Ep.19 - Home-Buying in LA: $120k Edition

$120k a year puts you in the top 10% of earners as an individual and top 20% as a household. If we use income as an imperfect proxy, you are solidly in the upper-middle class. With $120k, you can finally ditch condos and find a place with a yard.

But there's a caveat. Location-wise, it may be farther than you desire.

Here is everything you need to know.

HOUSE OR CONDO?

You now have some options with single-family houses. 

 

HOW MUCH HOME CAN YOU AFFORD?

Less than $600k.

 

YOUR BEST MORTGAGE PROGRAM

The best program is the 5% fixed rate conventional loan. 

If you don't have 5% cash saved up, your second best option is an FHA loan. The mortgage insurance on an FHA, which is called MIP, cannot be removed unless you refinance. If you want to learn more about these two programs, take a look at episode 3, where I dive into detail.

 

CREDIT SCORE

680 and above, but 740 gives you the best rate, which is 4.125% right now.

 

MAX MONTHLY DEBT ALLOWED? 

Housing Related Debt (36% of your income): $3,600. 

Total Debt (45% of your income): $4,500. That is the total amount of all your debt, including your mortgage, credit cards, student loans and car loans. So if your mortgage plus existing debt adds up to more than $4,500 a month, then you won't be able to buy a house.

 

HOW MUCH CASH DO YOU NEED?

Conventional Loan: 5% down + 3% closing costs. On a house of $600k, you should prepare $48k.

FHA Loan: 3.5% down + 3% closing costs. On a house of $600k, you should prepare $39k.

 

HOW MUCH EXISTING DEBT CAN YOU HAVE?

You should have close to zero debt. But, if you're a typical millennial in LA, this is probably not the case. Realistically, you can have up to $900 outstanding monthly debt (including credit card, student loan, car loan, etc.)

 

WHERE CAN YOU FIND THESE HOMES?

South LA : West Adams, Jefferson Park, Leimert Park, View Heights

Northeast LA: Mt. Washington, Glassell Park, Highland Park, Cypress Park

The Valley: Pretty much anywhere in the Valley.

South Bay: Hawthorne, Gardena, Torrance, Inglewood

 

LET'S FIND SOME REAL EXAMPLES! (click on the picture for more detail)

HOUSE #1 - South LA (View Park)

Address: 3965 S Victoria Ave, View Park, CA 90008

Home Price: $550k

Monthly Payment: $3,439 

  Source: Redfin.com

Source: Redfin.com

  Source: Redfin.com

Source: Redfin.com

HOUSE #2 - Northeast LA (Highland Park)

Address: 5156 Baltimore St, Los Angeles, CA 90042

Home Price: $549k

Monthly Payment: $3,433

 Source: Redfin.com

Source: Redfin.com

 Source: Redfin.com

Source: Redfin.com

HOUSE #3 - The Valley (Lake Balboa)

Address: 7717 Wish Ave, Lake Balboa, CA 91406

Home Price: $544k

Monthly Payment: $3,401

 Source: Redfin.com

Source: Redfin.com

 Source: Redfin.com

Source: Redfin.com

HOUSE #4 - South Bay (Inglewood)

Address: 11156 Mansel Ave, Inglewood, CA 90304

Home Price: $535k

Monthly Payment: $3,345

 Source: Redfin.com

Source: Redfin.com

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