A WOMAN has bought her first home at the age of 26 with a modest salary and no savings to speak of.
With the property costing over six figures, it’s left questions about how it was possible to budget such a transaction.
The first-time home buyer, Madison Hill, 30, told SWNS recently that four years prior, she didn’t have any “help from the bank of mom and dad and no savings” while looking for a place in Tulsa, Oklahoma.
In July 2021, the three-bedroom house Hill decided on was $95,000, and she decided to go ahead with finalizing her offer at $105,000.
“It was listed for $95k, but as investors were buying for cash, I offered $10k over the asking price, and it worked,” she said.
That summer, Hill was working as a graphic designer in a position that only paid $45,000 a year, she had no cash in savings accounts, and there was no financial cushion from her parents.
“I was making $45k a year, I barely had any savings for a home and didn’t have to empty my account to buy the house,” Hill explained.
For perspective, the average hourly wage in Tulsa at the time was about $24.44, or around a $50,020 salary, per data from the Bureau of Labor statistics.
So, Hill was making under the average and bought a six-figure property, something that might make a financial advisor wince.
To get in the right position for the buy, Hill used her education to assist her in the buying process.
LOANS TO THE RESCUE
She knew that, given her salary, she was eligible for a Federal Housing Administration (FHA) loan.
“FHA loans are typically reserved for people with low to medium incomes, and they let you buy a home with a down payment of only 3.5%,” Hill said.
“I worked with a lender who was setting up the mortgage lending for me.”
Hill added that “the money goes from the person who is setting up the loan to whoever is selling the house to you.”
After getting approved, it meant she could put the 3.5% down payment on the property, contributing about $3,500 herself.
Then, she applied for a down payment assistance program that helps eligible homebuyers cover those amounts.
How can your home be sold without your consent?
Your home can be sold from under you for various reasons - here are three key things to look out for:
Tax Sale
- A tax sale is the sale of property by a governmental entity to recover unpaid taxes by the owner who has reached a certain point of delinquency in their owed payments.
- Before a tax sale takes place, there is a right-of-redemption period where the owner can pay off their debt and reclaim their home.
- Each state has different laws surrounding tax sales but in most areas, the basic requirement is that adequate notice is given to the owner to pay the outstanding money, and any sale must be open to the public.
Foreclosure
- Foreclosures can take place when lenders take control of a property after borrowers have failed to make their repayments.
- Borrowers will receive a Notice of Default, triggering the foreclosure process.
- Homeowners in HOA communities can also see their homes foreclosed by their HOA for falling behind on fees.
- This means that even if you keep up with mortgage repayments, you could still lose your home if your HOA has a lien on your property.
- When such a foreclosure takes place, the sale price only needs to be enough to cover the HOA debt meaning that properties can be sold for much less than they are worth.
Property Fraud
- Criminals can use a fake or stolen ID to impersonate a homeowner in order to sell or mortgage homes.
- Typical targets for property fraud include absent owners like landlords, owners who live abroad, and sole owners of unmortgaged homes.
- The U.S. Sun previously reported on a man whose vacation home worth $300,000 was sold by criminals for just $9,000 – they even had the deed to the property.
That was also approved, which took away the $3,500 out of pocket she would’ve had to pay.
Basically, the loans covered all of those initial costs.
“I did a master’s in city planning, and that is where I learned about programs like these,” she said.
Hill noted that she’ll only have to repay the loan from the down payment assistance program if she moves out or refinances the Tulsa house, but she currently only pays about $900 monthly for mortgage, insurance, property tax, and other costs.
Still, there was around $6,500 in closing costs to consider.
The $6,500 covers lawyers and surveyors final checks and ensures the transfer of property ownership and a securing of the mortgage is legal and financially sound.
EARLY WITHDRAW
To pay for this, Hill made a controversial decision, drawing the amount from her 401(k) retirement account.
Financial advisors typically tell account holders to refrain from withdrawing early, which would be before the age of 59.5, out of a 401(k) as much as possible.
Doing so could result in a 10% early withdrawal tax penalty if an exception doesn’t apply.
Some exceptions include financial hardship, which does include costs related to buying a primary home, so Hill would be exempt from that penalty.
“The purchase of your primary residence is an allowable reason for early withdrawal from your 401(k),” Hill emphasized.
Considering her situation, it was a smart move to secure the property and likely not a significant enough amount to cause a drastic decline in her future retirement fund savings.
There’s also a new “like you own it” program that helps renters save for their own homes with one crucial requirement.
Some Americans are also looking at tiny homes, and Amazon sells an option for $11,700 that’s “perfect” for families.
