This is an amazing story. Congrats to your parents for such solid financial planning!
I feel like the dinosaur of this group, but we bought our first home, a 2 bd 1 ba, for <$35K. We had a FHA mortgage which meant only a 3% down payment. H earned a little more than I did and our combined salaries were about $25K. My dad helped with the down payment and I repaid him at 6% interest.
In two years, after significant bumps in pay and some nice bonuses, we moved to an interesting old house that needed a great deal of work. We didn’t make much on the sale of the first house, but had saved enough to cover that down payment on an adjustable rate mortgage with a reduced payment rate. The initial accrual rate was just shy of 18%, and the payment rate was “only” 13%. We paid extra each month to avoid adding to our debt.
Back then, we would have been thrilled with today’s interest rates.
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They were the poster children for pension-retirement and living within your means.
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Not sure how old you are, but my starting salary of $24,000/year working for a major auto company was quite a bit more than my friends from other schools earned in their first jobs (this was in 1983). We would not have considered $25,000 a “crappy” starting salary. Maybe you are younger than I am.
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I started at $24K in 1992.
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That’s amazing. I pay 19x that in property taxes for our main home and it would be substantially more if I didn’t live in the township with the lowest property tax rate in the county.
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Graduated college in 1989, but now that I think of it, that might’ve been job #2.
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We saved and cut back on some stuff to save. We also used money that we got as wedding gifts.
H’s grandmother passed and he inherited a bit of money from her, so we used that towards the downpayment as well.
You never know how much debt people are in or how they may work well into their 80’s…
True, but I know people who graduated college with no debt and are still having a hard time affording houses. And the issue with low COL areas, is that there might not be a lot of good jobs…
My kid’s groups of friends are responsible. Most don’t own…they can’t afford it or they want to spend on other stuff. I would say from what I see most seem to be good with money. I don’t necessarily think that owning means someone is more responsible with their money.
Exactly! Not everyone can or wants to be a lawyer, engineer, doctor, etc. I know people in those occupations who love it and I know some who do it and hate it and only do it because it pays a lot of money. Plus being an engineer is really hard, if you can’t pass your engineering classes, I think you need a different major.
that’s how my husband and I think. We wanted to be good buyers and solid buyers.
Same here! We paid for private school, college, and many other things. I think they’ve had it pretty good. And no one HAS to own a house…
They may have parental help.
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I forgot about my actual first house. A very small, older house in northern New Hampshire. 1976. It cost $10,000. Put $1000 down. Mortgage payment was $100. Sold that house in 1987. Netted $36,000. That became our emergency fund
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Back in the early 2000s, I put down 5% on my first home - a new construction in a state with a lower cost of living. I used my end of year bonus, which that year was multiples of the down payment and closing costs, but I also had enough otherwise saved with enough for the required savings reserves for the mortgage. Houses were much cheaper then. My D does have enough saved for a 20% down payment from a combination of a gift I gave her when she took a full ride, savings from multiple scholarships, and savings from her earnings. I will still likely gift her a down payment as she’s an only child and is at least 3-5 years from buying a house. I am all for her enjoying part of her inheritance while I’m alive to watch.
My husband and I were renting in Brooklyn in 2003 when I got a wild hair to buy something. A friend was living in Montclair, NJ in a two-family, with the renters covering a big chunk of their mortgage. We found a similar house in the same town for $350k. My parents loaned us $10k and we scraped together the rest for a 5 percent down payment. We got one of those interest-only loans that were trendy at the time.
Turns out, I hated being a landlord and we lasted just 2 years in that house before hightailing it back to Brooklyn, this time with a 1 year old in tow. We sold at a great time and cleared nearly 200k in profit, which was the springboard we needed to put 20 percent down on the next place, and so on. It was the largest sum of money we’d ever had sitting in our bank account and I can remember that giddy, shocked feeling when we got the check.
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Lol, I remember writing a check for $55-some K downplayment on House1 and thinking, “There goes our entire wealth!” We sold that house for a decent profit after 18 happy years in it.
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Here was my Bay Area buying experience in the late 1990’s (the first dotcom bubble/bust). I was relocated for work and sold my LA home and bought in 1999 in the Bay Area Peninsula. I paid $601K (after selling my LA home for $425K – it was a substantial stretch but the relocation came with a higher income). Of the 6 homes I have owned in my life, this was the worse. It was a 3 bedroom, 2 bathroom, approximately 1,500 sqft., with no usable garage, basement or attic. The house had been cheaply built decades before. It had single pane glass, clapboard paneling walls with no insulation. When it was windy, you could feel the breeze go through the house like there was nothing stopping it. There was no AC and very slow acting radiant floor heating (there was no gap between the ceiling and the roof to run ductwork). Nothing had been updated in decades.
Here’s how the buying process worked. Every Tuesday new listings would go live. We worked with a broker who got us into select previews that week, but the real action was on Sundays when every new listing would do an open house. My wife and I scoured the listings in the papers (no Zillow or Realtor.com yet) and divided and conquered visiting as many places as possible in two separate cars then reporting back. For an open house, you typically had to park a couple blocks away and in the course of 3-4 hours, they would get up to well over a hundred lookers; at any given time there was probably 1-2 dozen in the house. On the kitchen or dining table there was usually a full home inspection report and the CA-mandated disclosures. Unlike most markets, the seller paid for the inspection up-front. The reason they did this is that every home received multiple offers and was sold “as-is” so they provided that because your offer had to be completely non-contingent. You had to provide proof of your ability to buy (cash or loan) and accept an immediately binding deal before you could do any inspections yourself. It didn’t matter if you later discovered an issue – no ability to negotiate a credit or walk. The buyer paid for everything else (except commission)… A colleague who was looking in Palo Alto (too rich for us), once walked into a house that had burnt down in the back half and it was selling as-is to for over $600K.
