So a little while ago, a girlfriend of mine from law school who recently moved here from the Midwest asked me “Are there any sneaky ways to buy a home in Los Angeles? Because we’ve been looking and it just seems impossible”.
We laughed but then I really started to think about it, and although it’s difficult to buy a home here it’s certainly possible. There are definitely some strategies and ideas I can share, I hope this is helpful to someone.
- Adjust Your Expectations. No you don’t have to live in a dump, but if you want a 4 bedroom home on the beach but you have 1 bedroom condo in the suburbs kind of money, it is what it is. You have to decide what your priorities are. If you want to own something, is it more important to be in “x” neighborhood or is it more important to have “y” features in the home (yard/lot size, number of bedrooms, school district, etc.)? These are questions to think about. Once you know what is overwhelmingly important and non-negotiable to you, you can start to think about what might not be a must-have as well. And let’s not forget, this isn’t the last home you’ll ever have. You can buy something that suits your needs now, start to build equity, continue to save, and then buy something else later.
- Make a smaller downpayment. Realize you don’t have to put 20% down to buy a home. And don’t feel bad about it either. According to a survey done by the National Association of Realtors (NAR), the average down payment on a purchase mortgage was just 11 percent in 2016. For borrowers under the age of 35, the average down payment was just under 8 percent, according to the same NAR survey. So let’s face it, homes in Los Angeles are expensive. And it is hard to save up 20% down, especially for your first house. There are many options, from 0% down for certain professions, 1% down with downpayment assistance, 3% down for FHA programs, etc. There are many reputable lenders that can arrange the financing depending on what you have and what you need. And there are also other options-borrowing from your 401k, gift funds from family, that can get you into your first home. Ask your real estate agent to refer you to a lender that can discuss all your options with you.
- Consider roommates. If you are at a stage in your life when having a roommate is an option, and would like the comfort in knowing that someone is helping you pay your monthly mortgage, you may want to consider a roommate.
- Think about condos. “Eew, I don’t want to pay homeowner association (HOA) fees.” I get it, and I know where people are coming from with this comment. But HOA fees pay for common expenses, some (or all) of which you would have to pay anyway if you owned a single family home. For example, I own a stand alone single family residence and I pay for house insurance, a weekly gardener, weekly pool service, cable TV, trash and sewer service, etc. Many of these services that I pay for would be included in HOA fees. Condos typically have a lower entry price point and are a great way to own in Los Angeles.
- Explore duplexes. This could be a post in and of itself, but multi-unit properties, particularly duplexes, can be a great way to buy your first property in Los Angeles. The income from your tenants can help pay your mortgage. Moreover, if you buy a duplex to live in yourself, you can receive the same preferential lending treatment as a single family home (vs buying a single family home to live in first and then buying a duplex or other multi-unit as investment property second-the second scenario requires a higher downpayment and the interest rate on your loan is higher.)
Obviously I can’t include everything in my head in a blog post, so if you want to talk specifics or need a lender call me at Leah Guerra Homes 310-945-8232 or email at email@example.com.