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6 Signs You Are Ready to Buy vs. Rent in LA
Los Angeles is where people go to chase their dreams.
And it is common for folks chasing those dreams to rent an apartment when they first come to the city. It is appealing to spend a year or two in Santa Monica, then move across the city to the Hollywood Hills or Los Feliz.
The flexibility of renting is fun and convenient, but it builds no equity into your future. And it is hard to tell when it is the right time to make the switch, as there are several hurdles to clear before searching for a home.
To help buyers figure out if they are ready for their homeownership journey, the team atPrevu Real Estate put together a list of personal milestones that may signal it is time to switch from renting to buying.
You Are Confident In Your Career
There are plenty of jobs in Los Angeles, but renters should not start searching until they feel happy and secure in their career.
New grads commonly rent with friends or strangers in their first few years out of school. However, after a few years of stability in your career, it may just be the right time to jump on the homeownership ladder. Plus, lenders look for longevity when evaluating borrowers. The rule of thumb is to have at least two years of stable employment under your belt.
Of course, not all careers are the same. Freelancers should save their 1099s and salaried employees their W-2s, so they can speak with lenders to understand what they qualify for.
You've Saved Enough For A Down Payment
Purchasing a home is one of the most expensive things a person can buy, and this is especially true with the rising real estate prices in Los Angeles.
Investing in your future by building long-term equity is critical. That said, purchasing a home is not just a long-term expense where you shell out monthly mortgage payments. Buying a house requires a sizabledown payment plus closing costs. All in all, LA buyers can expect to show up with at least an average of 25% of the home price when the deal closes.
Lenders prefer borrowers who have ample funds put aside since it shows you can continue to make mortgage payments even if an issue arises. Ideally, you will have saved several years' worth of cash reserves built up for a rainy day fund, in addition to your down payment.
You Can Secure A commission Rebate
While there are plenty of buyer's agents out there, not all are the same.
Aspiring buyers in Los Angeles should interview multiple brokers to get a sense of their neighborhood knowledge, deal experience, and if they offercommission rebates. Sometimes called commission refunds, these rebates enable buyers to receive a portion of the broker fee their agent receives for representing them.
Modern brokerages likePrevu Real Estate streamline the homebuying process for buyers and their agents. This allows Prevu to provide new homeowners with up to 2% of the purchase price back to the buyer in the form of a rebate.
For example, if you buy a $1,500,000 house in Culver City with Prevu, you could receive up to $30,000 cash back at closing. That’s a huge savings that can make you more confident to make a higher offer, or more relaxed that you’ll have extra funds for renovations or new furniture after closing.
Your Credit Is Strong
Aside from a stable career and a savings cushion, renters looking to purchase their first home should also have good credit.
Part of what dictates your credit score is consistent payments on bills ranging from car payments to monthly credit card payments.
But there are other ways to build credit without financing a car purchase. For instance, renters can build credit by paying for subscriptions, gas, food, and other items on credit cards, then consistently paying off the entire balance every month.
It is critical to avoid financing any large ticket items in the same year as a home purchase. Lenders balk when they see sudden surges in credit like car loans or other large financed purchases.
You Can Lock In A Great Mortgage Rate
While there are many personal reasons why people purchase a home, there are external ones too. One of the most powerful drivers is access to attractive mortgage rates.
Interest rates are near historically low levels. While the Federal Reserve is not anticipated to raise rates until March, buyers should move fast if they plan to purchase a home this year to avoid the risk of higher mortgage rates later this year.
Renting builds no long-term equity, and Angelenos have never had a better opportunity to lock in favorable financing terms than now. Despite the high prices in the current competitive real estate market, aspiring buyers still have a chance to make the switch to homeownership and save thousands in interest payments.
You Know LA Like The Back Of Your Hand
After years of renting, many Angelenos have an idea of what neighborhoods they love.
That is the beauty of renting. Locals get a chance to sample different neighborhoods for a year or so, then pick up and move to a new one. Years of renting experience help renters know if they prefer settling for the long term in Santa Monica or Pasadena.