Profile picture for Mac Inger

Few questions from a first time buyer

Hello everybody. It seems like there is a lot of helpful people in this section so i am hazarding a couple of questions. Since finding the right girl i have been thinking about buying us a first house. It looks like in our area (Los Angeles...hollywood, west la, silverlake, echo park, downtown etc) minimum prices for something that would meet the lifestyle we are used to would be 480k-600k. Now the questions and info,...our credits are not so great: about 670. (i have hired a specialist to dispute some elements in the credit reports but that can also take months). My income is around 100k a year. Sometimes more (130-150) and sometimes less (80k-90k) depending on how lazy i am :) ...i am a freelance artist. Since i never thought i would buy a house in LA before i never really cared too much about the credit or saving,..so for the moment i have about 50k saved to go for a downpayment. Is this doable? Or should i get to work, save 100k (it might take a bit), fix my credit and then see?....i would like not to as i would have to sign other leases at pretty much the same amount as a mortgage monthly payment. Is FHA something to be looked at? Or do only a few lenders offer that? I am also a teacher if that helps any Thank you in advance for all help Best
  • October 20 2011 - Los Angeles
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Answers (13)

Profile picture for Mac Inger
Rudi thank you for your offer and the advice. I have your contacts.

Dan,..thanks for the links, need to do some reading. As far as renting vs buying,...i have rented in LA for the past 10 years. Im a bit over it. Would like to own...

You know what they say (at least in my parts): Man needs to:

1. Build a house
2. Have a kid
3. Plant a tree

then you can say goodbye :)
  • October 21 2011
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Mac,

Your welcome. Your income is good. You have enough for a 5% to 10% down payment. I wouldn't pay-off the bikes as of now. There are "what-if" scenarios to see if that would help.

You don't need to pay a "specialist" to dispute items in your credit report, I can help there and help you with a conventional loan with as little as 5% down. I don't originate 3.50% down FHA loans.

Happy funding, Rudi
  • October 21 2011
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Profile picture for the_country_hick
Mac, just be sure that buying makes sense. It may or may not in your case. Paying a small premium to own I can understand. Paying a lot more is a different story.

Read the blogs below before deciding to buy.

"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

"Why rent if you could buy for less money? Valid reasons inside."

Once you have decided to buy consider the blogs below.
"Questions I would ask when purchasing any property."

"What should I watch out for when choosing a home to buy so that I don't jump into a money pit?"




  • October 20 2011
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Profile picture for Mac Inger
Thank you Rudi. Gathering up the 20% (120-140k..) will take more time then just paying the MI fee,...thats my thinking at least. Myabe its wrong..?

I think i have about 12k debt on a couple of motorcycles. I can pay that off quick or add that 12k to the downpayment for the house. I have kept the monthly payments on the bikes as a means to get my credit up (?) rather then because i didnt have the means to pay them off...
  • October 20 2011
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Mac,

Your income is fine. You should be OK. You didn't mention anything about about your debt. The main thing lenders use for qualifying is the borrower's debt-to-income ratio (DTI). I lieu of a FHA loan you can get a conventional loan for as little as 5% down. Any loan with less than 20% down will require mortgage insurance (MI). FHA also has an upfront MI fee.

I would certainly check with your credit union first. That will give you something in hand to shop around with if you desire to do that.

Good luck on wanting to stop smoking.

Happy funding, Rudi
  • October 20 2011
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Profile picture for Mac Inger
Upon my honor, as i carry my girl through the doorstep, no more smoking. I like to build things so i will take the nonsmoking frustration to breaking walls and building garages and pools or whatever.

Sorry for derailing my own thread. :)
  • October 20 2011
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Profile picture for sunnyview
Zillow is great place to ask whatever questions you have and get links to information. I always get good helpful answers here.

p.s. If buying a house will make you quit smoking, I think you need to buy right away ;)
  • October 20 2011
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Profile picture for Mac Inger
Thank you very much for the quick replies.

