Possible move to LA: Need help buying

[PaddyMac]

When I first moved to LA and married an American, I had money in the bank from selling my small house in the UK. We used my money as the down payment. But when we went to get the mortgage, most of the bankers would not look at my salary or income because I did not have a credit history in the US. The fact that I had owned my own home in the UK was irrelevant.

Do you have green cards or jobs lined up? Unless you do, I don't see any bank loaning you money right after you step off a plane... Not without a job, credit history, etc etc.

[esmith143]

"3x gross income" is a very old rule from the days when mortgage rates were 8% or higher. You can typically afford to go to 5x, maybe 6x if you have 20% down. If you buy a house using the 3x rule, you'll probably find yourself one of the wealthiest people in the neighborhood. 10x is not doable and nobody will lend you 10x your gross income. (maybe except the mob, if you put your kidney as a collateral!)

It is difficult to impossible to borrow money to buy the house unless you're a U.S. citizen or you have a green card. You need decent credit history and at least a year of continuous employment in the United States.

There are different programs and lenders, but, generally speaking, it gets more difficult to borrow if your combined monthly payment (mortgage, property taxes etc.) is greater than 40-45% of your gross income, or if you have to borrow more than 500-600K.

[Mardala]

Good point. I lived in Canada for several years and ran into a similar problem (not that I sold a home in the US before moving there). I had to put money down to get a credit card.

Originally Posted by PaddyMac

When I first moved to LA and married an American, I had money in the bank from selling my small house in the UK. We used my money as the down payment. But when we went to get the mortgage, most of the bankers would not look at my salary or income because I did not have a credit history in the US. The fact that I had owned my own home in the UK was irrelevant.

Do you have green cards or jobs lined up? Unless you do, I don't see any bank loaning you money right after you step off a plane... Not without a job, credit history, etc etc.

[Loftspecialist]

I would also suggest you rent for six months to figure out where you want to settle down. Commuting is a big factor so you may want to check out areas close to where you will be working. I would also suggest you find a realtor and let them do the work, both for your rental and eventual purchase. They will also be able to advise you on financing.

[US-Traveller]

No lender is going to approve you for a loan unless the balance is less than 3 times your annual income. You must also show proof of income and many lenders will question your blank credit history. Your credit history doesn't travel between nations and right now lending is very restrictive. Without a credit history you'll need at least 30% down.

[motoman]

Originally Posted by esmith143

"3x gross income" is a very old rule from the days when mortgage rates were 8% or higher. You can typically afford to go to 5x, maybe 6x if you have 20% down. If you buy a house using the 3x rule, you'll probably find yourself one of the wealthiest people in the neighborhood. 10x is not doable and nobody will lend you 10x your gross income. (maybe except the mob, if you put your kidney as a collateral!)

It is difficult to impossible to borrow money to buy the house unless you're a U.S. citizen or you have a green card. You need decent credit history and at least a year of continuous employment in the United States.

There are different programs and lenders, but, generally speaking, it gets more difficult to borrow if your combined monthly payment (mortgage, property taxes etc.) is greater than 40-45% of your gross income, or if you have to borrow more than 500-600K.

3x gross income isn't an "old" rule of thumb, it is prudent lending. Everyone that supported the California housing bubble tried to explain away the old 3x rule, as if things are different now and it didn't apply. You can see where that got us.

If you're spending 40% of your gross income on a place to live, after having already put down $100k in savings as your downpayment, you don't have much money left to do anything at all. Let's do some math here.

Let's say you buy a $500,000 house, put down $100,000 in cash as a down payment, because everyone has an extra $100,000 laying around. You finance $400,000 at 5% for 30 years.

Annual numbers (rounded)
1) Mortgage payment = $26,000
2) Property taxes = $5,000
3) Long-term maintenance = $5,000
4) Income taxes (varies) = $30,000
5) Savings (15%) = $15,000

Just these numbers total to $81,000.

That leaves you $19,000 per year to pay for health insurance and medical costs, cars, gas, car insurance, car repairs, entertainment, vacations, extraordinary expenses, food, clothes, education, etc. In other words, not a chance in hell. You would be totally house poor.