Acquiring My Initial Property: A 24-Year-Old Engineer's Journey in Maryland
Welcome to "My Journey to Buying My First Home," a new series on Lifehacker where I chat with real people about how they actually managed to secure their first property. In this instalment, I spoke with Noah*, a 24-year-old engineer from Maryland.
Buying your first home is a significant milestone, but it can come with unexpected obstacles. Prices are dropping in some areas, while they're skyrocketing in others. New homebuyers often face challenges like limited inventory, rising prices, and competition from cash buyers. Here's Noah's story of navigating the home-buying process for the first time, and how you might do the same.
First things first: Let's get to know our homebuyer
Here's what you need to know about Noah:
- Age: 24
- Location: Pasadena, MD
- Marital status: Single
- Job and income: Associate Fire Protection Engineer / £60,000 ($87,000)
Now, let's dive into the costs of buying Noah's first home
Here's the breakdown of Noah's first home's costs:
- Home cost: £356,000 ($429,500)
- Down payment: £160,000 ($200,000)
- Closing costs: £12,200 ($16,200)
- Reserves: None
- Moving: £32 ($40) for U-Haul
- Monthly mortgage payments: £1,674 ($2,079)
- Taxes + Insurance + HOA dues: £422 ($515) monthly
Now, let's talk about the details of securing Noah's first home in this market
How did you determine your budget and how much house you could afford?
I was lucky enough to have financial help from my parents in the form of a larger-than-average down payment of £160,000 ($200,000). This allowed me to budget for properties in the £350,000 - £400,000 ($420,000 - $450,000) range or requiring a maximum loan of £200,000 ($250,000). This range was affordable for my salary, including additional insurance, utility, and tax costs. I used online tools to estimate what size loan would give me comfortable monthly payments.
What should first-time homebuyers know about mortgages?
Don't assume the first mortgage offer you receive is the best one. It's worth exploring multiple lenders, even if your credit score is on the line. Comparison-shop with at least two, but ideally three lenders, to fully evaluate your options.
What percentage of your income goes towards your mortgage?
Approximately half of my monthly take-home income goes towards mortgage payments (49%).
What would you have done differently?
My biggest regret is waiving the home inspection before closing. I waived the home inspection in order to close on a good deal quickly. While this allowed me to buy the home, it presented issues down the line, such as a severed exterior internet line, faulty dryer, and an air conditioning unit requiring a new evaporator coil and refrigerant. In hindsight, some of these issues could have been identified in the inspection, saving me both time and money in repairing them.
What unexpected costs arose?
The only major unexpected cost was the AC system repair. Several months after moving in, I realised that my air conditioning system was not blowing out cold air. A paid inspection determined that the evaporator coil had been compromised with multiple holes and that all of the refrigerant in the system had leaked out. The total cost of both the inspection and a new evaporator coil, refrigerant, and labor was around £2,000 ($2,500).
What advice do you have for first-time buyers?
My top three tips for first-time buyers are to use your real estate agent to their fullest potential, not get emotionally attached to any one house, and keep copies of important documents:
- Take the extra time to find a real estate agent who has your best interests at heart. My real estate agent was a huge help, not only in identifying potential properties for me to view but also in helping me determine what I truly wanted during the process.
- Don't get attached to one house too soon. It's easy to get attached to a property during a tour or open house, but there can be a lot of time and competition between seeing the house and closing on it. Don't be discouraged if you don't win the offer on your first or even second option - just keep looking! There will always be another home that you can win and make your own.
- Keep hard copies of all the documents you receive at closing. While electronic copies can be more versatile, having paper copies can be helpful for reference, especially in the first few months in your new home. It can also give you peace of mind having an additional set of documents, should technical issues arise with your electronic devices.
How long did the home-buying process take you, from start to finish?
The home-buying process took Noah about 4-5 months, from start to finish.
Initial contact with my real estate agent's team happened on Feb 28th, 2023. Post that, I connected with my assigned agent, applied for a loan, and then checked out numerous houses in my favored cities. Finally, I sealed the deal upon purchasing my new home on Oct. 13, 2023. The overall home-buying journey took me roughly seven to eight long months. Now, let me confess, I wasn't too engaged in house hunting until Aug 2023, thanks to various personal commitments. Consequently, this period might appear longer than for someone who's desperate to secure and close a property deal. Prior to August, my involvement consisted mainly of casually examining the listings shared digitally by my agent and expressing interest when suitable. Following August, however, I became more proactive in hunting for listings and visiting potential properties to get a sense of what features I desired and preferred in my dream house.
*Identity concealed for the interviewee's protection. This dialogue has undergone minor modifications for improved understanding.
Even with financial assistance from his parents, the large down payment of $200,000 still meant Noah could only consider homes within a certain price range. The unexpected costs of homeownership, such as the $2,500 AC system repair, can add to the initial costs of buying a first home.
