Understanding the Homebuyers

Here are key details about Sam and his wife, Julia:

• Age: Sam – 32 years; Julia – 31 years
• Location: Cincinnati, OH
• Relationship: Married couple
• Occupation/Annual Salary: Youth pastor earning $55,000; Graphic designer earning $60,000

Examining the Costs of Home Acquisition

Sam has provided a detailed breakdown of the expenses incurred while acquiring their first home:

• Purchase price of the home: $158,000
• Down payment made: $4,700
• Closing expenses: $4,400 (of which $3,500 was covered by the seller)
• Reserves saved: $20,000 (including funds for emergencies and renovations)
• Moving costs: $114 (for U-Haul and supplies)
• Monthly mortgage payment: $944
• Insurance and tax expenses: $243
• Total monthly obligations: $1,187
• Loan term: 30 years
• Interest rate applied: 6.25%

Below is the conversation with Sam, detailing his journey through the home-buying landscape.

Establishing a Budget: Their Strategy

After two years of renting, the couple sought a more secure living situation due to rising rental costs. Given that my wife might transition to part-time employment as they prepare to start a family, we focused on my income and aimed to remain within 30% of my salary as a guideline. This led us to a maximum home price of approximately $180,000.

Essential Insights About Mortgages for First-Time Buyers

Be sure to explore various lenders and options. This will likely be one of the most significant financial commitments you’ll make, so it’s crucial to secure the most favorable terms. Remember, even if shopping around impacts your credit score slightly, the long-term benefits are worth it.

Don’t overlook local credit unions! They offered us a rate that was 0.5% lower than the national lenders, saving us $200-300 monthly. Their PMI was reasonable at $31 per month since we couldn’t afford a 20% down payment. Credit unions typically retain your mortgage instead of selling it off, which can make for a more personalized experience. We even opened a Health Savings Account with them due to their exceptional service.

Percentage of Income Allocated to Mortgage Payments

Currently, our mortgage payments account for 15% of our combined income. We acknowledge that this figure might change as time goes on.

Unexpected Financial Surprises

Throughout the purchase process, several unexpected expenses arose. We needed to entirely update the home’s electrical system, an issue we were aware of beforehand. My father, a retired electrician, assisted us greatly, but we encountered one segment that required an additional $4,000 that he could not handle.

We opted for IKEA kitchen cabinets to manage costs, but when they arrived in 70 boxes—yes, 70—we realized we couldn’t assemble them ourselves in a timely manner. We contracted an installer for an extra $3,500. Although we had to take out another loan, the time and frustration saved were invaluable.

Reflections on Their Process

If given another opportunity, I would have explored various first-time buyer grants available in Ohio more thoroughly. During the financing stage, I felt too far along to assess these options thoroughly.

Advice for Aspiring Homeowners

Visualize what the property could become rather than how it currently appears. Old carpets can be replaced and floors can be refinished. With a willingness to learn from online resources and engage with local hardware stores, you can undertake many renovations yourself. I personally managed to install baseboards, remove a non-load-bearing wall (with friends’ assistance), and even replace a toilet!

Choosing the right real estate agent is crucial. Our purchase was heavily reliant on their expertise. In a competitive market, properties were listed and sold within mere days. We often contended with cash offers from investors. Despite writing personal letters to accompany our offers, the cash offers posed a substantial challenge. Fortunately, our agent successfully reached out to an investor who chose not to flip the house, allowing us to secure it at a reasonable price. They also negotiated several upgrades with the investor to save us time and effort.

A useful tip from our realtor: Create a prioritized list of repairs based on the home inspection report. This way, you’ll have a structured plan for home improvement projects over the coming years.

Timeline of the Home-Buying Experience

Our journey began with house hunting alongside our realtor in September 2023. After submitting a total of six offers, it proved challenging as several other properties received cash offers before we could compete. Ultimately, we finalized our purchase in January 2024.