How Student Loans Couldn’t Stop Me from Buying a Home at 25

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(Image credit: Apartment Therapy)

My husband and I are “recession kids.” We were just starting high school when the Great Recession brought the most significant economic downturn in the United States since the Great Depression. We watched our parents, neighbors, and family friends struggle with unemployment and the housing market crash. Foreclosures surged throughout the country, and home values plummeted following the housing bubble.

Because of this, both of us were cautious about the prospect of homeownership—but it was always something we wanted to do. But with student loans to pay off, it always felt like something far off in the future.

However, in 2017—nearly a decade after the market crash—things fell into place for us. Our apartment lease was soon coming to end, and we found ourselves genuinely curious about homeownership. It felt silly that we were spending $1,000+ on rent every month when we could be investing in a home of our own. Though we recognized that a 20 percent down payment wouldn’t be realistic for us—we had nearly three years of full-time work under our belts and had been able to start gradual savings—we could make a down payment up to 10 percent without draining every penny we saved. Even with a low down payment, our credit would bring our PMI (private mortgage insurance) to only about $50 a month.

So we started stopping at a few open houses in our Chicago neighborhood, signed up for Zillow alerts, and began fiddling with online mortgage calculators. That’s about as serious as we got for awhile. The prospect of investing in the housing market was still daunting, considering we knew many people still hadn’t recovered from their housing investments of the early 2000s. As the expiration date for our lease drew near, we decided that venturing into buying territory would make sense, but only if we found the right place. We weren’t comfortable taking on a mortgage just for the sake of owning any property.

But then, as luck would have it, we happened upon a foreclosure down the block from our apartment. The listing photos weren’t promising, but it was located in our desired neighborhood. The asking price seemed to slowly be decreasing the longer it sat vacant on the market. We reached out to a realtor we’d met at a couple open houses to see if he could show us the property. During our first visit, he quickly told us that there could be a lot of extra costs on top of the sticker price for a foreclosure.

“Whenever a client sees a foreclosure and wants to go after it, obviously they get a discount, but there are some things they need to be aware of, like in Illinois, buyers are legally responsible for up to six months of unpaid HOA assessments. It might be a good deal on the surface, but you have to include the court and attorney fees that come from that,” said Sam Cusentino, our real estate agent from @Properties in Chicago. “Information is scarce. You have to do your due diligence on your own with a foreclosure.”

During our first visit, we found the place needed moderate attention like some duct work, completely new paint, and eventual updating of appliances, but we saw enough potential in the property to consider making an offer for the asking price. The price had come down enough to where there were competing offers on the table. Even with the six months of HOA fees to potentially take over, it was still more affordable than comparable homes in the neighborhood. It took many calls to family members, a lawyer, and our agent for advice on whether or not this property was worth the investment risk, and we ultimately decided the property seemed to be one of our only opportunities to buy a home in our neighborhood, so we proceeded to bid.

And our offer was accepted! As first-time homebuyers, the experience was thrilling… but also terrifying. We quickly learned that trying to purchase a foreclosure is a very different process from the traditional home-buying experience our parents were familiar with. For starters, we learned we’d need to provide five percent in earnest money, opposed to the typical one to two percent. Our “recession kids” mindset kicked in. What if the housing market crashed again? Would we limit our financial freedom by investing our savings in a down payment? There were many times we were nervous and almost backed out of our offer.

But our agent assured us that it was a great time to buy. First, the rental market in Chicago was rising. “The rental market has kind of gone crazy in terms of pricing. The new buildings are luxury rentals,” Cusentino said, meaning that moderate-priced housing was becoming more competitive since there were fewer units on the market. He assured us that though the costs of buying would be a little bit more expensive with HOA fees for the first few years, it would eventually be cheaper in the long term—and stay cheaper. And, of course, it was a good investment opportunity.

Additionally, the bank wanted to get the property off its books as soon as possible since it’d been abandoned a year earlier, so it was priced-to-sell. In exchange for the low price, we were expected to take it as-is. We wondered what had happened to the previous owner, who picked up and left without telling anyone. Were there big repairs needed to be done that forced the previous owner to leave? Would we find surprise expenses or building annoyances once we moved in? Since the home was a real estate-owned property (REO) by Fannie Mae, we wouldn’t get any credits for the broken refrigerator, missing screen door, or cracked tiles. We did try to make changes to the contract, but they were rejected.

After many calls with a different lawyer, more advice from family members, and a home inspection, we went forward with securing our mortgage. Buying an REO property felt a bit impersonal; we never met the seller’s agent and no one representing Fannie Mae came to our closing, but we still popped champagne at the end of the process then got straight to work with home improvements.

We spent a month before moving in repainting the whole condo and stripping chipping paint off the exposed ductwork. We found out that there’s always more expenses than initially expected when buying a home, so we also had to confront the unexpected cost of refinishing our floors and repairing the refrigerator, which cost us another $2,000 within the first month.

As seemingly the first of our friends to buy a home, we quickly found ourselves with less active social calendars, replaced by home improvement work. Buying a foreclosure brought some headaches, but we are proud to have invested in our first home together, and purchasing a foreclosure enabled us to better afford this investment.