Go to school. Get a job. Make money. Buy a home. As a first-generation American daughter of immigrant parents, following that path meant success.
And as the eldest sibling of three, I was determined to make my parents proud. So there was never a doubt in my mind that I would achieve that ultimate goal of homeownership.
In 2010, I graduated college with a bachelor's and a master's degree and approximately $60,000 dollars in student loan debt. I soon got a job as a high school English teacher. I wasn't rolling in dough on my teaching salary, but I was steadily working my way through that "American Dream" checklist.
Three years later, on my 25th birthday, I decided that it was time to achieve the last step on my adulthood journey: Buy a home. This moment was the catalyst that completely redefined my relationship with money.
I called a real estate agent to figure out what would be required to buy a home. I laid out my finances and they informed me that I was prequalified for a $100,000 mortgage loan. But as it turns out, in the New York real estate market, that won't take you very far.
Even though I paid all of my bills on time, never missed a student loan payment, and had a 750-plus credit score, there was a key deciding factor that was preventing me from getting approved for a larger amount.
"Your debt-to-income ratio is too high," the agent explained. "You're viewed as a liability." I had never heard of the term before and I had no idea that it would be a barrier to becoming a homeowner. If I wanted a larger loan, I had to lower my DTI.
Your DTI is a percentage that compares your total monthly debt to your gross monthly income, and lenders use your DTI to determine your borrowing risk. To calculate your debt-to-income ratio, you must first add up your monthly debt payments, divide that number by your gross monthly income, and multiply that decimal by 100.
Most loan providers in the real estate sector prefer a borrower to have a debt-to-income ratio below 36%. My personal debt-to-income ratio was higher than 45% at the time, which in the mortgage world is a red flag.
Video by Courtney Stith
After speaking with my student loan providers, I spent the next five years focused on becoming debt-free to improve my DTI and overall quality of life.
When it was all said and done, in December 2018 I made my final student loan payment. I had initially borrowed a total of $60,000 and paid back approximately $102,000. The following month, in January 2019, I closed on my first home.
Although I had only been debt-free for a little over four weeks, and in hindsight I would have preferred to be debt-free for a while longer before jumping into such a huge financial commitment, it seemed like everything was falling into place.
I was a college grad, had a respectable career, and was finally a homeowner. For all intents and purposes, I was the product of immigrant parents who achieved the American dream.
That period of triumph, joy, and excitement lasted all of two weeks. This was the amount of time it took for both the washer-dryer and kitchen sink to start leaking.
The realization that every piece of this home's upkeep was now up to me, in addition to other daunting realizations, all started to heavily set in with every figurative fire I put out. Being a homeowner wasn't just about paying my mortgage. And that understanding came far too late and at far too steep a cost.
By July 2019, just six months after I closed on my home, I had already spent just over $15,000 in repairs without including the smaller costs of consistent maintenance. I was fortunate to be able to cover these costs thanks to my savings and help from my parents. But I was mentally exhausted.
As I looked for a financially sound exit strategy, I learned of another stipulation of homeownership that I wasn't aware of and had to take into consideration. Because I would be looking to sell my home in less than two years after its purchase, I would face a tax hit: capital gains on any profit from the sale.
It was becoming evident that I went into being a homeowner without an understanding of what it truly meant.
Video by Helen Zhao
Now years later, over 29 months of homeownership, I've spent about $25,000 dollars in repairs, have paid about $15,000 dollars in interest on my mortgage, and $22,000 in property taxes. And that's before you tally up a number of other costs like sewage and sanitation fees, homeowners insurance, and HOA fees.
Those routine costs of homeownership can be surprising enough. But if you throw in a random roof leak, an HVAC malfunction, or an electric or plumbing issue, you could potentially be looking at an additional $20,000 to $30,000 dollars of annual expenses you did not initially calculate or prepare for.
Even before you move in, the mortgage application process can come with a number of unexpected fees. The application itself can run anywhere from $300 to $500. Then there's home inspection fees, appraisal fees, origination fees, and sometimes private mortgage insurance as well. Many of these things are tacked on in various parts of the process from the beginning to closing.
Even though it was on me to educate myself before making such a significant purchase, I've also found that there is a persistent lack of transparency about the ins and outs of buying and owning a home. It can be hard to see the realities of the experience when it is often viewed as such an achievement.
Video by Stephen Parkhurst
I've often seen people on social media call those who choose to rent rather than own foolish or irresponsible because they are paying someone else to live in a property and aren't building equity. But you don't need to own a home to build wealth.
While my experience with being a homeowner hasn't been ideal in relation to my expectations, I have been able to speak openly about it in the hopes that I can help someone else navigate the process, or avoid it altogether if it doesn't suit their long-term goals.
I am not anti-homeownership, but I also no longer believe that owning a home is the only way to achieve the American dream.
Owning a home is a huge commitment, and you don't know gross until you've tried to DIY your own plumbing. But ultimately, my biggest piece of advice for anyone thinking about whether they want to purchase a home is this: Do not feel rushed or pressured to do so on anyone's timeline but your own. Choose the path to success that feels right to you.
Melissa is the co-founder and content creator of the Millennial in Debt brand. She has paid over $100,000 in student loan debt on a teacher's salary, and is currently teaching millennials how to get out of debt, build generational wealth, and earn financial freedom.
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