Ep.17 - Home-Buying in LA: $80k Edition

$80k is a pretty darn good salary for a single millennial in LA. If you rent, you can splurge a bit and save a bit. However, when it comes to buying a home, you are pretty much stuck with a condo, and you won't be able to live by the beach or bougie shops (let's say Abbot Kinney).

Here is everything you need to know.

HOUSE OR CONDO?

You are limited to condos only. Plain and simple.

HOW MUCH CAN YOU AFFORD?

Less than $350k (depending on HOA). If you have a lot of savings, then add the amount of savings on top of that. For example, if you have an extra $50k in savings to spend on a home you can afford a condo of up to $400k.

YOUR BEST MORTGAGE PROGRAM

The best program is the 5% fixed-rate conventional loan. It means that, compared to the 1% Quicken Loan in Ep.16, you need to have a bit more cash saved.

You won't qualify for the 1% down Quicken Loan, because you make more than the county median limit to qualify.

You are also unlikely to qualify for an FHA loan, because, for condos specifically, you can only go through an FHA loan if the condo itself is FHA approved. You can check if the condo is eligible here. This rule does not apply to single-family homes.

CREDIT SCORE

680 and above, but 740 gives you the best rate, which is 4.125% right now.

MAX MONTHLY DEBT ALLOWED?

Housing Related Debt (36% of your income): $2,400.

Total Debt (45% of your income):$3,000. That is the total amount of all your debt, including your mortgage, credit cards, student loans and car loans. So if your mortgage plus existing debt adds up to more than $3,000 a month, then you won't be able to buy a house.

HOW MUCH CASH DO YOU NEED?

5% down + 3% closing costs. On a house of $350k, you should prepare $28k.

HOW MUCH EXISTING DEBT CAN YOU HAVE?

You should have close to zero debt. But, if you're a typical millennial in LA, this is highly unlikely. Realistically, you can have up to $600 outstanding monthly debt (including credit card, student loan, car loan).