We can get too emotional or too analytical in buying our first home. But our guests in this episode balance each other out in moving forward. Nathaniel and Bryan are excellent, cautious, and serious planners. They were even shocked that they could do it with some deep research into trying to buy a home in one of the most expensive areas in the country! They didn’t need 20% down. Although they are super cautious and conservative, they still elected to use some of their retirement savings to purchase. Tune in to this episode, and you can learn more from their story.
Interview With First Timers In One Of The Most Expensive Areas – Buying Without 20% Down Payment
How to Navigate Buying Your First House in Overpriced Cities?
What do you do if you start adulting, become a grown-up, and move to an area that you love? The rents are insane and the home prices are insane. A 20% down payment to buy a home someday in this area costs more than a year’s salary. How are you ever going to buy a home without going broke, without depleting all your savings and retirements, or making yourself house-poor for the rest of your life? Like it or not, buying a home is different now than it has been in the past. Now, we have to think outside the box and get creative.
In this interview, you are going to see how to make that happen without depleting every penny you have or setting yourself up to be house-poor for decades. I was so excited in hearing what they had to say that I interrupted in this interview more than I ever have. I apologize to the audience, but most importantly, I apologize to Nathan and Brian. You guys are great. You just got me super excited and I wouldn’t shut up. Let’s go.
Everybody, it’s time for your favorite show. It’s the one where I don’t talk as much. I say that every time but I know that’s not how you think of it. This is Brian and Nathaniel who are up in Northern California. I’m sorry, is it Nathan or Nathaniel? Which do you prefer?
I don’t have a preference, so whatever comes naturally.
I tell people all the time, “Call me Dave or David, just don’t call me dumb ass,” and then I’m happy. Every time I listen to a podcast, they do this big, “Tell me all about yourself.” People are here because they want to know how to do this. I’m going to put you on the spot right away. What was one of the big things that you learned that you would love to share with other people about the whole buying a home process that you think they could possibly use in their life?
One of the biggest things that I learned partly from listening to your podcast, but I also did a little bit of my own research about it, is the different types of loans that are available. That came up for us because, in the Bay Area, the homes tend to be more expensive. You can quickly find yourself in a jumbo loan rather than the traditional loan. That makes a huge difference when it comes to the interest rate and how much you end up paying. A huge factor for us is making sure we stayed within the traditional loan amount.
This is great. For people who don’t know, I got into it now because I’m doing my Alphabet series. Now, it’s nonconforming because I was doing N. It can vary but you guys saw a big difference between what is the jumbo rate versus a conforming rate.
One thing I will add to what Nathan shared is number one, we had a great realtor and we found that realtor through this show, which was amazing. She connected us with a broker who was amazing. We have to give a shout-out to our broker, Jonas Champion up in the Bay Area. For those that might be looking for a broker. He worked with us. He explained everything that we needed to understand about non-conventional, conventional or jumbo and conventional. That was helpful for first-time home buyers who were trying to make their first big purchase up in the Bay Area.
[bctt tweet=”Having a great realtor and a broker is helpful for first-time home buyers trying to make their first big purchase.” via=”no”]
Any purchase in the Bay Area is a big purchase and I couldn’t agree more. It’s one of the reasons for being down here in Southern California. We’re not quite used to how it is as you guys are there. It’s still pretty expensive near the beach. I did a whole thing on the online lenders, and God bless these poor people out there who go online and they hit up these people. If you are in an area where things are rough or expensive or if you just need some creative thinking, those stellar superstar mortgage brokers can be a game-changer. I remember going back through the details. Which one of you was it that I had to convince? There was one email one time about, “I’m so glad you said something because my husband looked at the retirement funds,” or something like that.
That was probably me because I’ve been tuning in to your show for several months. I actually took your advice that I listened to older episodes, but I have been bingeing the show. I was telling my husband Brian about it. I’m like, “I’ve been listening to this guy. I think we could do a home purchase, but we might need to diversify our retirement and take it from our 401(k) in order to get into this home.” He was 100% against that before I pressed the issue.
I think mentally, the biggest obstacle for me was how are we going to get the finances in order to make the purchase. Nathan and I both have done a ton of due diligence over the last few years. We knew the market. We knew what neighborhoods we wanted to be in, and what we wanted. It was just how were we going to get there financially. For me, being a risk-averse government worker, I thought, “I don’t think I want to dip into that 401(k). It doesn’t sound smart.” Sitting back and looking at it now, I do think it probably got us to where we wanted to go with this purchase, but I’m also looking at it slightly different and seeing it as a positive versus a negative. I’m glad we went that route and ultimately got the house that we wanted.
