Buying a Home in My 20s Was a Financial Disaster—Here's How I Recovered

Like a lot of Americans, I was raised with the idea that buying a house was essential, and renting was throwing my money away. But my first shot at homeownership tanked my credit score and set my finances back for years. 

Thankfully, this story has a happy ending. I got out from under my home purchase, rebuilt my credit, and became a homeowner later, under much better financial circumstances. 

Here’s how it all went sideways for me that first time, and how I recovered from this major financial misstep. 

Buying a Home Isn’t Always the Right Call 

Here’s why it was wrong for me. 

My career wasn’t suited to owning a house

My misadventure with homeownership started over 15 years ago. I was in my 20s and just getting established in my career, which didn’t come with a high salary. Remote work was not a possibility for what I did.

My then-spouse and I had moved 1,000 miles for my first paying role in the field less than 18 months before buying a house. Looking back, it was obvious that I would have to move again soon for a new job, making renting much smarter for me. I ended up getting laid off from that job just two years after moving into the house, and had no job prospects in that city. 

I was broke

I had no savings to speak of and I lived paycheck-to-paycheck, with student loan debt and a car to pay off. Family members encouraged me to buy, and were willing to give me the down payment for an FHA mortgage. But once I had the house, I was responsible for anything and everything that could happen. 

I was fortunate that in the time I owned it, I didn’t need to make big repairs to the house. I would have needed to borrow money to cover them, and then have to fit more loan payments into my budget. Getting a mortgage without savings is a big home-buying mistake.

I risked my credit 

My credit was better than my spouse’s, so we decided that the mortgage would be just in my name, and he would be on the deed. This turned out to be a huge problem when we split up two years after I bought the house. 

I moved out, and he was supposed to continue paying the mortgage, since he wanted to stay. But because the house was in my name, it was my credit that suffered when he racked up more than $30,000 in delinquent mortgage payments before finally moving out. 

Related: Divorce and Debt Relief

Getting Out From Under a Mortgage

Consider buying a home only if you intend to stay for at least five years. That’s because of the cost of the loan. There are lender fees and other closing costs. If you sell soon after you buy, you could lose money on the deal. The home might not have gained enough value to make up for the cost to buy and sell it. 

I only lived in mine for two years, and it took me more than three years after I moved out to finally get rid of it. I asked my mortgage servicer for what’s called a short sale. Much like going through a debt settlement program, a short sale could set you free from a debt. In a short sale, the mortgage lender agrees to sell the home for less than the amount you still owe on the mortgage. Your lender has to agree to the deal, and it can take longer than a traditional sale. Then, some lenders agree to forgive the remaining balance. Others require you to repay it.

A short sale is catastrophic for your credit—it’s better than foreclosure, but it remains on your credit report for seven years from the sale (or your first late or missed payment, if you had any before the sale). 

3 Moves I Made to Financially Recover from Homeownership

Here’s how I got my finances back on track after the short sale.

1. I committed to on-time payments 

My credit was on the low side after all was said and done, and I needed to rebuild. Payment history is the biggest part of a credit score, and that was something I could directly control. 

So I decided that I wasn’t going to make a late payment on a credit account again if I could help it. It’s been almost 10 years since my short sale, and I haven’t paid a loan or credit card late since.

2. I kept renting 

I kept moving for work after I left that house, and in every new city and state I lived in, I signed leases on apartments or rental houses. I wasn’t going to make the mistake of buying again with a career in constant flux.

3. I learned a lot more about money management 

Five years after my short sale, I became a personal finance writer and editor. This meant learning much more about how to manage my finances, save money, and evaluate whether buying a home was a good decision for me. 

Looking back, I cringe to think about how much I didn’t know. I assumed that if I could afford mortgage payments, it meant I could afford to be a homeowner. I didn’t know how expensive owning a home really is.

But I try to give myself grace. We don’t know what we don’t know, and it’s never too late to learn more about budgeting, choosing the right bank account, investing, and buying a home. 

My Happy Ending Came with a House

I became a homeowner again last year, all on my own. I now have a firmer grasp of what owning a house involves. I work remotely (and hope to never move for a job again), and I have an emergency fund. 

If you’re struggling with debt or other money issues, don’t lose hope. Explore your options for debt help, which might include credit counseling, debt settlement, or bankruptcy. If you’re rebuilding your credit in the wake of a big financial misstep, focus on making on-time payments and using credit sparingly. Remember, a journey of a thousand miles begins with a single step.