How this millennial couple fixed their credit and bought their first home

• The median sales price of an existing single-family home rose to $364,300 in December 2021, up 16% from the same month a year earlier, according to the National Association of Realtors.
• Making monthly payments on or before time and keeping your revolving credit balances under 30% can improve your credit score.
• Shopping around with a few mortgage brokers and obtaining pre-approval from lenders can strengthen the bid on a home

This story is part of a regular series that examines the challenges Americans face as they try to buy starter homes.

Yesenia Martinez is the first to admit she’s the spender in her family.

When Martinez decided to buy her first home in the New York suburbs, the 32-year-old knew she’d have to mend her ways.

“My husband's more of the saver,” said Martinez, an elementary school teacher from the Bronx. “So I had to negotiate my plans with him, work as a team, and really get my credit in order.”

Martinez’s credit score always lingered in the 500-range, thanks to about $100,000 in debt accumulated obtaining her undergraduate and master's degrees. Credit scores range between 300-and 850 – and scores above 700 are generally considered good.

She also had five credits cards with a combined $16,000 balance. Her husband, Andrew Graham, 34, a correction officer at the Rikers Island prison complex, on the other hand, had always had “phenomenal” credit, she says.

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“As I was going through school and working lower-paying teaching jobs, I would supplement my income by using my credit cards,” she says.

The median sales price of an existing single-family home rose to $364,300 in December 2021, up 16% from the same month a year earlier, according to the National Association of Realtors. Last summer, in the middle of a red-hot pandemic market, the couple managed to get their credit in order and buy their first entry-level home.

How did they do it?

Martinez says her first order of business was to get a credit report through TransUnion, one of the three credit bureaus. She also picked up strategies through one of the company’s credit advisers to improve her score, such as making her monthly payments on or before time and keeping her revolving credit balances under 30%.

In March 2020, when the fast-spreading coronavirus pandemic shut down schools, the family's one-bedroom apartment felt tight and the need to find more space felt urgent.

The living room held two workspaces: an online teaching area for her, and across the room, a space where her 10-year-old daughter, Nyla, would attend remote school.

“It was so hard. We had the same hours and would be talking at the same time,” she says. “Her teacher's voice coming over into my speakers and my kids could hear that.”

But there also was a silver lining to the lockdown – it forced her to save.

“We were not spending money outside. I was cooking at home and everything was taking place at home,” she says. “No more happy hours at bars and hanging out with friends, no salons. It was none of that anymore.”

The silver lining

One year later, she reduced her credit card debt from $16,000 to $3,000. She and her husband also boosted their saving, amassing $80,000. The pause on the student loan repayment, in place from the beginning of the pandemic, was particularly helpful, she says.

Her score climbed up to 700.

“My husband pretty had been saving on his own for the last five years while I was clearing up my debt,” she says. “Before we started looking for a home, he wanted to make sure we were fully aligned.”

After shopping around for the best mortgage rates, the couple obtained a mortgage pre-approval to strengthen their chances in the intensely competitive pandemic housing market.

Prepared for the hunt

Real estate agent Claudia Barnes, who helped the couple find a home, says she wishes every potential homeowner would come as prepared.

“They did their due diligence. They were very open to suggestions. They asked questions and listened to everything,” she says. “It was a very aggressive market and so they lost out a couple of bids but they were successful in buying a home in four months.”

A starter home in New City, a suburb 37 miles north of New York City, costs a little more than $500,000. The couple, who have a combined income of $190,000, wanted to stay under $600,000. 

“They didn’t want to be house poor. They were very realistic and willing to make compromises,” she says. “They understood this didn’t have to be their forever home.”

After losing three bids, the couple offered $35,000 over an asking price of $525,000 for a 2,000-square-foot home. While they could have applied for an FHA loan for first-time homebuyers, they decided to go for a conventional loan.

“We felt conventional loans would be seen more favorably in this competitive market,” says Martinez. "We are a growing family and we wanted a great school district. So we did our research and knew that's what we wanted."

The couple put down $60,000 and locked in a 2.7% mortgage rate for a 30-year loan. They closed last summer on their three-bedroom house.

Martinez says the couple is creating a budget that will allow them to keep their debt low even with the new mortgage.

"We have a $3,600 mortgage payment per month so that's something that we need to focus on," she says. "So we really prioritize those bills."

Barnes says even in this competitive market, potential entry-level homebuyers can be successful if they are diligent and disciplined.

“I always said to them, if I could, I would put them on a poster and tell everyone to just mimic what this couple did,” she says.

Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY.  You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here