Everyone who owns a house has started with buying the first one, which hopefully worked better than mine. My first house was an experience. . . a real experience that I hope you did not have to go through. I was newly engaged to be married and out to get my first house (alone). Not a good idea, for no other reason than the fact that four eyes are better than two. Nevertheless, after a lot of looking, I found "the house" and made an offer, which was quickly accepted. I called my wife to be, and at that point realized my first error.
She asked how many bedrooms it had, and believe it or not – I didn't know (no one could make this up)! In fact, I am not sure I even looked. It turned out to be three. Whew!
We didn't have home inspections in those days, or at least my broker didn't mention it to me, so the next step was the financing. I didn't have a clue, because I was a young stockbroker at the time and knew nothing about real estate. The house was $37,000 and I needed to come up with 20% down. I decided upon 100% financing instead, so my broker arranged a second of 10% and I borrowed the remaining 10% down payment from a client; thus nothing down. That isn't how we do it today.
This wasn't the house I wanted, and it turned out to be the worst purchase I ever made in my life, because as little as I knew, my broker knew less. I didn't know that for a number of years until I was ready to sell and found out he had left the business because of serious personal problems. I found another broker who had sold a neighbor’s house in a week and she was as good as they got, representing me for the next 20 years.
I had purchased a home on a problem street. Had I purchased one block away – either way – the difference would have been dramatic to the upside. I had purchased less than I could have afforded, but didn't take advantage of the financing to pay down the house quicker and build my equity faster. I didn't know loans and didn't know anyone who did, so I just kept muddling along.
At that time, if someone had told me that real estate was going to be my life, my passion, and the way I would create my wealth, I don't know whether I would have laughed or cried. The only thing I really understood about real estate is that you could borrow against it, and that I did. I initially came up with about $4,000 (I paid my client back over a year) and 6 years later I sold and walked away with about $600. I was lucky to get that much.
With my next house, I assumed a loan and came up with just a little down, which is about all I had, and at that point I decided to start learning something about real estate.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.