Will i ever be able to afford a house (Highland: low income, rent)

[genjy]

Originally Posted by jm1982

To understand why people want to buy and pay a mortgage for 10 20 30 years .. Take a look at what prices were 10 20 30 years.

Another thing is that if you have a fixed rats mortgage your payment never goes up..

CA property tax doesn't really go up either. So in a couple decades, you could be the one that envious owners/renters complain about "paying very little property tax."

[Larry Siegel]

Originally Posted by Ca_allday

I am 26 years old, have been lurking this forum for awhile now.
I work in westwood, live in palms, but i grew up in the oc
I make a little over 110k/year
Will i ever be able to buy a home???
I want to live on the west side if not A little south of the 405....i glewood, lawndale,hawthorne are otions
I only have about 15k cash, 7300 in my roth ira, 33k in 403b...
I have a newborn son that i will start a 529 for
I dont think i will be able to afford a home for at least 5-10 years maybe longer
What is my limit ? 700k? 500k?
How do people afford to even buy homes in socal?

You're doing fine. You're only 26. $110K is a respectable income. When I was 26 I had $20,000 in student loans, a few thousand in savings, an entry-level business job, a wife, and a kid on the way. I saved for a while and when I was 30, I bought a small house in an expensive (top public schools) area with just over 5% down. I don't think that 5% down is available any more but maybe your parents can lend you some money to make up the rest of the down payment. That - or having two incomes and saving until you're close to 40 - is how people afford a house in coastal SoCal. Inland it's cheaper but I wouldn't be caught dead there.

Your story is a he*l of a lot more encouraging than a lot of people here who say they're pushing 40, can't find any permanent work, can't do this, can't do that.

Good luck.

[jm1982]

Yeah that is true and a good thing to keep into account. Many other cities will have higher property taxes, Prop 13 is a benefit for a lot of people .

It is hard to say there is great value right now in the L.A Market..but if you plan to live here a long time or a while there are probably worse things one could spend money on. One thing that seems to be historically true is that rents and property prices have gone up over time. Especially with rents at least in L.A it doesn't seem like they went down despite the 'housing crisis' and 'great recession" . I don't believe they went down much nationwide either. This is why buying distressed/REO investment property was such a great opportunity for many people including large corporations such as BlackStone that have bought thousands of homes under their "Invitation Homes" subsidary. Homes for Rent | Invitation Homes . You can search for their inventory of homes nationwide.


Also all real estate is local. Any area that is up and coming or that becomes desirable will increase higher than the average.

Just look at places like Highland Park, Echo Park,etc. Those where areas where many lived because they HAD to live there..now you have people with money getting into bidding wars to buy in those areas.

In my opinion and the opinion of others, a place like Boyle Heights seems to be ripe for future gentrification. One big reason for this is close proximity to DTLA which is growing like crazy.

During the 'housing crash' prime areas didn't go down much. For example in West L.A prices went down..but not as significantly as areas in parts of the valley which did go down significantly.

Of course past performance is no guarantee of future performance just as in any investment.

I purchased a home because I found a place that wouldn't be too much more than renting at the time.

If you can find a property like that which is hard now it takes away a bit of the risk since if you needed to move you could still rent out your house to cover payments.

I'm pretty sure I could rent out my place now to cover mortgage,taxes,etc .

A lot of people lost their homes because they couldn't ride out the downturn so to speak . They bought more house than they could afford.

Especially those in jobs like sales where they were making a big income off commissions saw their salaries take a big haircut because of the downturn and ended up losing their homes.

Because it is now harder to lie about your income for loans and that was a the cause of a lot of the downturn, the likely hood of another crash in the near future is unlikely.

Many of the foreclosures seem to have been worked out which is witnessed by the low amount of REOs on the market today..as can be seen on Redfin.com .

Before you could see so many new REO properties listed daily but inventory has dried up, thus the higher prices ( supply and demand).

[jm1982]

Originally Posted by Larry Siegel

You're doing fine. You're only 26. $110K is a respectable income. When I was 26 I had $20,000 in student loans, a few thousand in savings, an entry-level business job, a wife, and a kid on the way. I saved for a while and when I was 30, I bought a small house in an expensive (top public schools) area with just over 5% down. I don't think that 5% down is available any more but maybe your parents can lend you some money to make up the rest of the down payment. That - or having two incomes and saving until you're close to 40 - is how people afford a house in coastal SoCal. Inland it's cheaper but I wouldn't be caught dead there.

Your story is a he*l of a lot more encouraging than a lot of people here who say they're pushing 40, can't find any permanent work, can't do this, can't do that.

Good luck.

I agree that 26 with 110k income is great. Even in a high cost city like L.A 110k income is way above average. Average household income is 56k .

