We Live In An $87,700 Home, But We’re Approved For $850,000

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Today I have an incredibly inspiring post from Katelyn, a 26 year old who is one of my new favorite personal finance bloggers. Katelyn bought her first rental property at 19. She side hustled, budgeted, and paid off her rental property at 23. You can read more of her story on her blog at Hey You Finance.

In today’s post, she’s sharing:

  • Why she bought a house for $87,000 instead of a lot more
  • Tips for house buying and saving money
  • How many rental properties she has now (hint, more than one!)
  • If she’s still living in her $87,000 home

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We live in an $87,700 home, but we’re approved for $850,000. 

You must think we’re crazy, right? We’re not – at least I don’t think so! 

Let me explain the reasoning behind our low-cost of living and how it is setting us up for the future. 

First, a brief introduction. 

I’m Katelyn. I followed sort of an “untraditional” path after high school. 

Instead of enrolling in a 4-year program at a university an hour or so away, I chose to attend a local community college. My parents allowed me to continue living at home with them during this time. 

I took night and online classes in order to work full time during the day. With the savings I had from living at home and working full time, I was able to purchase my first rental property at 19. 

Read that full story here – How To Follow Your Own Financial Path: This Is How I Bought My First Rental Property At 19. *Spoiler Alert* With a few side hustles and a lot of hard work, I was able to pay off the property when I was 23.    

I’ll turn 26 in a few months. I could freak out about officially being closer to 30 than I am to 20, but my husband is 33 years old – so I always have him to keep me humble! 

We had been dating for almost a year when I started my house hunting journey. Things were going great, but it wasn’t quite serious enough to start talking houses together. 

While we’re from the same hometown, he was living about 3 hours away in a different city at the time and not quite ready to make the move back home. 

I consulted with him on different houses knowing that it could maybe impact him one day if things worked out, but it was ultimately my decision. It didn’t take too long before I found a house that I liked and I put in a full price offer. 

You’re probably thinking this was for $87,700, right? Nope. This was a different house. 

The sellers were asking almost $265,000. 

I was stretching myself pretty thin financially with this offer, but I was ready to have my own place! 

I anxiously awaited to hear if they were going to accept it or not…… and they didn’t. Instead, they went with an offer well above asking. One that I shouldn’t have, probably couldn’t have, competed with. 

What I thought was unfortunate at the time turned out to be the biggest blessing in disguise because it wasn’t but a few months later that the cutest little home came on the market for $87,700. 

This time when I put in a full price offer, they accepted! 

Yes! I purchased my first house for $87,700 right before I turned 23. 

For reference, the average sale price of a home in our area is around $200,000. 

I loved this house. Remember when I said I liked the $265,000 home? This one I loved. Technically still love, present tense, because we’re still living here! But anyway… 

The thing that I loved most about it was the purchase price itself. The price was less than a third of the home I almost bought. 

Not only was the purchase price of the home significantly less, but so was the insurance, utilities, property tax, and general upkeep as well. 

Alexis at Fitnancials has a great post that explains just how impactful a home’s size can be: How Much House Should I Buy? Pros And Cons Of Large Vs. Small Houses

My mortgage payment was almost less than half of one week’s pay! I still had so much discretionary income left over to allocate any way that I wanted. This was a lifesaver because as a new homeowner, I had so many things to buy.

I needed dishes, couches, a washer, a dryer, a kitchen table. The list goes on and on. I also wanted to buy a bit of cute décor, of course. 

While I’m typically a major saver, I didn’t mind the cost of turning my first house into a home. I could buy a few things here and there and I was still able to easily afford living on my own. 

After I had finished purchasing things to furnish the home, I began allocating additional money towards the principal loan balance of the house to pay the mortgage off early. I used an amortization schedule to track my progress. 

Read more on the benefit of using an amortization schedule here: How To Pay Your House Off Early and Save Money In The Process

I was able to live comfortably because of the low-cost purchase of the home. 

My then boyfriend, now husband, and I were still going strong, and he was super supportive throughout the entire process. He moved back to our hometown about a year after I bought the house. Instead of looking for his own place, he moved in with me. 

Over the next few months, we started talking about our future. We began discussing what our “forever home” might look like. 

Our humble $87,700 abode was just fine for the two of us, but with 2 bedrooms and 1 bath, we knew that we’d eventually like more space. 

