Let me guess what’s going through your head when you think about writing your rent check. You’re sick and tired of helping pay off your landlords mortgage, right? But is it a good time to buy a Los Angeles house and can you even afford it? In this article we’re going to look at: Can I afford a Los Angeles house? And weigh the pros and cons of L.A. home ownership VS paying the landlord for shelter.
“Should I buy a home or not?”
You most likely have two hesitations: time and money. The first questions you should ask yourself is if you understand how much it costs to buy a house including down payment, taxes, insurance, closing fees, and some kind of reserves stuffed away under your mattress for future unforeseen maintenance & repairs. Most of my buyer clients search for homes on Trulia or Zillow and see the payment amount next to the property pictures and get that magic number stuck in their minds. That number is figured on a conventional loan with 20% down and doesn’t include taxes and insurance witch typically is bundled with your mortgage payment to help make your life easier, but adds up to hundreds if not thousands of dollars difference in mortgage payments. These questions answered by a local mortgage broker who understands the Los Angeles market would be a smart first step in deciding if it makes sense to buy or rent a home.
“I can afford a house but is now the time to buy? I heard home prices are climbing.”
The short answer is yes they’re climbing. If you can afford to buy and plan on sticking around Los Angeles for an indefinite amount of time than buying might be smart for you. Home prices in Los Angeles, specifically the Eastside, have been steadily climbing between 9%-12% since last year.
“I don’t have a 20% down payment. Is that okay?”
Yes and no. What do you consider okay and the next person’s opinion is subjective. If you don’t have 20% of the purchase price as a down payment you’ll find yourself in a position of needing mortgage insurance (PMI) which can be a very expensive proposition. As an example, if you get an FHA loan the government requires two different mortgage insurance premiums – isn’t that nice? You’ll pay upfront 1.75% of the loan amount and that’s not all. You’ll also be responsible for paying another premium annually of 1.3% of you put at least 5% of the purchase price as a down payment. So it can be a large chunk of change to not have a large chunk of change as a down payment. Make sense?
“What happens if I move?”
Los Angeles is a massive city with plenty of people motivated to buy and sell real estate anytime of the year. If your boss offers you a promotion in San Francisco or your spouse spontaneously has an urge to live in Miami Beach, FL – are you comfortable holding your Los Angeles property as an investment? You could hire a management company or have a trusted friend be responsible for the property while you sit back collecting the rent. It’s a comforting feeling to have someone else paying your mortgage isn’t it? Or you could always hire a local real estate expert to help you get top dollar for the property.
Your Los Angeles Real Estate Expert
This article, Can I afford a Los Angeles house?, was provided by Glenn Shelhamer of The Shelhamer Real Estate Group. If you are selling your Los Angeles home, I have a comprehensive marketing plan, including preparing your Los Angeles home properly that will help get your home sold in less time and for more money. Call me at 310-913-9477 or contact me to discuss how I will get your home sold.
Illustration courtesy of cartoonimpact.com