In this short attention span TikTok world, it takes a little bit for me to explain. I can tell Nathan drank my Kool-Aid because he used the word once I explained to him that it was diversifying your portfolio. I say the yin and yang that you guys have in that is important because people can emotionally go too far when they buy a home, or they can analytically hold back and pay rent for too long. Especially now as the market is peeking out, it’s not going to be a sexy get-rich-quick make $100,000 in the first year you buy a house.
The whole understanding that the home can be an asset as well is huge. I’m so glad that you took the time. Nathan, good job in jumping back and forth. Thank you for paying attention to that. There’s so much current stuff that’s different. I started this thing back in 2019 in my living room, and it’s a whole different world now. Those are such phenomenal pieces. Let’s go back. Tell us, how long have you been in the Bay Area? When did you guys start thinking about it? Bring us on your journey. You guys closed when?
We closed on September 2nd. We looked at our first house on July 27th. It was a very quick turnaround. We found our house on the 27th of July. We made an offer a couple of days later. It was accepted and went into a pending status. We closed on the 2nd of September.
What was the journey before that? How long have you guys been in the area? How long have you been renting?
We’ve been in the Bay Area for almost seven years now. We’ve been renting this entire time. Before, we were at an apartment that was not as expensive. We decided to move into one of those more luxurious apartments in which the rent went up, so it was more expensive. We always knew we wanted to buy a house. That was always the goal. It was to have a backyard for the dogs to play in. We had been working for the past few years with our financial advisor to get all our debts paid off, so that was good. We had some savings, but not a ton. Before, I thought it was the 20% down. For the Bay Area, that’s tens of thousands. It’s so much money.
It’s hundreds of thousands.
That was the plan before and we had a little bit of money saved. We were like, “We’re going to have to wait a few years,” but then I listened to your show. I got into the mindset of I don’t want to sign another lease because it felt like we were throwing away money. The home crisis had gone up so much in the last two years. I had been watching them. You gave the statistics on this and I was like, “I can’t afford to wait another year because the house I want that I see now is going to be more expensive, and we’re never going to get there.”
I will say his prompting of this show and saying, “Let’s reach out to David and get a connection for a realtor and see where it goes.” I said, “Okay. That’s not hurting anything.” We got connected with Valerie and talked with her. I liked her. She said, “Don’t go look at houses over the weekends until you get a pre-approval.” We didn’t listen to that advice. We went out and looked at four houses. We found the one and it moved fast. It was an amazing experience.
I have a couple that tuned in to the show way back when. I think they’re from episode 33. They did the same thing. They called me because they’re in my area. I was like, “This is what we got to do.” It was on a Sunday night and they were like, “David, we found the house.” I was like, “You don’t have a loan yet.” I was going to ask what were the pitfalls or the things that you shouldn’t do. There’s tip one, get your pre-approval.
I appreciate you guys. I put this out there for people like you. It can be for people buying a $100,000 house. It can be for people buying a $2 million house. I’ve had a $2.1 million podcast listener up in the Bay Area. I know it wasn’t cheap for you all, but thank God you had the killer agent and the killer mortgage broker that were able to help you fast forward and be able to pull this off.
The biggest thing that I want to make sure people understand is if you’re not prepared, you have to have a good team and don’t jump the gun as you boys did, then you’ll be able to be prepared and be ready to go. You had the 20%. Were there any other things like misconceptions or ideas coming into you where you thought it was going to be like this, but it ended up being like that?
When we got down to negotiating the final numbers and how it all played out, number one, our realtor was so amazing. She handled all of that and got us a good deal. There were a number of inspection items that needed to be addressed. I didn’t have the understanding of how we could settle that up to make it work on the back end from a financial perspective. There were a lot of options that Valerie was able to work with the seller’s agent to negotiate a deal that would allow us to address those once we got into the property. From that angle, I learned a lot in the negotiation that went on with the closing cost, the inspection report, and the items that needed to be addressed in that.
That’s a good one. Go nitty gritty with me on that and I’ll explain afterward. Did you guys do credit as opposed to having them do the repairs?
We did. Also, being in the Bay Area, a lot of my friends that have bought homes had said, “You have to have no contingencies. You have to be super competitive because it’s a competitive market.” Our unicorn realtor Valerie was like, “No, I always do contingencies. We always do appraisals and inspections.” She had all that in there that was non-negotiable, which was super helpful because we got back the full report and it was pages and pages of things.
The guy we bought the home from was a flipper. He flipped the home. We weren’t trusting that he would make the repairs up to code. I had never heard about this credit situation, but of course, Valerie and Jonas were very knowledgeable and explained how that works through the escrow account. Ultimately, it turned out that because of the number of repairs that we found in the inspection and Valerie’s negotiation skills, they credited everything. We didn’t pay any closing costs.