On Monday, less than a week since the home listing went live, the sellers agent would host a “bidding party.” Typically unless there was something severely wrong with the house it would receive 4-7 offers and the winning offer typically was well over asking. And that’s it – you either were in an immediately binding deal or you lost and went back to the search rat race. For perspective, the house we bought for $601K had been previously sold bought 3 years before for $400K…
Unexpectedly, the company I worked for decided to relocate LA (ironic since that’s where I had moved from less than 18 months before). By the time I sold the dotcom bubble had just burst so the market was starting to significantly slow. Instead of bidding parties, it took 2-3 weeks to get a single at-listing price offer. It was 14 months between buying and selling and we timed the exit poorly and it still sold for $745K (up from $400 just 4 years before).
14 years later the home went up for sale again. They had refreshed the kitchen but that was about it. They asked $1.6M, they got $1.85M a couple weeks later (during another tech surge)… Today Zillow claims the 1,500 sqft, 3/2 room clapboard home is worth $2.7M (this is twice the current value of the home I finally ended up years later that is over 3x as large and sits on over an acre in still super expensive NJ).
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There was no special system. I saved a significant portion of income each year, rather than lived paycheck to paycheck, then used a portion of savings for the downpayment. My first home was a small condo. I bought it for the inflation equivalent of $420k. I didn’t buy immediately after I had enough savings for a downpayment, but I did buy at a relatively young age – 4 years after I started working.
While the specific numbers may differ, I expect the same general principle – gradually save over time, and use a portion of accumulated savings for a downpayment. I realize that the numbers may not work out well for many, and that’s okay. There are many advantages for young persons to rent rather than buy, particularly if debt to income is too high to support a large mortgage payment. This is especially true when thinking about purchasing soon after a sharp ~50% increase in prices and historically high unaffordability.
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Anyone else seeing these starter home neighborhoods pop up around them? We’ve seen several in the last 2 years; most are 3/2, 1,300-2,000 sqft, with garages for $220-300k. Yes, they’re built by the mass builders; having lived in a couple of the tract houses over the years, I’m aware of their potential issues, but those neighborhoods are good for 1st time buyers. They attract young families, so lots of little ones, neighborhood events, etc. Just curious if it’s a local trend or national.
https://www.zillow.com/community/wells-station/2060633657_zpid/
https://www.zillow.com/homedetails/442-Seaborn-Cir-Pendleton-SC-29670/2055057054_zpid/
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One of my kids lives near a Ryan Homes development. Houses, townhouses and apartments. Reasonably priced.
Not a huge fan of the building quality of Ryan Homes. But they do look like a decent value for those first time home owners.
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We bought our first coop 3 years after college. The coop price was 125k and we were required to put down 10%. I wasn’t sure whether I was going to share this, but looking back it was a bit crazy and funny.
I joined a Chinese group of 24 people. Each member was to put in notional amount of $500 a month. Few days before each month, the members were allowed to bid for the money one time in 24 months. Whoever bid the lowest amount would get all the money that month. As an example, if member A bidded 470 and member B bidded450, then member B would be the winner. What that meant was every member who has not won a bid yet would only have to pay 450. The winner would get (assuming it’s the first month) would get 450x 24. Thereafter member B would have to pay in 500 every month. If you did not need the money you would in essence get 500 x 24, but only pay 500-x every month depending how the bidding went. I was the youngest member of the association and everyone knew I wanted the money to buy a place, no one bidded against me. The interest I paid to everyone was very low. My mom told that was how they have helped each other to start a new business because in the early days it was hard for immigrants to borrow money from bank. I guess it took a village to help me get my first apartment.
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We do, but in our expensive area, they’re not affordable. They’re cheapish for our area, but still you’d have to be paid pretty well to be able to afford to live there…
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The first starter home link could be a good retirement floorplan.
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We were married 14 years before we bought our first and only house in 1998. It was $227k. (DC burbs) Put 10% down, got a HELOC for the other 10% to avoid PMI.
We had $7k each in UG loans. We hit the workforce in 1982 and 84, then H started law school 4.5 years later.
We had been married three years when he started law school. I supported us on my $20k salary thru law school to reduce the amount of loans he took. (Zero fin help from either set of parents for education, house, or anything else.) H took Stafford and PLUS loans. I didn’t cosign on the PLUS loans.
So…we paid off all the student loan debt ($54k+ interest between all of our loans), missed out on three years of my income because we had two kids in the years right after graduation. Then dropped about $80k (in mid 1990s money) on day care. We saved, too, but H didn’t contribute to his retirement. We bought based on H’s salary only; he had just started working for the govt when we bought the house.
Refinanced a couple times to 15 yr and sub-3% interest. Paid off after 24 years last spring.
S1 put 25% down in San Jose and got a 2.9% jumbo loan in the early weeks of Covid. Also paid less than asking price. The timing was perfect. He used some savings, but mainly stock grants. He lived in apartments and split the rent with roommates for eight years before buying. Lived (and still does, to a large extent) like a grad student.
S2 and DIL are in Lviv and spend $325/mo on a 2BR furnished apt. They don’t own furniture, but they are IDPs (Internally Displaced Persons), so it’s better not to be overly encumbered right now. He is still there after six years because the COL here is prohibitive. If he and DIL came here, they’d be living with us and struggling. In Lviv, their income gets them a nice life and relative safety.
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