I had never thought of becoming a homeowner at 27. I was a broke millennial who skipped more student loan payments than I made and I had never moved out on my own. My dad let me get away with not paying him every month for my car insurance while he footed the bill. I bought plane tickets and booked hotels whenever I got the whim to travel. I acted like all of my income was discretionary and had absolutely no savings. I won’t even mention my credit score, because as you can imagine, it was pretty bad. Doesn’t really sound like the profile of a potential home buyer, does it? But it turns out becoming a homeowner was the solution to my dad’s financial situation, and presented me with a way to finally start giving back to him. Let me tell you what happened.
In August 2015, I noticed that my dad’s stress about money was increasing. After talking with him a little about it, I found that the root of the problem was the mortgage on our house.
I found out that he owed about $90,000 on our Metro Detroit home. I was in shock. You see, we’d lived in the house since the fall of 1992, when I was just 4 years old. I had great memories of growing up with my three sisters and my parents in the place. But I never imagined what it cost my dad. When the housing crisis of 2007-2012 hit, home prices plummeted, and though people were abandoning their homes, my dad said he stayed because he wanted stability for the family. Knowing him, he also wanted to do what he thought was right.
But our house was only worth about $45,000 in 2015, just about the same as what it was worth when my dad first bought it 23 years prior, my dad said. I was baffled. What kind of financial wizardry had the bank worked? It just didn’t make sense. I found out that my dad had never taken out a second mortgage or home equity line of credit out on the house and had made regular monthly payments. I was furious. There was no doubt in my mind that my dad should have rightfully owned that house, free and clear. The bank did not deserve one more red cent out of his pocket. I told my dad to stop paying the mortgage while we figured out a game plan.
So my brain began turning. I hit Google and I started researching ways to get out of a mortgage. Then an idea came to me. What if we bought a house cash, moved in, and found a way to settle with the bank on the mortgage? Or what if we moved and let the house go into foreclosure, and let the bank take the house? There was no time to be sentimental. It was a matter of financial survival.
We started looking on Zillow for houses and determined a price range of about $25,000 and under. We decided that we would each use money from our 401(k) plans to fund our new house. I brought the idea of putting the new house in my name in case the bank tried to come after it to settle my dad’s debt.
Soon we found a house just a few blocks away from us and in our price range. It was a foreclosure that looked pretty decent from the outside. According to Zillow, it had been built in 2002, making it much newer than our old home; it was larger too. It was occupied though, so we wouldn’t be able to see the inside of the house. It was a risk, but we decided to take it.
The house was being sold on Auction.com and the minimum starting bid was $5,000. I registered for the auction, which was just a few days away. In order to participate in the auction, we had to put down an earnest money deposit of $2,500, so we did.
On the day of bidding, September 18, 2015, I was excited and nervous. I had the screen open at work, and as soon as the bidding opened, I watched someone enter a bid for $15,000. I waited until bidding was almost over, then I put a bid in for $25,000, and the bidding closed, with me winning the bid. I was so excited!
After signing all the documents and wiring some money to the title company, Bank of America, kept moving back the closing date. As annoying as that was, it gave us time to wrap our minds around moving out of our old home. Finally, we closed on the house on December 16, 2015. I was officially a homeowner! After wiring the money, we were given the code to the lock on the house, and we went in to check it out.
What we found was a house that was in the process of being remodeled. The walls and carpet were throughout the house were really dirty, but those were mainly cosmetic. But the house was ours free and clear. My dad hired a contractor to start work on the house in January 2016 and we started taking steps towards making the place livable for us..
In the meantime, the after my dad stopped paying the mortgage in September, the bank had been sending all kinds of letters to try to get him to pay, eventually, they offered him a deed in lieu of foreclosure, which is basically when you hand over the deed and ownership of a home over to the bank, and they cancel your mortgage. We were so blessed, because, it could have easily been a very ugly situation. So while we were getting the home ready for move-in, my dad successfully completed the process of handing over the home to the bank. The bank even gave my dad a few thousand dollars upon move out. It was the least they could do after ripping him off for so many years, in my opinion.
The house project was complete by June 2016, we had the house inspected by the city, and we got the go-ahead to move in. I’m not going to say having our home remodeled was easy; my dad and the contractor had many disagreements, and eventually, my dad let him go and we finished the rest of the work ourselves. But in the end is was so worth it. In all, my dad put about $15,000 into the house to get it ready for us to move in.
The whole point of this post is to show you that there are ways around the traditional home-buying scenario. For a person nearing retirement, perhaps using retirement savings with a goal of getting out of mortgage debt might be a good idea. Every situation is different, but you don’t have to be stuck with traditional home financing situations.
So that’s how I became a homeowner at 27! I know that it’s not totally uncommon or such a big deal, but it was for me. To be honest, my dad really put in the majority of the money, so I really consider it his house, though my name is on the deed. Buying the house was a bonding experience for us and every time I come over to visit, I’m reminded of what ideas and partnership and do.