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How much should millennials plan to spend on a home?
What if you fail the 28% rule of thumb test?
What about if you don’t have enough for a down payment?
What else should millennial homebuyers know?
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So, You’re a Los Angeles First-Time Home Buyer
Congrats—you’re ready to buy your first home. It’s a big deal, and like any major decision in your life, there are a lot of options out there, and it’s probably a bit overwhelming to figure out where to start. Not to worry, that’s why I’m here. So let’s get into what you need to know to buy a home in LA for the first time and stop lining a landlord’s pockets, and start building your own investment.
First off, I want to be clear; you do not need to be a gazillionaire to buy property in LA. People of all incomes buy and sell property in this city every day. Additionally, there is assistance to help you fulfill your dream of homeownership in Los Angeles, specifically. Buying property is an attainable goal for you—let me show you how.
Why Homeownership is a Smart Financial Move
There are many reasons why owning a home is a smart move financially.
When you’re a renter, you’re paying for someone else’s property, but when you become a homeowner, you’re investing in your own.
Let’s take a closer look at why purchasing your own home is a good move financially, though:
First, it’s an investment with a good return. You will generally see your home value appreciate over the years, especially in Los Angeles.
Second, it can be used as a hedge against inflation. Even if the economy is bad, your home’s value will generally see good returns.
Third, homeownership comes with plenty of tax benefits. Not only can you deduct mortgage interest payments, but you can also deduct property taxes and even your homeowner’s insurance.
Fourth, let’s not forget the big one: you get to live in your investment and pay yourself rent, rather than a landlord. That means for the first time; your housing costs are building you equity instead of a landlord. As a bonus, you also get to determine what color paint you get to use in your home, too!
Finally, in many instances, you’ll be able to project your housing costs for years, if not decades, in advance. You’re no longer tied to your landlord deciding what’s “fair” when it comes time to renew your lease—your mortgage terms will be spelled out for you, allowing you to plan well in advance.
Where Can a First-Time Home Buyer Get Help?
There are many options out there for first-time home buyers. Broadly speaking, the areas I recommend to look for help are:
- Friends and Family
- Local Real Estate and Mortgage Professionals
- Online (with some caveats)
- Government Programs
Friends and Family
Your friends and family who have bought a home are a great resource here. Ask them about their process—how did they find their home? How did they pay for it? How long did it take them from deciding to buy, to knowing they could buy, to actually buying? Also, ask what they wish they knew then (aka what mistakes did they make that you can avoid?) They can give great advice and point you in the right direction of where to go next in the process.
Local Real Estate and Mortgage Professionals
Real estate and mortgage businesses are other excellent sources of info. Who knows the neighborhoods and communities you’re looking to buy a home in better than those who have been helping people just like you buy and sell property there? Tap into their years of experience to help you understand your options and to know what a fair deal looks like.
Just keep in mind they’re also looking for business, so their advice may come with other motives. Avoid the hard sell and instead go in for fact-finding—this is not a process you should rush.
Google is your friend when looking into buying a home for the first time. There are lots of great threads on Reddit or even Nextdoor out there that can help you if you poke around a bit. One caveat, though— firmly believe that knowledge is power, but you need to use common sense when looking into home buying via Googling, OK? Anything from a .gov domain will be directly from the government and the most trustworthy. If you find yourself getting all your first-time LA home buying info from a random Redditor and they’re telling you to pay your down payment with loose change and poems, stop what you’re doing and get in touch with me ASAP!
The Federal Housing Administration (FHA) is another excellent source of information. Its purpose is to bring homeownership to as many Americans as possible. Not only has the FHA been one of the largest mortgage insurers for years, but their website also has all kinds of info, including state and local assistance programs for first-time buyers.
In Los Angeles County, The Los Angeles County Development Authority (LACDA) provides down payment assistance for low-to-moderate-income residents specifically; you can find more details on program eligibility on their website.
You should also check out HUD’s California program page. This excellent resource page outlines some of the options available to Los Angeles first-time home buyers, specifically. Here is a direct link to their assistance page.
Do your research, ask around, and call the FHA directly (1-800-225-5342) if you have questions. Chances are there are programs that can help you achieve first-time homeownership in Los Angeles.
The point is, there are many ways you can get the information you need to make sure you demystify your options so you can get a plan in place and the right people helping you through the process.
Buying Your First Home in LA Starts With Creating a Budget
For many people, the home buying process is the first time they make a detailed written monthly budget. That’s not surprising, given that creating budgets is not the most enjoyable activity (surprise, right?!) However, few things can prepare you for purchasing a new home like knowing where you stand financially.
That’s why a budget is the essential first step to achieving homeownership because you need to know how much money you have, how much you can put towards buying a home, and how much you can afford to spend on your home on an ongoing basis. Having this knowledge is often eye-opening because your perception and the reality of your finances may not align. That can suck, but it’s a good thing to know now because it sets you up for long-term success. It’s a lot easier to fix aspects of your finances before you begin house hunting than when you find your dream home and realize the mortgage isn’t affordable.
If you’re looking for help on how to start creating your budget, Freddie Mac has you covered. You can read their complete budget guide here.
Do your due diligence, collect information, see what programs you qualify for, and find people to be in your corner when you begin the home buying process.
…and remember: You got this. I’m so excited for you to start this process and find your dream home. I’ll be here for you when it comes time to figure out your mortgage, but I’m here during the preliminary stages, too. If you have any questions, hit me up. Let’s get you into your dream home in Los Angeles now!