How We Bought A House Making Under $35K a Year

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In June, we will have been in our home for two years, and every day even still, we feel so lucky to be here. We live in a beautiful + safe neighborhood right at the mouth of a canyon (we love our mountain views!), we have yet to get sick of having our own yard, and I have been quite surprised by how much I’ve enjoyed playing “interior designer” as we update our home to feel more like “us.” (If you’re interested in seeing some of the home projects we’ve done so far, click here.)

The funny thing is, we definitely had not planned on buying a house two years ago. In fact, our original plan was to save up a 20% down payment and then start looking for a home, ideally at a leisurely pace over several months so we could make sure we picked the “right” place.

The real story is laughably not at all similar to what we’d pictured.

An Unexpected Epiphany

After having a brutal start to our 2017, my husband and I had been talking a lot about why we were feeling so restless and whether we could afford to maybe change our original plans for buying a house. We’d been slowly but steadily socking away money for years but still were nowhere close to a 20% down payment, and in the meantime, we were just funneling more and more money towards our rent to live in an apartment that we’d never own.

We talked a lot about where we saw ourselves in the next five or ten years, and since the majority of our plans involved us staying in Cache Valley, we started to crunch some numbers to see if it made more sense to buy rather than to keep renting. (For starters, I did some quick calculations and discovered that in the six years we’d been married up to that point, we’d paid around $45,000 in rent payments. THAT was a wake-up call!)

During all this, we had an important realization–we were feeling restless because we didn’t really have any big goals in mind to work toward. We’d been floundering around from a lot of hard events in a row, but when the pieces of our world gradually started to fall back into place again, we were left with the feeling that life was too short to be complacent and content to stay exactly where we were.

So we decided to go meet with a lender, just to see what they’d say.

And the rest, as they say, is history–we got preapproved by our credit union for the loan at the beginning of May, we made an offer a couple of weeks later, and we were officially homeowners by mid-June.

Since I love when people share real numbers when talking about their finances, I’m going to share real numbers with you here. Matt and I have always been open with our finances with the hope that doing so might help other people know that you can do a lot on less than you think. We are currently making more now than we were two years ago (not drastically more, but more), and had we not known that we had some raises coming up soon after we’d purchased our home, we probably would have waited awhile longer before buying, if I’m being honest.

However, I don’t repent of having bought when we did. Sure, the real estate market had never been hotter (not in a good way for buyers) and sure, we ended up purchasing a home at the top of our preapproved range (which I would never, EVER recommend to anyone else, and which we only did because we knew a raise was forthcoming and we had savings)—but for us, I know that buying our house when we did was the right move.

Here’s how we swung it financially.

How We Could Afford Our House: All the Details

• For starters, we had no debt of any kind.
  • Matt and I were both able to graduate from college debt-free thanks to scholarships, grants, and working while in school, and we’d purchased our cars with cash upfront (and our Mazda, which Matt used to make car payments on, was paid off in full before we got married when I encouraged Matt to use his tax return from that year to pay off the car rather than to make our honeymoon more lavish. Best. Decision. EVER. And our honeymoon was still awesome, so we didn’t need the extra few grand to spend on it, anyway!)
  • I would highly recommend that if you’re making a lower income like we were that you worry about getting out of debt or greatly increasing your income BEFORE looking into buying a home.
• We were living on much less than we were making.
  • Our take-home pay at the time we bought our house was around $2,400 a month. Our rent for our apartment at the time cost us just $590, and we were pretty good about not going out to eat a lot, buying stuff we didn’t need, etc. Two years before we bought, we’d opened up a down payment savings account and contributed between $300-400 a month for several months, then we took that down to around $50-150 a month once we had our daughter and needed to beef our savings back up again after using them all up for hospital bills.
  • One important life shift that happened before all this that led to wanting to really start throwing money into a down payment account was when we did a no-spend month, which drastically reset our spending habits and made us realize we could be saving a ton more than we already were by cutting out all nonessentials. While we didn’t have drastic no-spend months every month after that, we DID cut out about 90% of the discretionary spending we’d been doing before, including on things like clothes (which used to be a big weakness of mine) and eating out.
  • When we started thinking more seriously about actually buying soon, we cranked up our saving even more and treated our income as if we were already making a mortgage payment to see how it would feel. Of course, I wish we would have done this for longer than the two months we did (since that’s how fast everything went for us once we decided to buy), but it was a great exercise to see if we could handle it.
• We kept our savings and our down payment account separate
  • This might seem like a weird one to put down, but we knew that under no conditions did we want to totally wipe out all our liquid savings when we bought our house, so we opened up two separate accounts. One account was our general emergency and unexpected expenses fund, and the other was our down payment account. Each month, we funneled money into both so that when it came time to buy, we knew we wouldn’t be leaving ourselves in a precarious financial situation by depleting all our savings to buy our house. While we did end up dipping into our savings a little bit (more on that in a minute), we largely left it untouched, which was SO SMART since there’s no way we would have been able to make ends meet that first year if we hadn’t.
  • By the time we started to seriously look for houses, we had $3500 in our down payment account and about $6000 in our general savings.
• We looked for a first-time homebuyers’ grant
  • Seeing as how we didn’t want to drain all our savings, we knew there was no way we could afford to pay closing costs AND the required 3% for a down payment without some sort of outside help. So, we looked around for some first-time homebuyers grants, but none of them seemed to apply to the areas or types of homes that we were wanting to buy. We decided to go ahead and at least talk to our credit union about what we would be preapproved for, and we asked them if they had any first-time homebuyer grants while we were there. In the greatest stroke of luck ever, the agent we were working with said they had literally just started a fund for just such a purpose that very month, and that we would be their first buyers at this branch. The grant basically would give us $7500 towards the down payment and closing costs as long as we qualified for it, and we would only need to pay it back if we were to move away from our house in less than 5 years.
  • To qualify for the grant, we needed excellent credit, which we already had (both of us had/have credit scores well into the 800’s), and we also needed to be below a certain income threshold (which we were). We also needed to take a homeowner’s course online through a local community group, which we completed immediately. Once we filled out the application, got our credit background check, and completed the course, we were approved for the grant (which is the ONLY reason we were able to buy as soon as we did).
  • If you’re in a similar situation and have excellent credit but need a bit more of a boost to cover closing costs and down payment and such, definitely ask around about grants! It would be worth your time to call around to several lenders, since you’ll never know what you’ll find.
• We cashed in some stocks I had
  • When I was born, my grandpa invested in some stocks in my name that would become available once I turned 18. Because the transfer would require some applications and notarized signatures and the official stock certificates (which I needed to obtain from my aunt, since they went into her custody after my grandpa passed away), I just had never taken the time to cash out the stocks before. Knowing that we’d need those funds to make up what we lacked for the down payment and closing costs, we put in the work and cashed those in, which gave us an additional $2000.

