What It’s Really Like…Buying a House When You Don’t Have Much Money
Buying a house is a difficult process full of complicated steps. It’s an even harder task when you don’t have a stash of cash ready to toss at each barrier to homeownership.
My wife and I purchased our first home this year, and we’ll both quickly tell you it’s one of the most difficult things we’ve done in either of our lives. The requirements and rules that govern the real estate world — basically a foreign language to first-time home-buyers — are insane in normal times, and they’re even crazier during the COVID-19 pandemic. Add in what I’ll call “the poor factor” and it often feels impossible to actually secure a home.
Buying a house is complicated. When you don’t have a lot of money, it’s more complicated. But my wife and I learned from experience that it’s not impossible.
Every home-buying process is different, with its own unique circumstances. I want you to know I know that before you read about our personal experience. Here’s what we went through in the summer of 2020.
Haves and Have Nots
For starters, if you’re not familiar with my situation from my previous “What It’s Really Like” pieces, I battle intense anxiety and depression that cause me to be quickly and easily overwhelmed by life and career positions that are not a big deal for many other people. Due to that, I have simplified my life in the past few years. I work from home doing multiple jobs to supplement my wife’s income and keep myself calmer. My wife is a public high school teacher. So neither of us make a ton of money. We collectively make ends meet but aren’t able to save all that much.
We also do not have generational wealth at our disposal. It turns out many young couples get assistance from their parents for their first home purchases. That wasn’t a luxury we had, and we didn’t receive a penny from family coffers to advance our ability to buy a home.
Heading into buying a home, we did start with a small amount of savings — just a few thousand dollars — that could help pay for closing costs and a minimal down payment. So we did have something to work with, and I’d advise anyone looking to buy their first home to fully study up on what closing costs are and how much you can expect them to set you back.
Basically, for those who aren’t experienced with them, closing costs are attorney, government and other fees for property and paperwork requirements during the sale, as well as other little payments that check all the boxes to allow you to get into a home.
Agents, Loans and Investors, Oh My!
Early in the process, we thought we could buy a home without a real estate agent. As we delved deeper into the process, we realized that was very unwise. The amount of red tape and rules, again lengthened by COVID, is so thick and legal that it is just smart to take the time to secure an agent who works on your behalf and has your best interests in mind. They can help you be sure you are doing what is right for your money and your peace of mind.
Besides, did you know that in many cases the home’s seller actually pays the commission your agent receives for their work? This means you aren’t really paying for that Realtor who’s helping you find your house. It’s a huge help, often at no cost to you.
It is just smart to take the time to secure an agent who works on your behalf and has your best interests in mind.
In addition to getting an agent, the other big pre-home-visiting step we took was getting pre-qualified for a mortgage amount. (That’s not the same thing as getting pre-approved for a loan. Pre-approved means a lender will offer you up to a certain amount.) Getting pre-qualified really just gives you an idea of the amount of money you could be offered by your lender. It’s like an estimate. For example, if you’re pre-qualified for $200,000 for a house, you can probably get a loan for houses with pricetags in that range. Knowing this number is essential as you browse houses so you can easily know what’s possible and what’s out of your reach.
Our pre-qualification number was quite a bit less than $200,000, so we fell into a price point that was incredibly difficult to navigate. It turns out there are many people out there just looking for cheap houses to buy, flip by making a few cosmetic changes, and then rent to other people. This creates a source of extra income for these people, who are known widely as “investors.”
Most of these investors have plenty of money sitting around from doing this flipping process many times before. So when a house they want comes on the market, they see it and make an offer immediately, sometimes without even seeing the house. They don’t have to deal with any banks for loans or many other parts of the process because they can just hand over the money and take the keys. No third parties required.
Since we don’t have a lot of money and therefore had a lower pre-qualification amount for a mortgage, we found ourselves competing for lower-priced houses — properties seen as rental-quality by many — that investors desperately wanted. We missed out on several houses because of how quickly investors swooped in to swipe them as soon as they hit the market. That made the process much more anxiety-inducing. Several times, when a house hit the market, we would ask our agent to set up a visit and tour, but the house was already unavailable (also known as “under contract”) before we could even set up a time.
If you have more money, you have more attainable homes on your radar. The more expensive the home, the less likely someone wants to snatch it up for rent. And the more you have in the bank, the more you can give for a down payment and all of those closing costs.
Another issue we encountered due to not having a lot of money for a big, expensive house was encountering shady real estate agents looking to take advantage of buyers. I want to be perfectly clear that our agent was phenomenal. We couldn’t have survived the home-buying process without him! But we got a poor opinion of other agents almost the whole way.
On the first home we offered, we were accepted and entered into a contract with the owner, a real estate agent himself. In our state, once you enter a contract you have a period of time during which you can investigate and inspect the home, using professionals to help you where possible. This is called “due diligence,” and we highly recommend you take every opportunity possible if this option applies to you. It’s a good thing we did that because the first home for which our offer was accepted had significant damage to the point that it would have cost us tens of thousands of dollars just to make the home safe to live in. Thanks to a trusted home inspection company, we found out in time, so we backed out and started over in our search.
The next few homes eluded us because of what we’ll call agent communication issues. One agent didn’t return our agent’s calls about our offer. Another agent allowed us to view a home, then it turned out the home was already sold by the time we had viewed it. A third agent declined our offer, demanded full price and wouldn’t budge on any other specifics. After all these experiences, we were certain buying a home just wasn’t in the cards for us. We started to get down on the process and felt like we’d be renting forever, mostly because we were just too poor to become homeowners. “No wonder so many people always rent,” we often said to each other during those times.
It’s Not Impossible
One day, while out touring other homes, our agent mentioned a home we had viewed online but not asked to go see in person. He recommended we visit, and we did. We liked it, we offered, and the offer was accepted. Diligence checks went well, our loan was approved, and we eventually ended up moving into the house about a month later. (Yes, the process from offer to moving in can take that long, sometimes longer.) Our fortunes changed in a matter of weeks. Though, I must tell you that those weeks were just as difficult as all the others.
It’s an anxious time, especially for someone with anxiety, waiting to learn if a house is in good condition, if someone’s going to extend you tens of thousands of dollars in loan money, and if you can take care of all of the necessary steps to purchase property.
COVID certainly didn’t help on the anxiety front. We could not visit homes without an agent, which is often the case anyway but even more so given the pandemic. However, our agent was not allowed to be present at closing with an attorney due to virus concerns and limited-contact restrictions. We had to wear gloves in some homes, disposable booties over our shoes in others, and we always had to wear facemasks. We even wore masks and were told to take the pens with us when we signed our closing documents to make our purchase official.
Many of these steps I’ve shared are commonplace for home-buying, or they change here and there from state to state. But one thing’s for certain anywhere: Money talks.
It’s an anxious time, especially for someone with anxiety, waiting to learn if a house is in good condition, if someone’s going to extend you tens of thousands of dollars in loan money and if you can take care of all of the necessary steps to purchase property.
If you have more money, you have more attainable homes on your radar. The more expensive the home, the less likely someone wants to snatch it up for rent. And the more you have in the bank, the more you can give for a down payment and all of those closing costs.
Buying a house is complicated. When you don’t have a lot of money, it’s even more complicated. But my wife and I learned from experience that it doesn’t have to be impossible.
“What it’s Really Like…” is a regular series by North Carolina writer and author Matthew Tessnear, who writes mostly about mental health, food and history from his perspective in the American South. You can follow him on Twitter @MatthewTessnear.