Also you can still buy with less than 5% down , an FHA loan allows one to buy with 3.5% down. Downpayment on 500k house would be $17,500.

Loans

[Larry Siegel]

Originally Posted by jm1982

Also you can still buy with less than 5% down , an FHA loan allows one to buy with 3.5% down. Downpayment on 500k house would be $17,500.

Loans

I'm glad to hear that program still exists.

[thelopez2]

Originally Posted by SomeoneConsiderate

You need to have a decent amount of money to put down, atleast 20%. My buddy who makes 100k a year was pre approved for 500k loan. So you have that to go by.

Nope you don't need 20% down and you should not go by someone else's pre approval since you don't know their whole story. Talk to a lender yourself.

Originally Posted by Ca_allday

Will i ever be able to buy a home???
15k cash, 7300 in my roth ira, 33k in 403b...
I dont think i will be able to afford a home for at least 5-10 years maybe longer
What is my limit ? 700k? 500k?
How do people afford to even buy homes in socal?

It is not how much you make, it is how much you save. Also it isn't how much you can qualify for , you need to have a budget on how much you can afford based on your lifestyle.

Only when a lender pulls your credit and looks at you assets will they be able to see what you qualify for.

People afford to buy homes by getting loans.

Originally Posted by Ca_allday

It's very discouraging, should I lover my 403b contributions? Currently at 15%...to try and keep my funds liquid for a down payment. Should I borrow against my 403b to fund a downpayment?
I def want more than just a 2 bed because I want to live in this whole the rest of my life and pass it down to my children.

Many people discourage against borrowing or taking money from a retirement account, that decision will be up to you. I'm not one of them.

You might want to talk to a financial planner and accountant. It is good to surround yourself with knowledgable professional and learn from others failures and successes.

Originally Posted by jm1982

$250,000 of profit on the sale of a house or $500000 for a couple that own a house is entirely tax free after living in it for two years .

I've never heard of a renter making any profit from renting for any length of time..
The mentality that " you can't take the money with you" is flawed.

The reason your landlord can rent to you for that " cheap " price is because they bought the property for much less in the past !

To OP another thing you can look into is buying a 2-4 unit property .
You can use the rental income to qualify and you can buy these with an FHA loan.
I believe you can use 75percent of the rents as income to qualify . Basically this allows you to buy more property for the money and in some cases people use this technique to live Mortgage free... Although hard to do in SoCal .

You should always be looking for undervalued or distressed properties that can be bought at a discount.

In real estate .. You make your money when you buy.

A 2009 -2012 were great years to buy but you can't go back in time .

There are properties people are buying for 30,000 or less that rent for 700+

Some of these areas could appreciate quicker than properties in LA

There are areas that have not recovered yet as much as LA .

Don't count on $500,000 tax free income because those tax breaks can go away, but still, you only pay taxes when you make money, even if you still had to pay 50% $250,000 is no chump change.

I've know people that rent for much less than it would be to purchase a property, but the funny thing is , they just spend their money in other places.

Before you get into becoming a landlord, talk to some local ones, you can even join AAGLA and read their publications.

The rent that you pay has no reflection on what a landlord has paid nor their existing loan balances, nor their profitability.

Originally Posted by jm1982

Just look at places like Highland Park, Echo Park,etc. Those where areas where many lived because they HAD to live there..now you have people with money getting into bidding wars to buy in those areas.

A lot of people lost their homes because they couldn't ride out the downturn so to speak . They bought more house than they could afford.

Especially those in jobs like sales where they were making a big income off commissions saw their salaries take a big haircut because of the downturn and ended up losing their homes.

i bought in Highland Park because it made sense and is not as scary and ghetto as people make it out to be.

Originally Posted by jm1982

Also you can still buy with less than 5% down , an FHA loan allows one to buy with 3.5% down. Downpayment on 500k house would be $17,500.

Loans

Before taking the path of FHA, understand your options and savings for a conventional loan.

It is time to talk to a lender

[Ca_allday]

Great advice I really appreciate it guys

[Rkstar71]

Originally Posted by Ca_allday

I am 26 years old, have been lurking this forum for awhile now.
I work in westwood, live in palms, but i grew up in the oc
I make a little over 110k/year
Will i ever be able to buy a home???
How do people afford to even buy homes in socal?

Wow you're doing great! 110k! Sign me up for a job like that.
I'm struggling to make $100/week.
You're asking will you ever be able to afford a home or house. I'm wondering if I'll be able to find work so I can get off unemployment, and I'm 42! Talk about the problems of the wealthy. lol

[Larry Siegel]

I'll bet the OP has some specialized education and training.

[Count David]

To better your chances, marry someone at work that has a similar income to yours.

I've found that is the easiest path to affluence.