Buying a Home in the SF Bay Area: How This Single Parent Did It

One day I woke up and decided to look into the possibility of buying a house. Literally. I woke up one morning to the muffled footsteps of my upstairs neighbor walking to his bathroom and turning on the shower and thought there had to be a better way. Prior to owning my 3 bedroom single family detached home (with no upstairs anything) I lived in rentals for over 10 years -- you know, the ones with thin walls (older buildings were always within my budget). I grew up in a home with solid walls and a backyard, so I never really got used to living in a place where I had neighbors above and on either side of me. It was especially hard for my oldest (then just a toddler) to grow up with a balcony and not a backyard, but we plodded on, thankful for any roof over our heads.

I was finally doing well in my job, and I had just finished paying off my school loan and a mountain of credit cards - I was feeling cautiously confident. Even though the debt was paid off, I had smeared my credit rating with a once-defaulted student loan I made good on and some late credit card payments. "You're crazy." one friend said. "Impossible! You need 2 incomes and A1 credit to buy a house in the Bay Area!" a family member said. So began my adventure into homeownership.

Currently my mortgage is about the same as what many folks pay to rent a 2-3 bedroom apartment in my area. Here are my 8 steps on how I did it:

1) Go on a fact-finding mission and speak to the professionals yourself. Rather than listening to the well-intentions & opinions of friends and family, or the media hype reiterating the same message, talk with realtors and loan officers specializing in first time home buyers. When I did this I was given information on the many First Time Home Buying Programs found in my area - something I (nor my well-intentioned friends, family and media) didn't even know existed. I met with several loan officers linked to some of the programs and they helped analyze my situation and ran some preliminary figures to determine my debt- to-income ratio. It looked okay - not great, but not bad, so I continued on. A lot has changed in the home loan industry since I bought my house 10 years ago, especially with the market's current situation. Don't listen to your Cousin Liz's home buying adventure - speak to the pros yourself and get the most recent 411.

2) If it isn't already, improve your credit history. This is important. Mine was not strong, something that I mentioned to the professionals from the very beginning. Couple that with my good-but-not-great salary I had to improve my credit rating. What was my saving grace? The fact that I had been with the same company for 9 years, and that my debt was paid off. What didn't work in my favor? The new car I had just purchased (it did help though that my payments were on time). Which brings me to Tip #3...

3) Save everything, spend nothing. Unless it applies to basic food, shelter and clothing. If my old beater had not died, I would not have purchased the car - but I did so months before I even considered buying a house. I began to question everything. Did I really need that perfume? Those extra pair of shoes? That extra pound of chicken? Remember, my career was just starting to take off and after years of being a starving student/single parent I was now a working class single parent with a mountain of debt that was finally paid off. I started living like a starving student again. I saved my entire tax refunds, skipping any celebratory indulgences like a dinner out. I started paying more than the monthly amount due on my car note. This was the start of my foray into frugal living. (Two more kids later I have improved on my frugal living skills, but I'm still learning -- it's an ever-evolving process!) Every time I had the urge to splurge I was jolted back into reality by my upstairs neighbor's heavy (albeit muffled) footsteps and his shower routine (did I mention I liked his choice of music, but not at 1am?)

4) Find out if there are First Time Home Buying Programs (FTHBPs) in your area. Check the city and county web pages. Keep in mind that some Programs target specific older neighborhoods where they have invested their redevelopment dollars. Some FTHBPs have different loan and payment structures. Each one is different, but all FTHBPs in my area had a more forgiving debt-to-income ratio and all helped the first time buyer throughout the entire home buying process which was a huge help. The Program I went with was one that only allowed me to buy in specific neighborhoods, but it came with a mortgage credit certificate (a tax advantage), a generous silent loan package that included down payment assistance + a renovation budget that I was only required to pay off if I sold my house or refinanced. Before I committed to the Program I drove around the neighborhoods several times, all at different times and days to get a feel of what I would be living in. Were there kids loitering? Was it quiet? I didn't do this, but it may be a good idea to also talk to local law enforcement to get their take on the neighborhood activity. My neighbors ended up to be an eclectic mix of young working class families, retired couples, a sports writer for a major newspaper and a football coach and his stay at home wife and young child. My redeveloped area was not so bad, but you should make it a point to research where you will be living before you commit.

5) Surround yourself with good people. I found my realtor by looking in various realtor magazines I picked up at the grocery store and checking online. I There aren't many out there, but those realtors that do specialize in first time home buyers usually hold seminars (some were very helpful, some were not so beware). Because I went with a specific FTHBP which limited me to their County loan programs, she not only worked well with my loan officer, she knew of his reputation and they made a great team. My realtor was very patient and focused on finding the right house for me at a time when the market was rising rapidly. I found myself saying yes to every house for fear it would be cost $10K more next week. She was constantly reminding me of my needs as a new homeowner.

It didn't start off that way. I first used a friend-of-a-friend's realtor who was only interested in showing me condos he had in his listings and tried to have me go through a very confusing loan process available only through his office. He also tried (unsuccessfully) to convince me to forego the First Time Home Buyers Program. But I didn't want an older condo with a small balcony my budget could afford via an adjustable rate mortgage; I wanted a house with a backyard and a stable fixed rate mortgage. Without the Program and the awesome realtor I eventually found on my own I would've found myself owning something similar to what I was already renting. Be strong enough to work with people you feel comfortable and confident in, you are making a huge investment. This is easier said than done, I know, but I finally found the nerve to choose my own realtor and it worked out perfectly. She found the right fixer upper for me and aggressively made the deal before I was priced out of the market.

6) Get pre-approved. Most realtors, even the ones specializing in first time home buyers will not take you to look at houses until you have been pre-approved for your home loan as they do not want to waste time showing you houses worth $700K when you can only afford $450K. Even if you have signed up with a realtor who has agreed to work with a First Time Home Buying Program, many will send you off to the loan officer to complete the pre-approval process first.

7) Keep all your ducks in a row. Make sure your checking and savings bank statements are organized. Since I didn't have A1 credit and my debt-to-income ratio was not that great, I was required to fax copies of my bank statements to my loan officer every month to make sure I had the money in the bank and I wasn't overdrawn. He also asked me to write a letter explaining why I had defaulted on my student loan and made late credit card payments, how I fixed it, and what I've learned from the situation. It was a very humbling (and exhausting) experience. Remember Tip #5? When I first met this loan officer over a cup of coffee I found him to be a friendly, intelligent, highly professional guy who asked me all sorts of questions about my professional and personal finance adventures. He was trying to determine if I was a person who had learned from her financial mistakes. Why was it so important for him to gauge the decency of my character? I later came to find out that he was the one that would be going to bat for me, pleading my case to the people in charge of actually approving (or not approving) my loan and since I didn't look too strong on paper he wanted to give me the benefit of the doubt in person. He wanted to make sure that the person he would be fighting for was really prepared both financially and mentally for homeownership. He had a stellar reputation riding on it. Boy did I luck out in surrounding myself with good people, because he went to bat for me on several occasions! And by the way, he scored a pretty decent fixed rate mortgage - no ARM for me, thank you very much.

8) Patience and perseverance. It took me 18 months from the time I woke up that morning to the time I moved my first box into my home. There was not one inactive day during that entire time. Friends of mine, a married couple with A1 credit and triple my income pulled their hair out during their pre-approval process (although there process was much quicker.) Reaching the American Dream - Impossible? No. Difficult? Yes, but not impossible. There goes that INDY attitude of mine again.

Good luck!