Buying my first home in 2020

Getting Started

I had always dreamed of buying a home, but it seemed like an impossible goal given my financial situation. Home buying isn't for everyone; it takes a lot of work, and financial investment. Despite the challenges, I felt ready to embark on the journey of purchasing a home.

On June 12th, 2020, I closed on my first home. Leading up to that day, I was filled with excitement and anticipation. At the time, I was living with my boyfriend (now husband) in a one-bedroom apartment. The arrangement worked well when I traveled for work during the week, but once the pandemic hit, it became less ideal. I longed for more space and a place to call my own, so I began searching for one-bedroom homes in Denver, Colorado.

As I started my search, a slew of questions arose. What kind of home did I want? What type of neighborhood would suit me best? While my initial focus on one-bedroom homes was due to budget constraints, the uncertainty brought by the pandemic made the process even more complex. How long would my boyfriend and I have to work from home? Balancing my immediate needs with a significant long-term financial commitment was challenging. To navigate these uncertainties, I reached out to a friend in real estate for guidance.

How I researched and planned for buying my first home

One of the main reasons I decided to buy my first home when I did was the historically low interest rates. I was fortunate enough to lock in a 3.25% rate. Reflecting on the 2008 housing market crash, I had always wished I could have bought a house then, despite not having the financial means at the time. Although interest rates weren’t particularly low back then, the mortgage crisis caused a significant drop in housing prices due to factors like subprime mortgages. This drastic price drop served as a market “equalizer” for those who typically couldn't afford to buy in a high-demand market.

Similarly, the pandemic created another unique market environment. Many people, including myself, took advantage of lower interest rates and decided to buy their first home. I tend to look for opportunities to enter the market when conditions are atypical and potential market “equalizers”—meaning where commodities are at a discount and therefore the pool widens for others to invest in—and the pandemic presented just such an opportunity. The combination of low interest rates and reduced housing prices made it an ideal time to make my move into homeownership.

Like any digital-savvy millennial who lives and dies by the internet, I began my home search online. Zillow, Redfin, and other real estate marketplaces quickly became my daily go-tos. Initially, the sheer volume of options was overwhelming, as I wasn't sure exactly what I was looking for—a one-bedroom, but in which neighborhood? Determined to gather as much information as possible, I spent weeks sifting through thousands of photos and listings. Then, one listing stood out—it was perfect.

Gathering a Pre-Approval Letter

As I embarked on my search, a friend of mine referred me to a loan officer he recommended. She helped me majorly in answering all of my questions related to the financial logistics of how this was all going to work, and most importantly, how much I could afford. While I used many online calculators, it was nice to speak to a real person to cut through the noise. She walked me through the process of getting a pre-approval letter, which is not a guaranteed loan offer, but rather, is the amount that a lender is willing to loan you for a new home.

Once I had my pre-approval letter, I was able to better narrow down my price range in my search, based on the loan amount I was willing to take out, minus the down payment. At the time I had roughly $20,000 saved, and was able to save a few thousand more over the course of my search. But the process went fast. I recommend starting to save early and padding in at least 25% more than your down payment for closing costs and other unexpected costs, for not only peace of mind, but financial preparedness.

The First-time Home Buyer Search Process

With my preapproval letter as my baseline, I began searching online for one-bedroom homes within my price range. I visited a few properties, but they lacked the charm I was looking for. I soon realized that having a home office was crucial, given the uncertainty of how long I would be working from home. Additionally, I wanted a space with plenty of natural light to fuel and nurture my creativity.

While I wasn't keen on living in a condo, I also didn't want the full responsibility of maintaining a house. Viewing listings in person with my realtor helped me refine my criteria even further, honing in on what truly mattered to me in a home.

Making the decision and how I landed on my first home

I remember the moment I saw my first home on Zillow. Somehow, I instantly knew it was the one. It was perfect—three stories, a townhome with a yard, and a new build. It had everything I wanted, even though I hadn't realized it until I saw it. I immediately called my realtor to schedule a viewing. When I visited the property, I was certain it would be my first home. Despite having only visited a few properties, I was ready to take the necessary steps to make it my own. It was an emotional decision; it felt like home.

