Saturday, March 14, 2009

I bought a house when I was 23

Not that there's anything spectacular or mind-boggling about buying a house when you're 23...

But there is something a bit mind-boggling about being 23, having no money and a job that pays pennies, and still managing to get someone to give you a loan. Looking back, it's one of those things that, in some respects, I wish I could go back and do over. It was probably not our wisest financial decision, and it's proof that practically anyone could get a loan not all that long ago.

Here's what happened: About seven years ago, we were going to school in Arizona and living in a cramped, dirty, and loud apartment complex in what turned out to be a somewhat dangerous part of town. We disliked our grad school program, we hated the oven-grade heat, and we really, REALLY hated the fact that our apartment manager refused to either fix our "air conditioner" (in quotes because it never actually cooled anything more than the air right in front of the vent) or let us out of the lease. We were miserable. Paying the rent to live in that dive felt like hell on Earth. After 10 unbearable months, we decided to cut our losses and head back to the east coast.

It was at this time that I decided we needed - NEEDED. - to buy our own house. I could not be convinced otherwise. Didn't I deserve my own place? Didn't the government in fact want me to own my own place?

"Why rent when we can spend the same amount of money on a place of our own?" I told Trent. "Besides, we'll get tax breaks, and if something needs to be fixed, we can do it ourselves."

Somehow, we managed to get approved for a 30-year fixed rate mortgage (we demanded this because "Home Buying for Dummies" said we should), even though we were making peanuts as teaching assistants and even though we had only a very small down payment, courtesy of sympathetic relatives. If I'd been the lender, I would have refused our application. In reality, we didn't have the resources. But the bank just slapped on a gigantic PMI and a high interest rate, handed us the keys, and called it a day. We paid a mortgage of $1080 a month for our condo on a grad school salary. Our neighbors were paying a lot less, thanks to their higher incomes and lower interest rates. Most of our friends, who were renting, paid a third to half of that for their living expenses (so I'd been wrong about the cost of renting). As for fixing things ourselves, we didn't have the money.

We never missed a mortgage payment, but only because there were months when we took out advances on our credit cards. Some months, we had so little cash in the bank that almost everything - bills, groceries, other necessities - went on the credit cards. I look back and feel perplexed as to why the lender felt that it was responsible to give us that loan. I also look back and wish I had really educated myself about home buying and the associated responsibilities. I wish I'd done the math. We scraped by on the skin of our teeth. I can see now just how easy it would have been, had we NOT had some credit and had we had an adjustable rate mortgage, to spiral down into debt and foreclosure.

When we bought our current place last April, we were a lot smarter about it. We ignored what the bank told us we could afford, crunched our own numbers, and found a place that was much, much less than what the "experts" said was within our budget. We again insisted on a fixed-rate mortgage, and we requested a home warranty from the seller. There are things I wish were different. Because we didn't have a 20% down payment, we still pay PMI, and our interest rate is high compared to current levels.

You live and learn, I guess, but especially now, when so many people are losing their homes, I'm really grateful that we managed to squeak by the first time around.

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