You Might Be Closer to Buying Your First Home Than You Think
Very rarely does somebody call me and say, “Matthew, I am ready to buy my first house.” Especially right now. More often, the conversation starts with some version of, “I would love to buy someday, but I am not ready yet.”
That is usually followed by a reason. Their credit is not good enough. They do not have enough money saved. They changed jobs last year. They have debt. Somewhere along the way, they have already decided that homeownership is not possible for them.
My first question is usually pretty simple: How do you know?
That is where things get interesting, because very often they do not. They know their credit is “bad,” but they do not know what score they actually need. They know they do not have enough money saved, but they do not know how much they actually need. They have already disqualified themselves before anybody who understands the process has had a chance to look at the situation.
One of my favorite ways to give someone the benefit of the doubt, especially when their choices or behavior do not make much sense to me, is to remember one simple thing:
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That applies here more than almost anywhere else.
Stop trying to underwrite your own mortgage
Buying a house involves a financial system that is far more complicated than most people realize until they are standing in the middle of it. Credit scores, debt to income ratios, employment history, mortgage programs, down payments, closing costs, taxes, insurance and underwriting all get thrown into the same conversation at once. Depending on the specific knowledge being measured, recent financial surveys suggest somewhere between 37% and 59% of Americans do not fully understand how credit scores and credit systems work. That is a pretty enormous knowledge gap for something that plays such a major role in whether people can buy a home.
The problem is, most of this is taught poorly, if it is taught at all. Yet people still sit at their kitchen table, look at a number on a credit app, remember something their uncle told them fifteen years ago and decide whether or not they qualify for a mortgage.
That is backwards.
Sometimes the person telling me they are not ready is absolutely correct. Maybe the credit really does need work. Maybe they genuinely need more savings. Maybe their income history needs a little more time. I am not suggesting that everybody who wants a house can walk into one tomorrow.
What I am saying is that there is a massive difference between “I cannot buy a house” and “I cannot buy a house today.” One is a dead end. The other is a plan.
At the beginning, most of the conversation comes down to three things: cash, credit and income.
Credit is probably where people beat themselves up the most. Someone tells me their credit is terrible, so I ask what their score needs to be. They do not know. I ask whether they have spoken to a lender. They have not. I ask whether they know what is hurting the score or which changes could make the biggest difference. Usually, they do not know that either.
At that point, we do not actually have a conclusion. We have a question.
A good lender is not useful because they can tell you that your credit is too low. You probably already know that. They are useful because they can tell you where you are, where you need to be and what might get you there. Maybe balances need to come down. Maybe an account needs attention. Maybe something simply needs time. Whatever the issue is, now you have a roadmap instead of a vague sense that your financial life is doomed.
“Get your life together and call me someday” is not a plan.
Cash works the same way. A lot of first time buyers still assume buying a house requires an enormous pile of money sitting in savings. Depending on the buyer, the loan program and their eligibility, the actual cash needed may look very different from what they imagined. That does not mean buying a house is cheap. It means you should know the actual number before deciding the number is impossible.
Income can be misunderstood too. Changing employers does not automatically mean you have to sit on the sidelines for years. Did you completely change careers, or did you move from one company to another doing essentially the same thing? Did you move into a better position? Did your income increase? Do you have multiple jobs? Is some of your income commission based?
There is context to all of it, which is precisely why trying to underwrite yourself from the kitchen table is a terrible hobby.
What you qualify for is not necessarily what you should spend
Then there is the opposite problem. Somebody finally talks to a lender, gets preapproved and immediately calls me in a mild state of terror.
“Matthew, they said I can buy a $400,000 house. I absolutely cannot afford a $400,000 house.”
Great. Then we are not buying one.
The maximum number on a preapproval is not an instruction. Just because a lender says your financial profile supports a certain purchase price does not mean you need to spend that amount, and it certainly does not mean you are going to feel comfortable doing it.
I am far more interested in the monthly payment you can live with than the absolute maximum amount somebody is willing to lend you.