Gary: Yes, i am on 1099 and have been for many years. My income is "consistent" within the range i was mentioning. I will be starting to ask around for a good loan broker. As far as the interest rates go, that is one of the reasons i wanted to buy sooner rather then later.

sunnyview: I didnt know about FHA until yesterday and rad up a bit on it. Seems like a decent way to get into a house and stop paying rent. My rent has been at 2300 for the last 4 years. I am comfortable paying above that for a house...of course as you say, taxes,insurance etc need to be added, but if i quit smoking i can definitely cover those,...and get healthier in the process :)
I will talk to my CPA about the deductions under this light.

Spirit: thank you,..i will do that and go talk to local lenders. I hear from coworkers entertainment credit union is decent and i can work with them since i am in the entertainment industry.

Montgomery: Yes self employed, under my own LLC. That is the standard for the kind of job i do. Is the 2 year average what the standard is for looking at income or just as many years as necessary. I have been living/working in LA for the past 9 years,...maybe that gives a better/bigger picture ?

The reason i was intersted in the FHA was that the downpayment cost of entry was negligible and an interesting option to get smth tht i think i can afford as far as monthly payments go, but not have to come up with say 150k. Houses under 400k around here dont look like a lot of fun to live in...

thank you again gentlemen (and ladies ?).
  • October 20 2011
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Profile picture for Jeff Giordano
Here is the number of an excellent mortgage broker.. he can pre-qualify you for a loan and then you are ready to look.  Please let him know I referred you and he will take the best care of you.

Home Loans LA - Bob Drapeau [phone removed by Zillow moderator]

Please give me a call when you've completed the pre-approval process, I would love to earn your business.

All the best,
Jeff Giordano
[phone removed by Zillow moderator]
  • October 20 2011
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If you get a 1099, financing can be a bit tricky, especially if your income is inconsistant. I would advise staying away from the large banks as they seem to be the leats helpful today and find a good loan broker in your area or your Realtor should be able to help you. There is a good chance that you may be paying a higher than normal interest rate, but keep in mind that a higher than normal rate today will seem cheap in a couple years when rates get back to normal.  
  • October 20 2011
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Profile picture for sunnyview
You are asking lots of good questions and it sounds like you have given buying some thought. Many lenders offer FHA and their minimum down is 3.5%, but the fees from what I read tend to be higher overall than doing a conventional loan as long as you qualify. There is a good mortgage calculator here where you can run numbers at different salaries and downs.

Most mortgages where you have less than 20% down will either carry a higher rate or will have monthly PMI added. PMI can run $80-140 a month depending on the house. There is a ballpark calculator for that here. Putting more down will also reduce your monthly payment, but it is a balance of where to put your money too.

I would start by looking at what you want to pay every month in a mortgage payment. It is always helpful to start with looking at what your current rent is now and then see how much house you get for that once you figure in mortgage/taxes/insurance if you buy. If you feelance, you also want to site down with a lender and ask about how your income will be viewed by underwriters and whether you should change how you take deductions on your taxes. Sometimes planning ahead in the tax return department can help lenders document the income that you will need to qualify for the house you want.
  • October 20 2011
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I would go get pre-approved first, talk with a local lender. This should not cost you anything & they will tell you, show you what you are pre-approved for.  No sense looking at a house for $ X if you cant get a loan for that much.  Also, they can show you what to work on, how to increase your credit scores and etc.  That way if now is not the right time for you, keep saving, keep working on your scores and soon it will be.  Next, talk with friends or family about a referral for a buyers agent/Realtor.  Let them work for you.  Best of luck.
Spirit
  • October 20 2011
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It sounds like you are self employed.  If so, you would be qualified based upon your net income after expenses with add backs for paper losses such as depreciation.  Also, your income would be averaged over the past 2 years.  In order to get appropriate advice, your tax returns need to be reviewed.
  • October 20 2011
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