It Always Costs More Than You Think

When we finally found our house, we knew we’d have to put in an offer ASAP. We literally drove past our house right as the former owners were putting a For Sale sign into the grass, and even though we made an appointment to see it right away, there was still another family that beat us to the punch (and the owners had hinted that they were just going to take the first offer they got because they didn’t want to incite a bidding war).

This is where we were REALLY glad we had our realtor, even though it ended up costing us WAY more in the end.

Normally, the buyer doesn’t owe any fees to their realtor (a fact I didn’t know until we started looking for houses). But, as the former owners of the home were choosing to sell it themselves rather than hire their own realtor, they divulged quite a lot of information to our realtor that you normally never would have, including the full details of the offer that was made just before ours. (For the record, four families had looked at the house in the 24 hours the For Sale sign was up, and all four ended up making offers. Ours was officially the second one that came in.) As mentioned above, they also had told us that they just wanted to sell it as fast as possible and not get into a bidding war with interested buyers, so they were planning to just take the first offer no matter what. Luckily for us, our realtor was amazing and not only convinced them to even entertain our offer in the first place, but because they’d been forthright and shared everything about the first offer with him without us asking them to, we were able to beat the first offer on every point.

However, the fact that we’d chosen to “swing for the fence” on our offer did come with costs we hadn’t anticipated.

• First, we ended up making an offer over the list price.
  • Our house was listed for $199,900, but we ended up offering $205,000. Seeing as how we’d only prequalified up to $210,000, we were REALLY pushing our limits. As I said, I would never recommend that anyone do the same—we only chose to do so because we knew we had some raises coming our way and that we had money in savings to fall back on if we absolutely had to.
• Second, we offered to pay ALL of our own realtor’s costs.
  • Normally, the sellers will pay the realtor’s fees, but as the first family had offered to do the whole transaction with no realtor involved, we knew that to continue utilizing ours and his expertise, we needed to try and beat that offer. So we got our realtor to accept less than his usual commission price (2% of the purchase price of the home rather than his usual 3%), which, while it ended up saving us $2050, it still ended up costing us $4100 to pay for his services.
• Third, we also offered to pay for ALL of our own closing costs, as well.
  • Often when an offer is made, the buyer might request that the seller helps offset some of the costs of closing for the buyer as part of the deal. Since the family who made the first offer had offered to cover all their own closing costs, we figured we’d better do the same, just to give us the best possible chance of our offer being accepted.

I was able to, in carefully looking over the estimated closing costs, save us a few hundred dollars by catching an error and also having the sellers agree to pay a small part of our closing costs because of an error with the timing of the sale that was out of our hands, but all told, our closing costs were quite expensive.

All told, here’s how it added up:

$6,150 (minimum required down payment of 3%)

+ $4,100 (realtor fee)

+ $5,978 (closing costs

= $16,228

Crazy, right? Here’s how we funded that monstrosity:

$7,500 (grant from credit union)

+ $3,500 (money saved in our down payment account)

+ $2,000 (money from sold stocks)

+ $1,000 (cash flowed)

+ $2,228 (general savings account)

= $16,228

Hmm…Maybe Do As I Say, Not As I Do

If I were a financial adviser giving advice to someone in our shoes, I would say that in many ways, what we did was crazy. We probably *should* have just made an offer on a home that was much lower in our predetermined range, we *should* have not offered to pay our own realtor fees, we *should* have saved a lot more money to begin with.

For us though, our instincts about THIS particular house just felt really good, and we’ve never once regretted our decision.

Has money been tight a lot since?

Absolutely.

The only way we’ve been able to make ends meet a lot of the time is because both my husband and I are naturally pretty frugal people, we both don’t mind staying home the majority of nights/weekends, and we’ve been willing to make sacrifices in order to live within our means.

So, the moral of the story is this—

You can often do quite a bit on a lower income if you’re super smart about it, but you *do* need to be willing to make sacrifices.

For us, buying this house has been worth all the sacrifices, and as our income has gradually increased each year since, it hasn’t been quite as hard. (Though–full disclosure–we did have to pull between $100-200 a month out of our savings for the first 9 months or so after owning, until we got enough of a raise to cover everything.)

Now that things aren’t quite as tight as they were before, we’ve been doing things like the $1000 in 100 Days Challenge to beef our savings back up, and we’re currently working on ways to increase our income this year.

In the end, I would say that you definitely CAN purchase a home if you’re making a pretty low income, but I WOULD suggest that you are a little more moderate about it than we were 🙂

Hope you found this honest look at our finances useful, and if you want more inspiration, motivation, and concrete tips and help for managing your own money better, don’t forget to check out the Master Your Money Bundle when it becomes available on Feb. 19th!