Becoming a First-Time Homebuyer

Home ownership isn’t right for everyone, but it can be a great investment and provide a huge sense of satisfaction. Before you cross home ownership off your list because you don’t think you can afford it, let me tell you what it takes.

The median house price in the Ukiah Valley is about $425,000. Since you probably don’t have that kind of cash lying around, you’ll need a home loan . The good news is that many first-time-homebuyer loan programs require little or no money for a down payment, making this whole adventure a lot more doable.

In recent weeks, the annual percentage rate for a 30-year, fixed-rate mortgage with little or no money down has been in the neighborhood of 6 percent. That means, you’ll need about $3,000 a month to pay the principal, interest, taxes, homeowner’s insurance, and mortgage insurance. You’ll also need an additional $500 a month for home repairs and upkeep.

That additional $500 a month should go into a savings account each month and only be used for the inevitable expenses that come with home ownership. At some point, you’ll need to paint your home inside and out, patch the roof, replace the water heater, and buy new appliances. You’ll need to replace carpeting, fix windows, and if you have children, you’ll have reupholster your favorite easy chair to get rid of the Silly Putty. If you’re lucky, these repairs won’t all be necessary at once, but I can guarantee they’re coming eventually.

So how much income do you need to earn to be able to buy a median-priced house? Your total household income needs to be about $100,000 a year. If both contributors make the same amount, they each need to be employed full time making about $25 per hour.

And as you might imagine, reportable income is not the only requirement to get a loan. You need good credit (a credit score in the mid 600s) and job stability. Lenders want to do everything possible to assure that you can make your monthly payments, now and in the future.

To rent this same house, rather than spending $2800-3500 per month, you would pay closer to $1500-1700 per month. Of course, once that $1500 is spent, it’s gone. You are not building any equity. So although renting is a bargain, keep in mind there are more issues to consider than just the monthly cost. During the last 50 years, home ownership has created more wealth in the U.S. than any other investment.

And owning your own home has benefits that go beyond financial. Pounding a nail wherever you want doesn’t require anyone else’s permission. You can replace the lawn with a vegetable garden or rip out ugly bushes for an unobstructed view of your kids playing in the yard. You can allow your teen to paint her bedroom purple, knowing you can paint over it when she heads off to college. And your elbow grease benefits YOU.

When you rent, your home can be sold out from under you at any time, forcing you to find a new place to live in a market with very few homes available. For many, the tradeoffs make home ownership worth the expense. If you think you might be able to purchase a home, and you’d like to learn more, call your local Realtor and they can help you figure it out.

Before I go, I wanted to mention an issue facing local homeowners and renters alike. The water in our region depends in large part on the Potter Valley Water Project. PG&E has owned the hydroelectric project for years, but it looks like they’re selling. If the future owners are not good stewards, the water that irrigates our crops and provides our drinking water could be at risk from Potter Valley to Healdsburg. Visit to learn more.

If you have questions about real estate or property management, please contact me at or call (707) 462-4000. If you’d like to read previous articles, visit my blog at Dick Selzer is a real estate broker who has been in the business for more than 40 years.

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