Renting is the worst. Every month it feels like money being thrown out the window. In Los Angeles, it is getting worse as rents keep increasing and renters are not moving. Only one thing will change this: more rental units become available. This can happen by either developers building more rental buildings, which is being fought by many residents for various reasons (some valid and some ridiculous). Or as renters become home buyers, their former rental will become available for a new tenant. One problem we have seen lately is renters who are hesitant to buy because they have been discouraged by various homebuying myths. We are here to shed some light on some of these myths keeping renters who want to buy from achieving their dreams. I've heard many reasons from clients and friends, and while there are actual valid reasons the ones below may not be valid for everyone.
I do not have 20% for a down payment
Many buyers are led to believe they must have at least a 20% down payment, good credit, and have been at their current job for years. While all loan advertisements are basing their rates on a similar criteria, there are more options for those who do not match up to the standard criteria. I'm not saying there is a loan for everyone, but it should not stop a buyer from discussing with a lender to learn what options are available and could work for them. Lenders have loan options for as low as 5% down payment, as well as 10% down 5, 7, and 10 year ARM (adjustable rate mortgage) options.
No available inventory / Can't find a home in my price range
While there is a lack of inventory in Los Angeles, that should not be a reason not to buy. The mortgage rates are so low it worth the extra time spent looking for a home.
The second part of this excuse ("I can't find a home I like in my price range") needs some out of the box thinking to find what you are looking for. First you need to answer this one question - what is more important: location or house? Is it more important for you to be in a specific area or do you want the home of your dreams? For some, these two are not mutually exclusive. However, many more buyers should take the time to really think about this. Evaluate how you want to spend your days. Does it involve walking into to town or enjoying your morning coffee looking out at your view?
One of my favorite aspects of Los Angeles is this town offers something for everyone if you have an open mind and are willing to explore. Try visiting neighborhoods that offer a similar lifestyle at a lower price point. Priced out of Los Feliz or Silver Lake? Try Atwater Village or Highland Park.
If you have to be in a specific area, see if there are houses you can renovate. If you are willing to invest the time and sweat equity, you can get into your dream neighborhood at a price that is under market value. This option is more time intensive and not for everyone, but in the end you will have a home you love in the area you want to be in.
I can't compete in multiple offers and against all cash
While many properties are still receiving multiple offers, terms can be just as important as the financing. It all depends on the seller. There are sellers who go for the best price over cash, and there are sellers who accept the all-cash offer at a lower price than the offer with a loan. This is where your Realtor is your best ally. A good Realtor can gain inside knowledge of the seller's motivations and help craft a winning offer not solely based on price.
We are in a bubble
This reasoning I have some trouble wrapping my head around due to my knowledge of the market and current mortgage rates. Mortgage rates are historically low and housing inventory is also very low. If the mortgage rates increase by 1%, to spend the same amount on monthly mortgage payments the price of the house would have to drop 10%. That means when mortgage rates increase (and they will eventually), a $1,000,000 house would have to sell for $900,000 for your monthly payments to be the same. Take a minute to think that over.
With such a lack of inventory and high demand from buyers, while I do see prices stabilizing, I do not see prices reducing overall.
Have you thought about buying but been discouraged by what you have heard without exploring any further? We would be happy to sit down with you and answer your questions and concerns. If we can help you, we will. And if we cannot help you right now, you will at least know what you need to do in order to prepare yourself to buy a home in the future.
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