Successfully buying a home is a large undertaking that demands research, forethought, patience, and discipline. Money is, of course, a large part of the equation, so let’s answer an important question: How much do you need to save before buying a home in Los Angeles?
Put Together a Budget
The first place to start is to make a detailed budget listing all of your income and itemized expenses.
Don’t leave anything out, including your regular monthly payments for any debts you currently owe. You need this in order to responsibly move forward with the beginnings of the mortgage pre-approval process, or put in an offer on any property down the line.
Pick Your Target
Your next step is to look through listings to find a property or neighborhood that catches your eye.
Do some market research in those neighborhoods to see what sorts of amenities are available in the surrounding area, and if you think it would be a good fit for you. Another thing to consider is transportation. If you’re used to using mass transit, check any connecting lines, and plot out your commute to and from work to give you some idea of your average day when living at that location.
You’re looking for a space to settle down for a while and want to make sure it’s comfortable, so taking the time to learn a bit about that area could help you determine what works best for you.
What Can You Afford?
With an idea of where you’d like to move and your detailed budget, it’s time to figure out what is a realistic price for you to pay, so you know how much you need to save before buying a home.
Your goal should be to put 20% of the total purchase price down to avoid paying additional monthly fees to your mortgage lender in the form of Private Mortgage Insurance, or PMI. To figure out how much of a down payment you will need to make, take the total purchase price of the home and multiply it by 0.2 – this will give you the 20% you’re trying to reach.
Be realistic with yourself here, and don’t stretch your finances so thin that you end up buying your lovely new – and empty – home.
Rework the Numbers
After coming up with some reasonable properties that you think are within your financial reach, take a second look at your budget.
When making the second pass at your budget, you’re looking for places you can attempt cutting expenses a bit in order to save before buying a home. Perhaps going out for meals a little less often can get you to your goal a little faster, and it would likely be worth it.
Once you have your reworked budget and savings goals ironed out, make sure you do your absolute best to stick to them.
Account for Everything
One final thing you will want to do is take into consideration any additional expenses that can fly under the radar for some people.
When you buy this house, chances are you’re going to incur some more expenses from moving, utility bills, homeowners insurance, or maybe you need to pick up an appliance or two. If you’re moving into a neighborhood with a Homeowners Association (HOA), you will likely be required to pay some monthly or annual dues to that organization.
Meeting your first savings goal to put 20% down on the property was the baseline, and now you will want to have a little bit of a financial buffer zone to make sure things don’t fall through right after the move.