Are you moving to Cleveland, OH and planning to buy a house? Are you already living in the area and ready to buy your first home? You’re probably already aware of Cleveland’s low home prices – but the city’s housing market is definitely heating up.
Cleveland was ranked the #5 top housing market to watch in 2022 by Forbes thanks to the booming Cleveland real estate market and home prices that remain affordable despite home prices increasing 19% year-over-year.
Ready to find out what you need to know about buying a house in Cleveland? This step-by-step guide will help you buy a home in Cleveland, set a realistic budget for a home you can afford, and give you crucial insight into the local real estate market.
How to Buy a House in Cleveland
Ready to learn about the process of buying a house in Cleveland? Here is a step-by-step guide that takes you through creating a home-buying budget, house-hunting tips, and what you can expect when you make an offer.
#1. Set a Realistic Budget
Before you even think about house hunting, make sure you know what you can afford to pay for a home and what you’ll get approved to borrow. To budget for buying a house in Cleveland, you can start with the 28/36 rule. This general guideline is used during mortgage qualification.
- Don’t exceed 28% of your gross income for housing costs including principal, interest, property taxes, and home insurance.
- Don’t exceed 36% of your gross income for total debt payments including your mortgage, car loans, and credit cards.
The median household income in Cleveland is $26,200. With this income, you want a monthly housing payment of $611 or less and total debt payments of $786 per month. That’s easily attainable with Cleveland’s cheap real estate and a modest down payment!
Remember that your mortgage payment isn’t the only expense you will have as a homeowner. Cleveland homeowners pay an average of $9,227 in hidden homeownership costs every year, right around the national average. That includes $6,550 in necessary expenses like utilities, taxes, and insurance and $2,700 in total maintenance costs. Make sure you budget for the following.
- Property taxes: Expect to pay between $1,500 and $4,000 per year in property taxes. Make sure you check the school district and tax rate in the neighborhood before you buy!
- Homeowner’s insurance. The average cost of homeowner’s insurance in Ohio is $1,100 per year.
- Maintenance & repairs. Budget about 1% of your home’s value for repairs and maintenance each year.
- Closing costs. Expect to pay 2-5% of the purchase price in closing costs.
There may be other costs you’ll want to consider. If you’re moving from an apartment into a home, expect higher utility bills. You may need to buy new furniture when you move, especially if it’s your first home or you’re moving into a large home. You may save money by buying used furniture in Cleveland. Don’t forget to consider moving costs too!
How much does it cost to buy a house in Cleveland, Ohio?
The Cleveland real estate market is very hot. In fall 2022, the median home price in Cleveland is $125,000. That’s up 19% year-over-year but almost one-third the U.S. median home price of $350,000!
Why are houses so cheap in Cleveland? One major reason is population trends. Cleveland’s population reached a peak of 914,000 in 1950 after 90 years of tremendous growth. Since then, its population has been on a decline, losing 23% of its population between 1970 and 1980 alone (750,000 to 573,000) when it dropped off the list of top 10 largest U.S. cities.
Today, the population is 385,000 and the homes built during its peak didn’t simply vanish. However, Cleveland is turning around its decline and many neighborhoods – especially downtown Cleveland – are now growing rapidly.
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Another factor holding down Cleveland home prices? High taxes. Cuyahoga County has the highest property taxes in Ohio which are already among the highest in the country! The median property tax bill in Cleveland is $1,500, but it’s as high as $3,900 in parts of the city served by Shaker Heights schools.
#2. Get Pre-Approved for a Mortgage
Once you have a good budget in mind, you can take the next step: getting pre-approved for a mortgage. This process is very similar to applying for a mortgage. You will need to submit a home loan application, have your credit checked, and provide extensive documentation regarding your assets, debts, and income.
Always take this step before house hunting! Your lender will give you a pre-approval with a loan limit to buy a house in Cleveland that demonstrates to sellers and their agents that you are a serious, qualified buyer.
What is needed to buy a house in Cleveland?
To get approved for a mortgage and buy a house, you will need to meet some basic requirements.
- Credit score of 620 or higher for most mortgage programs and lenders.
- Stable employment with the same employer for at least one year.
- Sufficient income to repay. You usually need a debt-to-income ratio of 36% or lower to afford your mortgage and get approved.
- Down payment. For most mortgages, you need a down payment, although some programs allow 100% financing and you can qualify for first-time homebuyer programs in Ohio that offer down payment assistance. Some loans require as little as 3.5% down.
- Cash reserves to cover your closing costs and other costs of buying a home.
- Proof funds for your closing costs and down payment are seasoned (have been in your account for at least 90 days) or sourced (the lender can see where they originated such as your paycheck).
- Gift letter if you are using gift money from a family member for your down payment.