[bctt tweet=”Because of the number of repairs that we found in the inspection and Valerie’s negotiation skills, they credited everything. We didn’t pay closing costs.” via=”no”]
It’s so funny because I know all the good stuff. We got the house, but the interview is awesome because I get a chance. For those of you out there, part of your contingency period is the fact that you get to have an inspection, and after the inspection, you can ask him to fix it. I love what you said there, Nathan.
The guy is flipping the house. He’s already putting lipstick on the pig. I’m not going to ask him to fix the sink because if the sink is leaking the way it will work is you negotiate, “You’re going to repair this,” and it works completely. You don’t get to check that until a couple of days before you close. Savvy sellers know that. Not to mention the fact that who knows what your opinion of fixed is versus my opinion. It could be totally different.
The great thing about a good real estate team helping you is that you can get that as a credit. The credit can come to you as cash at close, which means now I don’t have to bring in another $5,000, $10,000 or $15,000 of closing costs. You then get to do my favorite thing, which is moving in and start calling a repairman. I sure as heck don’t do it. My son does nowadays.
We’re in that phase right now. Actually, we are on the phone with contractors every single day. It’s a process, but we’re getting the standard that we want to get done on the house or the fixes that we want to fix.
There’s always the give and take and the pros and the cons. By moving quickly on this place, you weren’t coming in with 50% down in the Bay Area. I’m assuming that you had to take the home and now do these fixes. That was one of the compromises that you were willing to do.
That was one of the compromises. One of the reasons why it worked for us is because we’re still in our apartment. Our lease doesn’t end for a few more months because I thought it was going to take 4 or 5 months to find a house. I said, “Let’s start looking and see what happens.” It worked out quickly. As you said, we saved tens of thousands of dollars on the closing by having them do the credit. That gave us the room to breathe and able to slowly make the repairs before we even have to move in.
There are some people that try to close it so tight and I will say to them, “If you’re trying to save that much money, then either you’re stretching too far on the purchase or you can barely afford this house.” If you can’t afford to cover both for a month or so, plus it’s fun. Have you done a slumber party yet? Have you gone over there and hung out?
We totally did. Part of the reason why we purchased the home is because our good friends live two blocks away. They were having a party at their house and we didn’t want to have to deal with coming back, so we spent the night there. All we have is a mattress that we ordered online. We spent the night at an empty house with our two dogs.
How fun. That so warms my heart. You mentioned it earlier. It is something that people need to think about it. I have more people that buy homes for dogs than themselves. Around where I live is very similar to you. There are entry-level homes a lot of times that might have a balcony. The garage is above or underneath the unit and then you have a balcony. They call me and go, “What about my dogs?” That was obviously a consideration for you guys.
We have two dogs. They’ve been city dogs for six years. We definitely want to give them the backyard, which we were able to accomplish. Nathan and I are also in the adoption phase and we’re trying to adopt a child, so we wanted more space than what we currently have. We were able to get that through this house. Now we have four bedrooms, two baths, and a large enough space for a future child, hopefully. Knock on wood.
I have been through this before and I love the day I hand them the keys. I know some people are very excited about the keys, but they’re also like, “Let’s go fill out all our paperwork right now and send it in and say, ‘We are legit. We have a house, a mortgage and rooms.’” You look a lot better to the agency. That’s so fantastic. I usually end the interviews by saying, “How does your future look?” I guess that’s how your future looks. You’re excited to start a family there.
It’s funny because we actually happen to be at the annual review mark with our adoption agency. We’ll definitely be updating everything to reflect the home purchase and hopes of increasing our chances of a match there.
We’re super excited. As I said, we’re in the neighborhood that we want to be in. We’re already looking at schools for this future child and we’ve got a backyard for the dogs. We couldn’t be happier with the purchase and we’re very blessed and thankful.
Let me once again reiterate. You’re in the neighborhood and the schools that you want to be in, and it’s okay that you got into your 401(k). You want to make sure.
There’s still some in there. We didn’t have to use all of it.
We just dipped in there and it was perfectly fine.
That’s great. It’s diversification. The nice thing is if you guys are going through adoption now, twenty years from now, we’re going to be talking about college potentially. Go back and look at home values twenty years ago, I bet it probably did better than the 401(k)s. You’re going to be in good shape. That’s very exciting. My family is going to be so happy when I come home. They’re going to be like, “You had a good interview, dad,” because I’m glowing.
