How Much It Cost to Buy Our First Home in Southern California

by Erika Torres

first time homebuyersI know whenever I read about other bloggers buying homes, I want to know the financials.

It helps me better understand and see how much different the home buying landscape is in other states.

I will say that our area–Southern California– is still a very strong sellers’ market. I wish that Eric and I had been able to buy back in 2010 when the prices dipped for the first time in like 20 years, but alas, we had just gotten married and were $45K in debt.

Even now, it is completely crazy to me that Eric and I decided to buy a home. It was not our plan at all to buy right now, but when do things ever go according to plan?

Originally, we thought we would sit tight, keep saving money, and start looking next year, but when you find a house you love…

I honestly don’t know if we would ever feel financially secure enough to buy a house. It is just such a big investment—both financially and emotionally. And frankly, I hope every person that signs into a half-a-million-dollar contract has at least some hesitation.

The Cost of Buying a Home in Southern California

We ended up going with a full-price offer of $559,000 for a two-bed, two-bath on a 5,500 sq.ft. lot in a desirable neighborhood.

We received $6,000 in credits from the seller, plus an additional $2,000 credit from the lender.

Essentially, this is what we paid:

House Inspection Fee: $350
Appraisal: $475
Wire Fee: $25
10% Down Payment and Closing Costs: $55,425

Total: $56,275

And we did it all on our own!

I can’t tell you how badly Eric and I considered withdrawing all those funds from the bank and doing this with it:



But we just didn’t have time.. Those damn loan officers were on us like white on rice. One day…

While I don’t feel comfortable sharing the exact amount of our mortgage, I will say that it is less than the very first home we were looking at.

How Buying a Home Affected Our Finances

When we first decided to put an offer on a home, Eric and I were willing to go all in and put every last penny toward the house.

1) Luckily, we didn’t have to and 2) I am SO grateful that we didn’t have to!

Not only is buying a home expensive, but the process of moving and setting up house is expensive too.

Even if the house is move-in ready–which ours was–there are always a million little things you want to do to make it yours.

We’ve been living in the house about 18 days, and we’ve been to Home Depot about 15 times. We’ve paid for paint, painters, landscapers, curtains, a couple of pieces of furniture, house supplies…

I would say that you should always have at least about $5,000 extra laying around for all that miscellaneous house stuff. I feel lucky that we have managed incredibly well, that we never had to drain our savings accounts, and that we still have a comfortable amount of money in our savings account.

The Terms of our First-Time Home Buyer Loan

Because we had less than 20% for a down payment (and a lot of first-time home buyers in Southern California don’t have 20%), we had two options for loans:

  • Pay PMI of $398 per month, which will automatically drop off when we reach 20% equity (PMI cannot be written off in taxes)
  • Pay an extra .25% in interest over the life of the loan. This .25% can only be removed if you refinance. This interest is tax write-off.

We chose to go with the higher interest rate for the life of the loan. Any way you sliced it, this was the cheaper option.

The Benefits of Good Credit

Of course, Eric and I both received our credit scores during this process, and we were both in the excellent category. This helps us in a variety of ways.

  • The loan company actually ended up giving us a $2,000 credit because we turned out to be a much smaller risk than originally anticipated.
  • We qualified for the best rate available.
  • Having excellent credit scores and solid jobs made the loan process the easiest part!


Thought About Selling Your Property?

As much as you need to know the do’s and don’ts in buying a home, you must also take into consideration the things you need to know in case you think about selling it. A well-constructed grant deed that is customized according to your state and specific situation will give you confidence in the propertly you are selling. You need to manage and check that these requirements are prepared first before transferring it to another owner to manage the risk on your end.

I cannot emphasize enough how much having good credit helped. I am really proud of ourselves for how far we’ve come!


Cameon Knight January 2, 2015 - 6:42 pm

I always find it SO interesting to see different prices for real estate around the country. We bought a 3 bedroom 2 bath home three years ago (with an extra room for office) for $70,000. It needed some cosmetic stuff done but we’ve been able to do those things ourselves. Homes like ours still go for $200,000 in our area in Alabama. I could not imagine taking out that much money! Whooo!

Jayson @ Monster Piggy Bank December 29, 2014 - 3:23 am

Well-planned! Been wanting to live in SoCal because I am a fan of sports network like Fox Sports net and of entertainment. It feels everything I need is there! Yay! Kudos for pulling it off. Enjoy!

Alexis December 23, 2014 - 2:12 pm

I am so jealous! I recently went visited southern California and had an amazing time. I couldn’t find one area that wasn’t amazingly beautiful.

Cindy December 21, 2014 - 9:06 am

You’re so right about keeping a good chunk of money when buying a house, 5000$ feels about right. We got our house last year and it was life-saving to have money on hand for all those trips to Home Depot, Rona and Ikea. We had all kinds of little things to fix and those can add up pretty fast.

Reply December 18, 2014 - 2:12 pm

This is fantastic! Yup, also went with the slightly higher interest rate for the life of the loan, but this can be dealt with by making additional payments towards principal (but not at the expense of other higher-payoff investing/saving). The monthly payment still intimidates me, as does the overall balance, but it’s manageable. I think my goal for next year is increase income to the point where mortgage payment is less than 15% of just my gross income (not both of us). Excited to see the discussion of the master suite addition!