#3. Hire a Buyer’s Agent
With a pre-approval in hand, you’re ready to hire a buyer’s agent to help you. A qualified real estate agent will represent you and protect your best interests while helping you through every step of buying a house in Cleveland. Here’s why you should work with a professional:
- The seller pays the buyer’s agent fees.
- Experienced agents are prepared to navigate potential hurdles with a proactive approach.
- Your agent can help you explore neighborhoods that fit your needs, give you honest advice about homes you see, and narrow down options to find the right house.
- Your agent will negotiate on your behalf and help you make the best offer.
Not sure where to start to get expert representation? Here’s what to look for when choosing a buyer’s agent.
#4. Go House Hunting in Cleveland
Finally, you’re ready for the best part of the process: house hunting. As excited as you may be to finally start looking at homes for sale, make sure you go into it with realistic expectations and a good idea of what you’re looking for.
Think about what’s most important to you and make lists of:
- Features you need
- Features you want
- Features you do not want
- Deal breakers
Every home you see should be compared to these lists. Why? Because it can be easy to fall in love with a home that, realistically, isn’t right for you. If you go into house-hunting with rose-tinted glasses, you may convince yourself to buy a beautiful home with a large yard and hardwood floors believing the long commute will be worth it. Of course, once you’ve been dealing with that 45-minute commute for a couple months, you may regret being swayed by your emotions.
Best neighborhoods to buy a house in Cleveland
What are the best places to buy a house in Cleveland? It depends on what you’re looking for! Your agent will be a great resource to recommend neighborhoods that fit your needs. To help your agent suggest the best neighborhoods, consider your priorities and what you are looking for. Here are some things you may want to assess in each neighborhood.
- What is the school district? What schools would your children attend?
- Does the area have a high crime rate?
- What will your commute look like?
- Is public transportation available and convenient?
- Does the street get a lot of traffic?
- What parks, shopping, entertainment, and places of worship are nearby?
- Do you see pride of ownership in the neighborhood with well-maintained homes and yards?
Here are some resources to help you find the best place to buy a house in Cleveland.
- Best neighborhoods in Cleveland
- Safest Cleveland neighborhoods
- Best suburbs of Cleveland
- Best school districts in Cuyahoga County
#5. Submit an Offer on a Home
Once you’ve found a home that seems perfect, you’re ready to make an offer! This is the most stressful part of buying a home, but your agent will be there to help you create the strongest offer based on market conditions and comparable sales.
Because the market is so competitive and inventory remains low, many buyers are encouraged to offer over asking price. It’s common for sellers to see 10 or more offers! While you may need to overcome the appraisal gap – such as putting an appraisal waiver in your offer – extremely low interest rates make up for paying a bit more, especially with Cleveland’s affordable housing.
Your real estate agent can help you review comparable home sales and prepare the strongest offer possible. Even though cash offers grab a seller’s attention, there may be ways to make your offer more competitive like an escalation clause. This allows you to increase your offer over asking price with a pre-determined cap to compete with other buyers.
After your offer is submitted, the seller may:
- Accept your offer as-is. When your offer is accepted, you will be under contract.
- Reject your offer. In this case, you can start searching again for a home.
- Make a counteroffer. They may request changes that you can accept, or you can make another counteroffer.
#6. Close on Your New Home!
Once the offer is accepted and the contract is signed, you will be officially under contract! It will take about 60 days to close. Before you can close and move into your new home, many things will need to happen. This includes the home inspection, appraisal, title search, meeting contingencies, and finalizing your mortgage.
Once all the escrow requirements are met, you will need to sign a lot of paperwork that officially transfers ownership of the home and the loan proceeds. You’ll also get the keys to your new home!
Cleveland First Time Homebuyer Programs – Down Payment Assistance & More
If you haven’t owned a home in the last three years, you are considered a first-time homebuyer. First-time homebuyers in Cleveland can qualify for programs that make homeownership even more affordable!
The Cuyahoga County Down Payment Assistance Program is designed for low to moderate-income buyers. You can receive down payment assistance of 10% the purchase price of a single-family home up to $14,900!
The BELIEVE mortgage is another great program if you’re buying a house in Cuyahoga County. You do not need to be a first-time homebuyer to qualify, although you must take first-time homebuyer classes. The program requires a down payment as low as 3% with no private mortgage insurance. It can be combined with the down payment assistance program above!
The Ohio Housing Finance Agency (OHFA) also offers first-time homebuyer programs in Cleveland. The Your Choice! Down Payment Assistance program offers 2.5% or 5% of the purchase price that can be used toward closing costs or your down payment.
Hopefully you feel more confident about beginning the home-buying process! Once you’re under contract on a home or you’re starting the house hunt, call Summit Moving & Storage to get help preparing for the next stage: moving into your new home!