The day you are handed the keys to your first home in the City of Angels will feel like a dream come true. But searching for your first home and shopping for the right mortgage can prove to be an involved process. Here are a few things you should know before you embark on your quest.
1. The housing market is very competitive right now.
First, California is experiencing a housing crisis right now. There are more and more people in need of affordable housing, and fewer and fewer projects being developed. This has resulted in a massive housing shortage, which in turn has pushed prices through the roof.
That means that you may need to dig to find the best values in the Los Angeles housing market. There are still excellent values available, but finding them requires extra research.
2. You may qualify for an FHA loan.
The good news is that a lot of first time homebuyers qualify for an FHA loan. These loans are insured by the Federal Housing Administration, and offer quite a few benefits to keep housing affordable. You may qualify for a down payment of just 3.5%, and you could have lower closing costs. Interest rates on FHA loans are usually more affordable too.
Another important thing about FHA loans is that they can open doors which might otherwise be barred shut due to an imperfect credit score.
3. There are local programs to help you out.
The FHA loan is federally backed, but it is not the only government program you can avail yourself of if you need assistance buying your first home. You can also consider local programs to support new homebuyers.
Los Angeles County has a program called the Affordable Homeownership Program. If you are classified as having low or moderate income and you are a first-time homebuyer, you might be able to get down payment assistance. For one person, the maximum annual income as of 2017 to qualify for this assistance is $50,500. So, a lot of people will find that they qualify for this program.
4. There are more costs to buying a home than you may realize.
Another important thing to know as a first time home buyer is that the true cost of buying a home in Los Angeles (or anywhere) is higher than you may realize. It is not just the cost of your mortgage.
You also need to weigh in other expenses such as your down payment, home inspection fees, earnest money deposit, closing costs, cash in reserve, moving costs, and costs for repairs or renovations.
Those are just the one-time costs when you are buying the home; you also need to think about what you will pay in the future. Along with your mortgage premiums and interest, you will also need to account for mortgage or homeowner’s insurance premiums, property taxes, utilities, rental costs, and homeowner’s association fees where applicable, and the cost of future maintenance.
New homeowners sometimes end up in over their heads because they forget to calculate all these miscellaneous costs. But if you make sure you account for everything, you will know what you can really afford and you will pick a house which is right for you.
5. You will end up making renovations and improvements.
This is almost a guarantee, even if you are purchasing a house which is in excellent condition. You will probably want to personalize it and make it more your own. Make sure to set aside some extra money for those renovations—more than you think you will need.
6. Pre-approval may be crucial in getting the home you want.
One of the very first things you should do when you begin your search for your Los Angeles dream home is get pre-approved. Doing so can streamline the application process when you do find a home you want, and it makes it more likely that the seller will accept your offer. You will also find that you may qualify for lower costs all around, which is very important in this competitive market.
7. The school district will impact the cost of a home.
This is something which is easy to overlook if you do not have children yourself. You will pay more for a home which is in a top school district, and less for one which is not. If you do not have children and do not plan to in the future, you may be able to save money simply by choosing a home in another district.
8. You need to think about your future before you choose a home and mortgage.
Speaking of the future, there are a lot of questions you should ask yourself about your plans for the years ahead before you invest in a home and select a mortgage. For example, if you will likely be moving in a few years, an adjustable interest rate may save you a lot of money on L.A. housing. But if you think Los Angeles will be your permanent home, a fixed rate mortgage might be safer. You need to consider not only the money you can save now, but the money you could potentially save decades from now.
If you need help navigating today’s competitive housing market, Pacshores Mortgage is here. Call (310) 478-5005 to explore affordable mortgage opportunities and find out if you qualify for an FHA loan.