Ep.22 - Home-Buying in LA: $200k Edition
A $200k salary was a concept that was completely unimaginable when I was growing up. To be honest, $20/hr would've been a dream wage for me. Fast forward 10 years: now I understand how expensive adulting really is.
When it comes to home buying in LA, the reality is, one may still feel average with $200k/yr.
Here is everything you need to know.
HOUSE OR CONDO?
You can definitely find a nice home in most parts of LA.
HOW MUCH HOME CAN YOU AFFORD?
Up to $1 million.
YOUR BEST MORTGAGE PROGRAM
You should consider the conventional 30-year fixed rate mortgage program with 20% down. You may be able to get away with 15% down with some lenders.
Your challenge at this level is not so much the mortgage, but the down payment. Keep reading, I hope you have a lot saved.
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): $6,000.
Total Debt (45% of your income): $7,500. 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 $7,500 a month, then you won't be able to buy a house.
HOW MUCH CASH DO YOU NEED?
20% Conventional Loan: you should prepare $230k for a down payment and closing costs.
You may also qualify for the 15% Conventional Loan: you should prepare $180k. The drawback is, you will have to pay for private mortgage insurance, which could be somewhere between $200 to $500 a month.
HOW MUCH EXISTING DEBT CAN YOU HAVE?
If you make this much, and you want to buy a $1 million dollar home, you should prioritize paying off your debt, before buying a house. It's ultimately your choice, you CAN have up to $1,750 outstanding monthly debt (including credit card, student loan, car loan).
WHERE CAN YOU FIND THESE HOMES?
At this salary, it's easier to list places where you can't buy than where you can.
You can pretty much find a place anywhere, except the Westside and the Hollywood Hills. Most homes west of the 405 start at $1.2 million.
LET'S FIND SOME REAL EXAMPLES! (click on the picture itself for more detail)
HOUSE #1 - Ladera Heights
Address: 5812 South Garth Ave, Los Angeles, CA 90056
Home Price: $985k
Monthly Payment: $5,613 (with 15% down)
HOUSE #2 - Culver City
Address: 4072 Sawtelle Blvd, Culver City, CA 90066
Home Price: $950k
Monthly Payment: $5,414 (with 15% down)
HOUSE #3 - South Pasadena
Address: 1435 Oak Crest Ave, South Pasadena, CA 91030
Home Price: $949k
Monthly Payment: $5,408 (with 15% down)
HOUSE #4 - Eagle Rock
Address: 1904 Nolden St, Los Angeles, CA 90041
Home Price: $899k
Monthly Payment: $5,123
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