As the job market in Los Angeles County improves and the home prices in Echo Park, Sliver Lake, and other areas in the LA metro area have come off their highs of the mid 2000s, many first time homebuyers have decided to take advantage of low interest rates and purchase their first home. They are attracted to the security and stability that home ownership brings, as well as the desire to establish roots in the greater Los Angeles area.
Since purchasing a home for the first time can be a daunting experience, the buyer’s agents at Real Estate Unlimited, who work with first time home buyers, offer these helpful tips to reduce some of the confusion and frustration some first time home buyers face.
Committing to home ownership goes beyond having enough money saved to make a down payment and having a job. You also need to be sure that you can see yourself living in the Los Angeles area for the next five to seven years. Additionally, you need to ask yourself if you think your job will be secure for the long-term.
Homeownership also means that you will be responsible for the time and expense involved in maintaining the home. When your home needs a new coat of paint, you will be responsible for either doing this yourself or hiring a painter. If the water heater starts leaking in the middle of the night, you will not be able to call a landlord or the afterhours maintenance person. You will need to mop the floors, turn off the water supply, and arrange to have the water heater replaced or repaired. Think about if you have the time and resources to handle the upkeep of a home.
Given the wide variety of home styles and neighborhoods listed in the Los Angeles area, you will have a ton of options to choose from. From a town home in an urban area or a single family home in the suburbs, Los Angeles County has it.
Since the collapse of the housing market and mortgage crisis, lenders have become much more stringent in their assessment of the qualifications people have to meet to secure a mortgage.
To find out if you will meet these requirements, follow these steps:
1. Get a Copy of Your Credit Report and Review It.
First, you want to review it to make sure it does not have any errors. If you do find an issue, contact your creditor and the reporting agency to have the incorrect information removed. Once you have a correct credit report, see if your score is at least 600 as this is the lowest score that the Federal Housing Administration (FHA) will accept for its first-time buyers loans. Mortgage loans from traditional lenders will require at least a 620. To qualify for the best interest rates, you will need to have a credit score of 720 or better. If you find you need to improve your credit score, you can get advice from a non-profit consumer credit counseling agency.
2. Do a Self-Assessment of Your Income to Debt Ratio.
Lenders will also consider what percentage of your income you use to pay off debts. If this ratio is greater than 45 percent, you will need to look at paying down your credit cards or paying off your car before applying for a home mortgage.
3. Make Sure You Have Enough for a Down Payment.
The days of no down payment loans are history for the most part. For FHA first time buyer loans and Veteran’s Administration loans, you will need to have at least 3.5 percent of the purchase price as a down payment. For traditional loans, count on having to put down 10 to 20 percent of the purchase price. Remember the more money that you are able to use as a down payment on the home, the more equity that you will have and the lower your monthly house payments will be
An agent who has experience with first time buyers, like the buyer’s agents at Real Estate Unlimited, will explain each step of the home buying process. They will have contacts with lenders who also work with first time buyers. If you find that your dream home is a short sale or a foreclosure, the angent can help you navigate the more complicated process involved in purchasing these homes.
After your offer on the home you have chosen has been accepted, you will have 30 days to have a home inspection completed and, depending on the terms of your contract, request that the homeowner either make repairs to the home or reduce the purchase price so that you can pay for the repairs. Often costly structural issues, such as foundation issues or roof problems, cannot be found just by looking at the home. A home inspection will prevent you from having unpleasant surprises.
If you have decided it is time to buy your first home, contact a los angeles real estate agent at Real Estate Unlimited Agency by calling (213) 375-8738 or contact us online and we will guide you in your journey to making your first home purchase.