Your mind is set: you have decided that you want to buy a house in Los Angeles. It’s a big decision to make, especially because renting gives you so much more flexibility.
However, being ready and knowing where you want to buy a house is not enough. You should ask yourself: Can I afford a house in Los Angeles?
This is not an easy question to answer, but I’m going to help you with this process.
Here are a few essential questions you need to ask yourself.
1. Do you have enough money for the down payment?
This is the first thing you need to ask yourself before you decide on what house to buy.
The price for a house in Los Angeles can go as high as $1 million, depending on what area you want to live in.
Most lenders will require from the buyer 20% down payment. When taking into consideration the fact that we’re talking about LA, the down payment can get pretty high.
If you don’t have enough money for the down payment, then you’d better start saving now.
2. Could you still manage your finances if tax increase?
Keep in mind that you will be paying the mortgage monthly. The mortgage covers principal, interest, taxes and insurance.
If by any chance you will go for a fixed-rate mortgage, then your principal and interest will remain the same.
Your taxes and insurance could potentially fluctuate. This can happen in a couple of cases:
- If your home is reassessed at a higher value
- If the local government will decide to increase taxes
You have to ask yourself if your budget will allow you to afford to pay your mortgage in case those two things happen.
3. Did you save money for potential repairs and maintenance of the house?
Even if you buy a brand new house, you will still need to invest money in the house. Still, it won’t be as much as you would in the case of an older home.
Perhaps you won’t like the floor, or the sink, or the windows, and the list can go on.
You should put 1% of your home’s value aside every year so that you can keep up with any maintenance that needs to be done.
4. How long do you plan on living in a house in Los Angeles?
Buying a home means that you’ll have other costs as well, such as certain fees, taxes, commissions, and inspections.
You need to take those into consideration as well.
Do you plan on living for more than five years in the house you want to buy? If the answer is ‘Yes’, then it will be worth it.
However, if you’re planning on living there only for a couple of years, then renting makes more sense.
So, are you qualified to buy a house in Los Angeles?
If the questions above didn’t help you figure this out, then you can take our Home Buyer Quiz.
I came up with twelve simple questions that have multiple choice answers. The quiz shouldn’t take you more than one minute to complete, so feel free to submit your answers.
Finding the answer to this question shouldn’t be hard, which is why this quiz is so easy and fun to take.
Let me know what your result was after taking the quiz in the comment section below.