This is awesome. Thank you very much for all the insights and tips. There are so many pieces that other people are going to be able to use. Not to mention understanding how important that team was. I’m glad that we got a great connection with you guys. Thank you so much. I’m going to be putting together what to do in your first year. I’m going to be talking to you guys after the move-in, and get your updates on little things, and tips that we can give to people after they move into the home if you’re alright with that.
That would be great. I feel like we already learned so much from the one night that we spent in the house.
The most important thing about this whole interview is everybody gives a little time to get the contractor in there first, and the first purchase is to buy the mattress, then buy the appliances. You can’t sleep in the fridge. Did you get the mattress in the box that came to your house and unloaded it?
I got one of those in my house and my wife thought I was crazy, but I love my purple mattress. I’m not a sponsor, but you can call me anytime. That’s fantastic. You guys are the best. You also made an excuse for me to go back up to the Bay Area because I love it up there. I’ll drive by your house and I’ll scream, “You can do it.” Thank you so much, guys. I appreciate it. Congratulations and good luck with everything moving forward.
You too, David. Thank you.
I’m excited to do this and get this information out to everybody all over YouTube. You can help by subscribing, notifying, and hitting those likes. It helps the algorithm. It helps everybody out there to find this. This is free fun information and we give it twice a week. There are lots of interviews with other first-time home buyers on the channel. You can learn from them, so you can make this happen for you.
Helping people buy a home for their family is one thing, but helping people buy a home, which is a means to an end to achieving a family in the adoption process. I don’t take myself too seriously, but I’m humbled by the one that Nathan and Brian used the show to be able to be in a position to show supreme stability as adoption candidates. That is uplifting. Of course, because I can’t stay serious for too long, they got to have a slumber party. If you’re on the fence about buying, there’s another great bonus for owning a home. You don’t hear about this on HGTV. You can get slumber parties in your new, big, empty house while you’re renovating it and you still have your apartment.
Of course, the big lesson they gave us and the one that I was so excited about that I kept interrupting them is that if you live in an expensive area, the difference in the 20% down payment is not tens of thousands of dollars. It’s hundreds of thousands of dollars. I hope that you listen closely to Nathan and Brian. They didn’t take the decision of using a low down payment lightly, but they also didn’t dismiss it and consider it unsafe either.
It took a little bit of convincing but in the end, it was one of the only ways that they could actually make their dream of home ownership happen. You guys know if I could, I would wrap this all up in a little easy app that you could understand or one quick TikTok video and you would all go, “That’s a great trick,” but this isn’t a hack. This is a real process. I’ve discussed the process of using your 401(k) or your retirement and as Nate got to learn, diversifying your portfolio.
I went into it deep in episodes 22, 58, 75 and 113. It sucks, but here’s your truth bomb. Life is not fair. You’re not going to be able to buy a home the same way the Boomers did. Life is different now. They got better economic times, but you get the internet and more entrepreneurial opportunities. You got to see the Cubs win the World Series before you were middle-aged.
I get it. Life is not fair but if you do the work as they did, you talk to a financial advisor, you research on your own, you listen to the podcast, and you get a great unicorn realtor that then refers you to an amazing customer service mortgage pro, not the stuff you’re going to get from an online lender, someone is going to be able to talk to you. You can get all the creative advice that they did to find a way to safely and securely beat the system in an expensive area and feel positively secure that you’re making the right move without having to use the old dinosaur, archaic, unattainable 20% Boomer, financial down payment.
Those paths are not feasible in today’s world. Listen closely to their words, and then if you want more information and get deep into it like what they did, go back to episodes 22 58, 75, and 113 for more safe and practical financial philosophies to help people thrive in this world instead of fretting about how it’s not the way it used to be.
There’s plenty more at HowToBuyAHome.com. If you’re just starting out, get in there and sign up for the starter kit, and we’ll get into the advanced financials for you a few months down the line if all this stuff is like, “I don’t even know what they’re talking about.” If this story that was shared was helpful for you, it’s probably going to be helpful for other people, so please share the show when you can. Click the little share button and send it out right now.
By sharing it with your friends, we can help lots of people crush the confusion and come to the happy ending that Nathaniel and Brian did. There’s more on YouTube that you can share with your friends as well. That’s at How To Buy A Home Podcast. Search it up. I’m going home. That was glorious. I feel so good, and you should too. Nothing great in life is easy, but with the help and guidance of pros who are looking out for you, things that are difficult are not impossible. You know what that means. You can do this.
- Episode 22 – Previous Episode
- Episode 58 – Previous Episode
- Episode 75 – Previous Episode
- Episode 113 – Previous Episode
- How To Buy A Home Podcast – YouTube
This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!