How I Got a No Money Down Mortgage Loan (an appreciation post)
Every personal finance blogger I’ve seen has some massive advantage that they may or may not acknowledge. Because I live in reality, I absolutely intend to shout my lucky breaks from the rooftop. Not because I want to floss and certainly not because I have some guilt about it.
Like it or not, we all have to play in the system that exists. It’s fine to rage against the machine and demand a new system, but in the meantime you probably want to do what you can to succeed in the one we were given.
As part of embracing the privilege, I want to call out one of the best opportunities given to me…
Young and Dumb (and unprepared)
I bought my first house at 21, as a junior enlisted guy living in South Carolina. Not the best house nor a particularly safe neighborhood, but at $80k it never occurred to me how out-of-reach housing was for most.
Fast forward a few years…fresh out of the military, living near Washington, DC (a decidedly HIGH cost of living area), and just starting my civilian career. Making decent money, but nothing astonishing. Our 2br apartment that we paid $2150/mo for was coming up on lease renewal. They wanted $2400/mo to renew. We decided to look for housing, and quickly discovered what everyone from the DMV already knew….housing is expensive.
Like the naïve idiot that I was/am, we landed on a nice townhouse in a nice neighborhood, and we were barely comfortable with the mortgage payment, since it was roughly the cost of rent.
Oh but that down payment. At a $450k purchase price, 20% down to avoid PMI would have required $90,000. Never mind that $90k was more than I made in a year, I hadn’t thought once about saving for a down payment.
VA Loan to the Rescue
Enter the VA-backed loan. Essentially it allows an honorably discharged veteran to purchase a hour with no money down, at a lower rate than a conventional mortgage. There are some stipulations but getting one is the only reason we were able to buy that house. It was but one of many lucky breaks I’ve gotten. As a 28 year old with no money in the bank (but a decent income), I was able to buy that house with zero down, for roughly 1% less on the APR than a conventional mortgage.
This is, obviously, not advice. You can’t just up and decide to get a VA loan if you’re not an honorably discharged veteran. What this is is transparency. I’m so tired of boomers claiming to have pulled themselves up by their bootstraps* when you could buy a house for the two nickels you earned at the soda fountain. I’m also over millennials that hand-wave that “small loan” they got from their parents to help with the down payment. I had an obvious advantage, it allowed me to do something, here are the facts. It’s also worth pointing out that a sober accounting of the numbers means this wasn’t really the best investment.
*fun fact: The phrase ‘pull yourself up by your bootstraps’ originated as something intentionally absurd and physically impossible.
Since I’m feeling salty, what’s the ‘finance guru’ blindspot that makes your eyes roll?