How I purchased My First House at 23 Making $17 an Hour (and 6 Ways You Can Too)

When I was in my early 20's, buying a home on my own was not something that I was considering. From the age of 19, I was renting my own apartments, living alone with my cats. I was happy with this arrangement, as my rent was always low and I had the freedom and flexibility to move as I pleased. I didn't have the hassle of home repairs, property taxes, or any of the other expensive and confusing aspects of home ownership.

It wasn't until I ended up with 6 cats that I realized I needed more space (and less restrictions, no landlord wants 6 cats!). I didn't know where to start, or if I even qualified, so I got a referral for a local real estate agent. He walked me through the home buying process, and within a month I was unpacking my things in my "new" 100-year-old, desperately-in-need-of-tlc-home. It needed work, but it was mine to do as I pleased. For about $100 more a month than I was paying in rent at the time, I was paying down my own mortgage. My cats ran free. It was a liberating feeling.

Things have changed in the real estate market since I bought my first house. I signed the closing documents the day before my 24th birthday, in January of 2022. AT the time, I was making around $17/hour, and had very little money saved. I was able to get a no-money down loan, and a 2.25% interest rate, which made the purchase possible.

It's unlikely that we will see rates this low any time soon, but that doesn't mean that affordable home ownership is out of reach. Below I am going to share 6 tips on house I was able to afford my first home by myself, with little money saved and a low income.

1. Your Credit Matters

While I wasn't making a lot of money, I took my credit score very seriously. Credit is one of the biggest qualifying factors for getting approved for a mortgage, so making sure you have a good score is a must. A score above 650 will grant you the best terms, though it may be possible to obtain a loan with a score as low as 500. There are some loan types that don't even have a score requirement (more on that later). The best ways to improve your credit score are to pay off debt, make payments on time, keep your credit card utilization low, and avoid excessive credit pulls.

2. Pay Off Debt

Debt is a fact of life for most Americans, whether it be personal loans, credit cards, car loans, or their mortgage. When I was looking to purchase my home, I made sure to have the least amount of debt as possible. I paid off my car, and lowered my credit card balance to less than $1,000. I had no other debt.

Paying off debt is easier said than done, but paying off (or at least lowering) your debt will make it much easier for you to obtain a mortgage. Mortgage lenders consider something called DTI, or Debt-to-Income ratio. This is how much your debt payments are compared to your monthly income. A higher score indicates a higher debt load. It is recommended to have a DTI of 35% or less.

3. Have a Savings

This might be an obvious one, but I'm not even talking about a savings just for a down payment. While I was able to buy my home with no money down, I almost immediately had to spend over $3,500 to get my HVAC unit replaced. This was an unexpected expense that I was thankfully able to pay for because I had an emergency savings. While you don't have to save up 20% for a down payment, it is highly recommended that you have some sort of savings (recommended is 3-6 months of expenses) before you buy a home.

4. Buy a Starter Home

Something I didn't realize before I bought my first home is the fact that I don't have to live in this home for the rest of my life. For that reason, I had always told myself I would wait until I was married. The cool thing about buying your first home is that it makes buying your next home easier. For this reason, I recommended buying a humble "starter home" as your first home. Starter homes are typically smaller, older, and less expensive than the average home.

My first home was a 100 year old, 2 bed, 1 bath, and needed a lot of work. For that reason, I was able to snag it for around $170k. Being on my own, I didn't need much in terms of space or luxuries, and I needed it to be affordable for my lower income. Of course, the caveats of buying a starter home are that you are much more likely to have more costs associated with the home.

Repairs, updates, and maintenance will likely cost more than if you were to buy a brand new home. This is why I recommend that you have a modest savings before making your first home purchase. Though starter homes might not be the most glamours or "easy" thing, they can be a great option for a first time home buyer that is looking for affordability and doesn't mind getting their hands a little dirty.

5. House Hack

Being a real estate investor myself, I absolutely love house hacking and recommend it to anyone. In simple terms, house hacking is where you buy a multi-unit or multi-room property and rent out a unit while you live in the other unit. Typically, the rent you make will pay most if not all of your mortgage, and you essentially lie for "free".

You don't have to buy a big apartment building to do this, in fact you don't even have to buy a multi-unit. When I bought my second house, I rented a room out. The money I received every month for the room paid most of my housing bills. Earlier this year, I renovated my garage into a 1 bedroom apartment, which I moved in to. I now rent out my entire house, and this rent pays all of my housing bills and then some, so I truly do live for free.

For your first house, I highly recommended buying a duplex. You can find duplexes for the same price (and often less) as a single family house. Live in one side, and rent the other side out. If you are not interested in being a landlord, then you can hire a property manager to manage the rental aspect, though managing one tenant that lives next to you is pretty beginner-friendly. Eventually, you can buy your next house and rent your duplex out fully, which will offer even more income and invite you into the world of real estate investing. I'll make a more detailed post on this later.

6. Explore Loan Options

There's a widespread belief that you must have 20% saved for a down payment in order to buy a house. While this may be true for an investment property, it is not true for the first time home buyer. There are many different loan programs offered to first time home buyers that offer loans as low as 3-5% down, and some are even $0.

A USDA loan, for example, is what I used when I bought my first house. This loan offers no-money down, however the home must be located in a location deemed rural by the USDA. VA loans are another option that offer $0 down, though you must be a military veteran to qualify. Speak to a local mortgage lender to discuss your options.

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Buying a home is not exclusive to people who are financially well-off. There are many things that first time buyers can do to qualify them for a mortgage, and finally achieve their dream of home ownership. The first step is to reach out to a local REALTOR®, who can walk them through the process.

If you have any questions or if you want to start your journey of home ownership, don't hesitate to reach out to me. Helping first time buyers and investors find their first home is one of my favorite things to do!