We decided that we might want to build our dream home one day, so we purchased a vacant lot. 

Not long after this purchase, we were engaged! It was something that we had been talking about for a while. He popped the question on the newly purchased lot – the location of our future home! 

We worked on the building plans for our new construction home over the next few months. We had a number in mind that we were comfortable spending that was well below the amount that the bank pre-approved us for. 

We had decided to go ahead through the pre-approval process before we bought the lot. 

We were pre-approved for $850,000. 

That was almost TEN TIMES the cost of our current house. 

We’re just your middle-income couple earning an average wage. He’s an engineer. I’m a staff accountant. This was WAY more than we ever expected to be approved for. 

We manage our finances well by paying off debt and never carrying a credit card balance. We also both have credit scores over 750. 

We live well below our means so that we are able to save and invest aggressively. 

Our retirement and other investment accounts are funded heavily. Our low-cost home is paid for in full.

We have an additional revenue stream of rental income coming in each month from a paid for property. In addition to our housing expenses being extremely affordable, we also drive used, paid for vehicles and live a rather modest lifestyle. 

We are saving the majority of what we make in order to work towards a life of financial freedom. 

This pre-approval was nearly two years ago…. and we’re still living in our $87,700 home. 

We could’ve bought any house in our town that was on the market. We could’ve built our dream home as that price came in well under $850k. 

Why didn’t we?! 

The bank may have pre-approved us for $850k, but there was NO way that we could actually afford a home of that stature. 

The upkeep on a home of that price, the utilities, the insurance, and the property tax would have drained us. This would have left us with very little wiggle room to pay for any financial curveballs such as car or medical expenses, or even future children. 

We would have had to dip into our long-term investments, which is not the point of long-term investments. 

Just because the bank pre-approves you for an amount does NOT mean that this is the amount that you should spend. 

The bank does not know what your long-term financial goals might be or how you prefer to allocate your money. 

It is up to you, as the borrower, to do your own due diligence into analyzing your financial state and deciding what YOU feel best fits into your budget. 

Truth be told – the cost to build our dream home exceeded the cost of what we felt comfortable spending. 

We made the responsible – some may say boring – decision to put that plan on hold. 

On paper, we could’ve done it. The bank would’ve lent us the money. However, we knew that that was not the best route for us to pursue financially. 

We had worked too hard accumulating savings and diversifying our portfolio to turn around and be locked into a mortgage that would force us to live paycheck to paycheck. 

What’s our plan now? 

We’ve looked at multiple houses that have come on the market. We’ve even put offers in on a few. 

For now, we find ourselves still living simply in our $87,700 home. Purchasing a house is a big commitment. One that shouldn’t be taken lightly. 

We have our hearts set on building our dream home, one day, when we’re ready. 

This process is called delayed gratification. It’s essentially the concept of having the financial discipline to avoid buying something impulsively and instead postponing the purchase in hopes of a more valuable, long-term reward. 

In our situation particularly, living in our low-cost home allows us to continue saving aggressively. 

These extra dollars we are accumulating can be allocated towards our future down payment, which will lessen our monthly mortgage. 

For example, borrowing $400,000 instead of $500,000 over 30 years at 3.5% will reduce a monthly mortgage payment by about $450! This would save almost $62,000 in interest over the lifetime of the loan as well. 

These are impactful numbers.

We recently purchased our third rental property, something that wouldn’t have been doable if our funds were maxed out in a big home mortgage. 

Living well below our means now is allowing us to build a healthy nest egg for ourselves and our future family. 

Yes, we live in an $87,700 home, but we’re approved for $850,000. 

This happened somewhat by accident in the fact that the first home I put an offer on for almost $265,000 fell through. Then when wanting to build, building prices came back higher than expected. 

Although it wasn’t the original plan, the path that we’re on now has us headed towards a life of financial freedom and we wouldn’t have it any other way!

Author bio: “Hey, I’m Katelyn! Numbers nerd turned personal finance blogger. My hobbies include detailed budgeting, balancing my checkbook, and investing in real estate. (I wasn’t kidding when I said nerd, ha!) At Hey You Finance we aim to help you maximize your financial potential by encouraging diversified income, budgeting, investing, and managing your debt wisely! The backbone of financial success is knowing where your money is coming from and, more importantly, where it is going.”

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