We’ve all been there: scrolling on Zillow wondering what people do to budget to buy beautiful homes we could only one day dream of living in. I’m here to talk to you about how I was able to budget for my dream home just two years out of college. It wasn’t easy, but, I was able to budget to for my dream home by setting financial goals and having a great realtor to help explain all the in’s and out’s of home buying.

Timeline

May 2017 … Graduated college with $12,000 in savings over three years
June 2017 … Opened investment accounts (I would recommend Fidelity or Vanguard)
June 2017 … Accepted first “real” job ($45,000 salary)
Dec. 2017 … Achieved savings milestone of $25,000
Aug. 2018 … Hired at FedEx ($65,000 salary + $5,000 sign on bonus)
Sept. 2018 … Decided to move out from parent’s place by purchasing home
Dec. 2018 … Achieved savings milestone of $50,000 (combination of cash + investments)
Feb. 2019 … Found dream home
Mar. 2019 … Closed on property
April 2019 … Cash Deposits: $4,000 tax return + $4,000 Tuition Reimbursement (provided by FedEx)

Loan Type

My initial assumption when buying a home was that you had to put 20% on a down payment in order to buy a home. While that is true to avoid PMI (Private Mortgage Insurance), it is not always the best use of money. To briefly describe, PMI is the insurance you pay your lender to show that you can also cover your mortgage payment.

For instance, I could not have imagined, nor could I afford a $60,000 down payment on a $316,000 home value. As a first time home buyer, I was able to secure an FHA Loan (Federal Housing Administration Loan) which granted me a mere 3.5% down! Can you believe that? Now keep in mind, that money would have only covered the down payment and would not include realtor fees, inspection costs, or closing costs. Check out the breakdown below to see just how much I paid out of pocket for my home.

Cost Analysis

Home Appraisal $316,000
Loan Financed $304,940 (Home Value – Down Payment)
Interest Rate 4.5% (Equivalent to 5.4% on a conventional loan)

Earnest Money $1,000 (Paid upfront with offer for earnest)
Down Payment $11,060 (3.5% of Home Value)
Realtor Fees $11,060 (3.5% of Home Value)
Inspection $400 (Never forego an inspection as it can cost you thousands in the future)
Repair Credit $2,000 (Negotiated in contract for roof, fireplace, electrical)

Total Out of Pocket Cost: $21,520

Payment

Thankfully, my financial plan to save and invest for long term goals put me in great position to buy my dream home. I had always planned to sell my mutual fund from May 2017 (my initial college savings) to pay for my first home. I was able to profit almost 20% interest on my money for the $10,000 to pull out and I covered the additional $11,000 from the cash that I received from government and academic reimbursements as well as liquid savings from salary that year.

I’m not sure that I believe in luck, but I do believe that properly executed financial plans can help anyone accomplish their goals. Some people may be shocked that I am sharing this, but so many people I know are going through the home buying experience and if my story can help or provide insight to just one person, than this blog is worth it.

Refinance

You may have noticed I didn’t detail my current monthly mortgage. In the next blog post, I’ll explain how I was able to cut the amount I owe on my house by HALF across 30 years and lower by monthly mortgage by over $500 dollars! Did you guess how much my home cost me? Do you think you can guess my new mortgage? Let me know in the comments!