If you qualify for $400,000 but the payment that allows you to sleep comfortably at night puts you closer to $250,000, then $250,000 is our target. You still need groceries after closing. Cars still break. Kids still need things. Furnaces have an incredible ability to stop working shortly after somebody spends all of their savings buying a house.
Life has the rude habit of continuing after you get the keys. The goal is homeownership, not becoming house broke.
This becomes especially important in Western New York because the same purchase price can mean very different monthly payments depending on where the property is located. A $250,000 home in one municipality may carry a very different tax burden than a $250,000 home somewhere else. Insurance, financing, mortgage insurance and other costs can change the number too.
That means your buying power is not simply a price range. You may comfortably afford more in one area and need to spend less in another while still ending up with roughly the same monthly payment.
That is why one of the most important conversations I can have with a buyer is not, “What is the most expensive house you can buy?”
It is, “What payment are you comfortable living with?”
The price gets you through the front door. The payment is what you live with every month afterward.
Nobody is waiting to laugh at you
One of the biggest reasons people avoid having this conversation is embarrassment. They are afraid somebody is going to judge them. They are embarrassed by an old collection, credit card debt or a financial mistake they made five years ago. They think their income is too low and assume a lender is going to pull up the credit report, point at the screen and laugh.
Nobody in this business has time for that, and more importantly, nobody benefits from it.
Your finances are going to be evaluated. There is no way around that. Cash, credit and income will be looked at throughout the process because everyone involved needs to know that the transaction can actually make it to the closing table.
That scrutiny is not ridicule. It is a system of checks designed to make sure the numbers work.
If you are not ready, a good lender should be able to tell you why and what comes next. Maybe something needs to be paid down. Maybe you need to build a little more cash. Maybe you need a few more months of history. Whatever it is, now there is direction.
And if you are still afraid somebody is going to laugh at you, I can put it in the most practical terms possible: nobody gets paid to laugh at you.
The lender does not make money by humiliating somebody over a credit report. I do not make money by packaging somebody up as a joke and sending them to a lender. Everybody involved benefits when you get from where you are now to a place where buying a home makes sense.
The entire point is to help you move forward.
I think of it like a traffic light
This is probably the easiest way I know to explain where somebody stands.
Sometimes you have a green light. The numbers work, the financing works and we can start moving.
Sometimes it is yellow. Pump the brakes a little. You are close, but there are one or two things that need attention first. Maybe we need a few months. Maybe a balance needs to come down. Maybe you need a little more money saved. Whatever it is, we know what we are waiting for and what to do while we wait.
Then sometimes the light is red. We are not buying a house today. Maybe we are not buying one for a while.
That can feel discouraging, but a red light does not mean the road ends. It means you stop, do the work and wait for the light to change.
What bothers me is when somebody never even gets to the intersection because they already decided the light must be red.
If you need six months to get ready, knowing that today is infinitely more useful than discovering it six months from now. If the answer is a year, fine. At least the clock starts now. And if you walk into the conversation convinced you are years away only to discover the light is already green, even better.
Some of my favorite closings start with “I do not think I can do this”
The easy transactions are great. Somebody has excellent credit, stable income, money saved, gets approved immediately, finds a house and closes. Everybody is happy.
But those are not always the ones you remember.
You remember the person who genuinely believed homeownership was impossible. The buyer who thought their credit had killed the dream. The person who was embarrassed to even make the first phone call. The one who needed six months, nine months or a year to get everything where it needed to be.
Then one day they get the preapproval, write an offer, get it accepted and eventually sit at a closing table holding keys to something they had already convinced themselves they would never own.
Those are the closings where the lender and I tend to high five each other afterward.
Not because anybody performed financial wizardry. It is because somebody stopped assuming long enough to ask the question. They got a roadmap, did the work and turned something they thought was a dream into a plan.
So if you are wondering whether you are ready to buy your first home, I am not going to tell you yes or no.
I am going to tell you to find out.
Maybe the light is green. Maybe it is yellow. Maybe it is red. But standing three blocks away trying to guess what color it is does not get you any closer to home.