After years of thinking about and financially planning for the possibility of buying my first home, I was surprised by how a feeling was enough to move forward. Although it may seem like the second significant financial decision I’ve made based on intuition, I trusted my gut. While I consider myself a logical person, if something feels right, I usually go for it.

The Financial Details of Buying my First Home

The financial foundation of buying my first home began with saving for a down payment. I set up automatic transfers to a dedicated savings account each month, helping me stay on track with my savings goal. This process varies for everyone, but it was essential in determining my target. Connecting with a loan officer was another crucial milestone, helping me understand how my down payment savings translated into the home I wanted.

I managed to save around $25,000 for the down payment. Ultimately, I used about 6% of the purchase price for the down payment. My loan officer was instrumental in guiding me through the various mortgage options, helping me choose the one that best suited my needs. I highly recommend working with a trusted loan officer, as they can simplify and clarify the wealth of information you find online.

Closing Day and Moving In

The closing process was a whirlwind of paperwork and signatures. Prior to closing day, I had envisioned a dreary scenario: a dark room with a harsh fluorescent overhead light, where I'd be stuck for hours, signing document after document. In reality, closing day was much brighter and more celebratory. My realtor and loan officer greeted me with champagne to mark the milestone. There was someone to explain every detail and answer any questions I had. It was a far cry from the grim scenario I had imagined. After signing the final document, we toasted to a new chapter. I felt a profound sense of accomplishment and was eagerly anticipating the journey of homeownership.

I don’t recall all the details of moving in, as they were overshadowed by the excitement of settling into a new place. It wasn't just a new space; it was officially “mine.” That feeling was something I cherished, especially in the beginning, as it was an experience I had never had before.

The Joys and Pitfalls of Furnishing a New Home

In the following months, I experienced the joys of furnishing my new home and making plans to personalize every nook and cranny. Reality soon set in when I realized my ambitions exceeded my budget. However, I embraced each moment as a valuable learning experience, enjoying the early stages of homeownership despite the challenges.

“The Old Days”

My new home was a 700 square-foot three-story new build townhouse, with an enclosed yard. As I got settled in, I enjoyed the quiet street with kids frequently riding their bike, and the neighbors across the street that sat on their porch. Over the next few months I hosted outdoor movie nights with the flimsy projector that would wave in the wind, and invite friends over for front-yard hangouts. In the midst of the pandemic, it felt like my home was a safe haven, like a memory from “the old days.”

Reflections on Buying My First Home and Advice

Reflecting on my journey to homeownership, I realize it was packed with invaluable lessons. I learned the crucial importance of saving for this significant financial investment and being prepared for unexpected costs. Maintaining a home is also a substantial financial and time commitment, requiring dedication and foresight. For anyone considering buying their first home, I recommend being ready for emotional highs and lows and staying focused on your long-term goals. Identify your "why" and carefully weigh the pros and cons compared to renting. Although I no longer live in my first purchased home—having converted it into a long-term rental property—owning a home has provided me with the opportunity to build long-term wealth and acquire new skills. I am looking forward to how this investment will continue to evolve.

If you're considering buying your first home, take these steps into account:

Create a Punch List: Write down what you're looking for in a home, including must-haves and nice-to-haves.
Evaluate Buying vs. Renting: Make a pros and cons list to weigh the benefits and drawbacks of buying versus renting.
Get Pre-Approved: Connect with a loan officer to obtain a pre-approval letter, giving you a clear idea of your budget.
Plan Your Down Payment: Determine how much you'll need to save for a down payment and add an additional 25% to cover hidden costs.
Start Saving: Set up a dedicated savings plan to reach your down payment goal.
Begin Your Search: Look for homes online and in your desired neighborhoods.
Visit Listings: Attend open houses and schedule viewings with your realtor, and be sure to ask plenty of questions.
Refine and Repeat: Continue refining your search criteria based on your visits and feedback until you find the right home.