Purchasing our first home at 19 on a 35k income

Today I’m covering off on the story of buying our first home 15 years ago (pre-GFC). This is a story of misadventure, and I hope that by sharing this story that it may remind us all that we all make some crazy decisions on our money journeys. No-one’s journey is perfect least of all ours.

Let’s go back in time to 2006, I was 19 and my boyfriend (now husband) at the time was 20. I was in my 1st year of university and after just over a year of dating we were ready to move out of home together. At the time I had been living with him in his mum’s home for almost a year. She had kindly taken me in when she realised that I was couch surfing with friends or sleeping in my car to avoid a bad home situation. My boyfriend was working fulltime in an entry level job making just under 25k per year (pre tax), and I worked casually as a barista between university commitments making approximately 10k a year.

We initially planned to rent a small townhouse or unit close to family and spent our spare time perusing rentals on realestate.com.au. My research led me to look at how much the cheapest houses in metropolitan Adelaide were, and I was pleasantly surprised by my searches. In 2006 you could purchase a 3 bed, 1-bathroom home on 500sqm for 100k less than an hour from the city. 100k didn’t feel like a lot of money so I decided to investigate how much mortgage payments would be. After finding an online calculator I discovered that the mortgage payments were slightly less than what we could afford to pay for rent (even with the 8% interest rates which were the norm at that time). I also discovered that we were eligible for the first homeowners grant worth $7000 at the time. At this point I decided to take my research to my boyfriend and present my case for buying a house together. In hindsight my boyfriend had very little option but to go along with my crazy plan (I was a girl on a mission), so he said yes to at least going to a mortgage broker.

Our first experience with the mortgage broker wasn’t great…. in fact, the meeting ended up with him laughing at us, and us leaving feeling a little sheepish. Looking back on this response it shouldn’t have come as a surprise to us that we received this treatment. We were a terrible investment to any bank. We were just kids earning under 35k a year and didn’t even have a deposit.

The first experience didn’t deter me in fact I remember it spurring me on. We then found another mortgage broker who ran the numbers with us and explained our options. He was very young much like us and plotted a path for us to make home ownership a reality thanks to a product available at the time called no deposit 100% home loans (remember this is pre GFC). After our meeting we were granted a borrowing capacity of 125k and started house hunting.

Armed with our home purchasing budget we looked a little more closely at the suburbs that were in our price range. We looked specifically for houses that were walking distance to the train station and to local amenities (such as healthcare and shopping centres). We then started viewing houses that matched our very low requirements. In the end we viewed only one house before we purchased our first home. I feel comfortable telling you now that we had no idea what we were doing, and what to look for in a house. We picked our first house through gut instinct, it had less cracks than the last house we saw, and the bathroom wasn’t pink.  

Although we were proud of buying our first house not many around us felt the same when it came to sharing our news with family / friends. I can’t blame them. It was the worst house in an area with a bad reputation, we were moving away from where we had grown up, we had only been dating for a year, we had no idea how to renovate, and had very little financial security.

Despite our lack of experience in buying a house, we managed to haggle the price down by 6k to 114k and paid a very small holding deposit from our tiny emergency fund. We were also fortunate that the real estate agent recommended we put the sale down as subject to finance and a building / pest inspection. Like I said we had no clue what we were doing and are fortunate that we didn’t get into trouble here. After negotiating a price, we quickly learnt that we required a person called a conveyancer to assist us in the purchase of the house, and were referred to one by the real estate agent (we are still with our conveyancer to this day after multiple purchases).

Our next learning experience was being told that our first homeowners grant wouldn’t pay for all the fees and stamp duties that come with homeownership, so we had a shortfall. We didn’t have savings and we had already used our emergency fund, so we sold both of our cars (including my husbands prized Celica 1991 with pop up lights) and became a one car family.

By some miracle the rest of the home sale went through without any other problems, our finance was approved thanks to our mortgage broker (and pre GFC lending), and settlement occurred within 30 days. Funnily enough this purchase remains to be the smoothest home purchases we’ve made to this day (but that’s another story).

As I write this post, I have lost count of how many times I’ve cringed at my own naïve actions, how many times it could’ve gone so wrong, and how many basic home buying rules we broke. That said I have no regrets buying our first home as it provided so many learning experiences that have shaped us to this day.

Our 10 biggest takeaways from buying our first home have been:

  1. Make sure you have a deposit to avoid Private Mortgage Insurance or PMI (not like us).
  2. Make sure you have a Fully Funded Emergency Fund (We always keep 3-6 months these days because something always breaks or costs more than expected when purchasing a new property).
  3. If you buy a property requiring renovations then budget this out in advance and have these funds saved (or at least a portion saved).
  4. Make sure to do a pest and building inspection and write it in your contract.
  5. If you require finance then be sure to consider writing a subject to finance clause (in case your finance falls through).
  6. Don’t forget to budget for additional costs besides the mortgage. Just because you can afford the mortgage payment doesn’t mean you can afford the property. Home ownership comes with additional costs like maintenance, additional insurance, council rates and water rates.
  7. Discuss your future relationship and financial expectations, wants and dreams before buying a house with a significant other. Our relationship is still going strong, but we could’ve avoided a lot of finance related arguments if we were both on the same page from day one.
  8. Find a good conveyancer or lawyer before you purchase your property.
  9. Find a mortgage broker who has your back and cheers you on from the side-lines is important.
  10. Lastly make sure you visit any potential homes at different times of the day / week to really scope out the neighbourhood (Unknown to us our street had weekly fight nights, all night party music playing, street racing, and regular visits from the police).

Do you have any crazy first home buying stories? Feel free to add them in the comments.

Our First Home – We never had a celebration shot in front of the for sale sign. It was in such a bad suburb that it didn’t even have a sign (as they kept getting covered in graffiti)

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