Charlie dreamed of a new home: vaulted ceilings, marble countertops, and exquisite shrubberies surrounding the property. But when he sat down with the realtor and heard terms like “escrow,” “PMI,” and “amortization,” he woke up. He realized that buying a home wasn’t just about finding the right place—it was about understanding the financial roadmap to get there.
Charlie got to work. He opted for additional hours at work to improve his savings rate and began mapping out terms and requirements to ensure a path forward.
“Bigger is always better,” he wrote initially and voiced to himself. “If I can have a home with plenty of room, it will be something for my family to enjoy, and something to be proud of.”
After defining his goal, he researched to define other terms he should be aware of.
“Interest rate,” he scrawled on his notepaper and spoke aloud. “The cost of borrowing. Even a small difference can mean thousands over time. Rates can be fixed or variable, and they’re influenced by my credit score, loan type, and market conditions.”
“Principal versus interest,” he quizzed himself. “Principal reduces my loan balance. Interest is the lender’s fee. Early on, most of my payment goes to interest. Over time, more goes to principal. This process is called amortization.”
“Equity,” he thought aloud while writing. “The part of my home I truly own. If my home is worth $250,000 and I owe $200,000, I have $50,000 in equity.” He made a note to avoid being “upside down”—owing more than the home is worth. If the value dropped to $150,000, I’d still owe $200,000. Selling wouldn’t even cover the debt.
“PMI,” he carefully penned. “Private Mortgage Insurance. If my initial down payment is under 20%, I pay extra each month—not for me, but to protect the lender.”
“Escrow,” he narrated as he wrote. “A holding account for home-related expenses. At first, it might cover appraisal fees or earnest money. Later, it pays property taxes and insurance—rolled into my monthly mortgage payment.”
Charlie hadn’t used credit before, so he had no score. He signed up for a credit card, paid it off monthly, and slowly built his credit. After nearly a year, he had an acceptable score and enough savings for a sizable down payment. The mortgage company would have allowed him to borrow a lot more, but he signed up for a mortgage where the payment was under a quarter of his income. This allowed for a modest house where is his monthly payments in the future would be manageable. Charlie celebrated but continued to work hard.
Charlie was happy in his modest home, but he remembered his goal for a large dream house. He wrote on the top of his notepaper that owning his dream home will be worth whatever steps it takes to get there financially. After that, he could enjoy a well-deserved relaxation.
Along the way, he got married, had kids, and at long last upgraded to his dream house.
Charlie reflected. He appreciated the home, the stability, and especially the shrubbery. But he thought about the sacrifice it took to get there. He remembered watching his son throw his first pitch—but also the baseball games he missed when he was busy with work. He remembered the princess games he played with his daughter—but also the heart-to-heart conversations he couldn’t be there for when her dog passed away. They grew too fast.
The house two doors down was for sale. A young couple was considering moving in. They had a baby on the way, and they had plans and dreams of their own. Charlie welcomed them warmly. He was eager to pass down his insights through his hard-earned roadmap. But before handing them his list, he paused. He wanted the best for this young family, and their lives as they made memories together. He wanted them to learn not only from his successes but also his regrets.
He crossed out his note on the top of the sheet about bigger is better and made one final entry.
Time. He wrote slowly.
Time waits for no one.
At Covenant Financial,
Our mission is to inspire people with confidence for their future, empowering them to enjoy today’s moments.
Our vision is to see people discover harmony in life by balancing faith, family, and finances in perfect rhythm.
Our purpose is to equip individuals and families with a clear financial plan while providing unwavering support on their journey.
It’s time to schedule your consultation at no cost so we can walk beside you in discovering harmony in your faith, family, and finances.