for the first time, my house was already damaged, and I had to find money to cover the renovation that I couldn’t afford- in the house I could barely afford.
Thankfully I was eventually able to get a loan from a family friend to cover the renovation, and I could breathe again.
I could pay them back for the next two years while living on peanut butter and jelly sandwiches.
Everything was going to be fine.
And then the contractor found black mold. We had to tear out the entire bathroom.
Then he found it in the ceiling of the bathroom downstairs. We had to tear out that entire bathroom.
He found floor joists that had been cut, staples in the electrical wire (that amazingly had never caught fire), and more problems than I ever could have imagined.
Problem #5: I Had Also Picked the Wrong Contractor
My contractor convinced me that he was going to fix all of my problems, and everything was going to be okay.
And I believed him.
Until everything started going wrong.
My contractor was judgmental and became verbally abusive towards my boyfriend.
His team forgot to seal the bathroom when they completed their demolition, so every inch of my lower floor was covered in dust.
After he hadn’t shown up for a few weeks, he called me to tell me he had forgotten about my project.
When he finally showed up again, his team put down flooring without paying attention.
He blamed me for buying the wrong boxes and told me that replacing it would be at my expense.
And after 10 months of living in a construction zone, I lost it.
I finally kicked him and his team out and took a deep breath.
I didn’t care if anything was done.
I wanted my house and my life back.
I had spent an entire year of salary on all of the renovations.
I was broke.
I was exhausted.
And my relationship with my boyfriend was hanging on by a thread, thanks to my lack of sanity and the horrible treatment he endured from the contractor.
All I could do was look back and see what I had missed- if I had just seen the signs, known better from the beginning, I could have prevented all of this.
Five Years Later
It has been five years since the day I kicked my contractor out.
Five years later, I still find things that he did incorrectly, and I still announce that I hate him on a regular basis.
Unfortunately, just because he’s gone doesn’t mean that my home was ever able to recover.
Thankfully, I changed jobs 2 years into living here. Thanks to my raise, I was no longer house poor, and I can now afford my house.
My boyfriend stuck with me through the awful times, and he’s now my husband.
Our combined salaries have made us comfortable, which makes living in the house a little less challenging.
We haven’t been able to finish and fix everything that my contractor left unfinished, but we’ve given ourselves the grace and time to get there when we can.
We’ve repainted and brought in a plumber to fix the problems our contractor left behind.
We’ve replaced the hot water heater, HVAC, air conditioner, and dryer.
I finally gave in and bought a whole house water softener, so every surface that is touched by water no longer turns orange.
We’ve refinanced twice, once to get rid of PMI and once to get a better interest rate.
This year will finally be the year that I can cashflow the full kitchen renovation I planned on DIYing when six years ago.
I’m still hoping that someday I will love my house as much as I did the first day I walked in.
Maybe then I’ll stop making jokes about it being cursed!
What Can You Learn from Experience?
Looking back, there are so many things I would have done differently if I could do it over again.
I would have:
1. Set a realistic budget for what I could afford
2. Waited longer until I had a bigger down payment so I could avoid PMI
3. Built up my credit on my own, without just being an authorized user on my mom’s cards
4. Found a better, reputable home inspector to catch all of the problems that our house had
6. Not just picked my contractor because he was cheap and acted like my savior
7. Paid more attention to how my contractor was treating my boyfriend and kicked him out sooner
As much as I’ve wished for it over the years, I can’t go back and rewrite the past.
But hopefully you can learn from my mistakes and save yourself time and trouble when you buy your first house!
Are you planning on buying your first home soon? What lessons have you taken away from my experience that you can use for your first home? If you already own your home, what problems did you encounter when you bought your first house?
Share your answers in the comments!
If you’re in the market for your first home, check out my First Home Buyer Guide for more advice to save you time and trouble when you buy your first home.
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Related Debt & Savings Posts:
Your New Mortgage: How Much Home Can You Afford?
First Time Home Buyer Guide: Everything You Need to Know to Buy Your First Home
How a Sinking Fund Can Keep You On Budget and Out of Debt
Emergency Fund 101: Why You Need an Emergency Fund