SavvyFinancialLatina December 17, 2014 - 8:19 pm

Congratulations on your new home!!!!! It’s such an exciting period 🙂 Can’t wait to read more.

C@thesingledollar December 17, 2014 - 3:23 pm

Wow, that is incredibly impressive — I’m a little familiar with the SoCal market, as one of my dreams is to move to LA (friends/family) and I’m pretty sure I could basically never, ever afford to buy there. Many congratulations!

Kait December 16, 2014 - 9:38 pm

Wow – I’m certainly impressed that you guys were able to save enough to buy a home in southern California! I live in Los Angeles right now and the thought of us buying a home here anytime soon is a laughable dream at this point 🙂

I am a relatively new reader, so I apologize if you’ve already discussed this in past posts that I have yet to read, but I am curious about how you organized your savings – did you guys opt for a separate “home” savings account? Curious to hear your strategy! Thank you!

newlywedsonabudget December 17, 2014 - 9:43 am

Hi Kait, welcome!
Yes, we have about six or seven different savings accounts to help us meet various goals. For example, for 2015 our savings goals are: master suite addition, car down payment fund, Christmas fund ($50 per paycheck), Roth IRA fund, vacation fund, emergency fund..
We have monthly savings goals for each fund, and we place them in order of importance. So each month we have to save THIS amount of money for each account, but let’s say we don’t make enough in extra income to cover all of them, then the ones at the bottom of the list (like vacation fund) don’t make their savings goals that month. We find that this strategy works best for us bc we can save for lots of goals at the same time rather than having one giant pot. We use Capital One 360 to have all these savings accounts and it works really well because a) they offer higher interest and b) the accounts aren’t connected to our main checking account so it’s that whole out of sight, out of mind that makes it a lot easier to save when you don’t have easy access to it. If you’d like to sign up for Capital One, let me know bc I have a bonus offer (affiliate link)!

Jessica December 16, 2014 - 4:04 pm

Congratulations! Owning a home in So. Cal. is definitely an achievement to be proud of!

My husband and I are working on paying off debt and saving to buy a home in LA. The prices seem overwhelming sometimes. It’s motivating to see someone achieving their dream of home ownership and not ruining their finances in the process!

Reply December 16, 2014 - 9:28 am

That is AMAZING friend!! that you were able to put that much down and had such great credit, no surprise there. Congrats again!!

Reply December 16, 2014 - 5:24 am

Great job on your new home purchase! Good job putting down 10% too- that’s no small feat in an area with pricey housing!

the Roamer December 15, 2014 - 3:17 pm

That is great advice about not losing all your cash cushion.

Still that is a huge loan. Expected of California of course.
How comfortable are the monthly payments going to be? I’m sure its more then the monthly payment at the town house. Also I don’t remember where you renting the town house or do you have to sell that soon

newlywedsonabudget December 15, 2014 - 3:45 pm

Thankfully we’ll be managing just fine, but I will go into detail on Wednesday about how our mortgage is affecting our budget.

We were renting the townhouse before

Tonya@Budget and the Beach December 15, 2014 - 11:51 am

Congrats once again! Not an easy thing to do in Socal!

Michelle December 15, 2014 - 8:40 am

Loved reading this post. Again, I am so happy that you found your dream house! We are currently saving for our home down payment for our next house and it’s going to hurt to pay so much for our next house when our current one is so cheap. I need to prepare for it! 🙂

CECE December 15, 2014 - 8:40 am

It sounds like even though you didn’t plan on it right then you were so far into planning FOR IT that when you found something you were in a good position to jump on it. That is awesome. A friend of mine recently bought a house and she mentioned that PMI NEVER going away is a new thing now. I don’t know if it just depends on your credit history or what but for her loan it never goes away until she re-finances which I had never heard of. The additional .25 interest sounds better to me because PMI just sounds like something extra and you have to pay interest anyway. It is definitely a good idea to have savings for miscellaneous because once you buy the house and pay for a move you still need money for other things and it can be stressful dealing with it all at once.

Kim December 15, 2014 - 7:11 am

I think we put down about 5% when we purchased our house 2.5 years ago. I found we needed just about that same amount to furnish the house. We were moving from a one bedroom condo to a three bedroom, three story house. We bought the big furniture pretty quick, but the little stuff, like side tables, lamps, curtains (we had decent blinds on every window, so it wasn’t a privacy concern) we took our time on. Even 2.5 years in the house, I still haven’t done all of the painting I want to, I haven’t even thought about colors aside from “Not what it currently is”.

Congrats on your house!!! It’s such a huge step, but so very exciting.

Reply December 15, 2014 - 4:58 am

Nicely done! I totally agree with you on not spending every last penny on buying a house. We kept a nice cushion when we bought our house two years ago and I’m so glad we did. Life still happens even though you bought a place and it’s never wise to skate too close to that $0 line. Congrats on your new home!!


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