With the weather we have been having it feels like summer has practically arrived here in LA! You might be thinking about buying a house… This blog guides you through the first stop on how to prepare to buy a house–or condo–in LA. And the tip is you should get started even before you start looking.
Know your budget
Don’t waste time…
If you are paying cash of course you know your budget so start looking! Remember property taxes are approximately 1.25 percent of the purchase price–due every year–so be sure to count this into your monthly/yearly expenses. Condos have Home Owner Association dues, so make sure to also include them in your budget.
How to determine your budget when acquiring a Loan
Getting a loan is something you need to think about well before you’re ready to put in an offer. So, if you intend to obtain a loan you will need to get a pre-approval letter from a licensed lender or Bank to present to the seller with your offer to purchase. I suggest you do this before you start your search as it can save you a lot of wasted time. Together with the lender you will determine what your budget will be. This will be based on the down payment you wish to make, and what you want your monthly mortgage payments to be.
You will have to provide the lender with all your financial information:
- tax returns
- savings accounts
- property ownerships
- other loans etc
You want to have this approval letter ready before you make an offer. A seller will not take your offer seriously without it especially if you find yourself in a multiple bid scenario then you’ll be significantly disadvantaged.
If you’re a foreign national only a few banks do these loans. I can refer these lenders to you. Just be aware you will need a higher down payment, usually 35% or more, they will require i-depth financial verification and information, and, it may take a lot longer time to process. It may also mean that the interest rate could be higher than available local rates.
Credit! Credit! Credit!
In order to get the best loan with the lowest interest rate possible, your credit is extremely important. It has to be in great shape. Make sure you are on top of your credit, check you have paid all your bills on time and have nothing outstanding, even one unpaid bill of as little as $100 can affect the interest rate you’re offered. It is also very difficult to resolve after the fact and already in the escrow process.
The higher your FICO score the lower your interest rate.
Yes, it’s true. Interest rates are offered to you based on your credit rather than promotional specials.
Don’t make any major purchases several months before you intend to make an offer
Resist buying a new car, or new appliances for example. This can affect your loan to debt ratio and can lower your borrowing power. Wait until after you have closed escrow for that! This is why it is so important to speak to your lender before you start looking, they will be able to advise you on all aspects of your credit and income to maximize your buying power.
Apply to more than one Bank or Broker
I recommend double applying with either two banks or a bank and a broker. Different banks and lenders have varying guidelines and programs they offer, therefore rates can differ. You will have to provide a lot of paperwork to one bank so why not give it to another at the same time when you’ve already done the hard work.
If you have been banking with one for many years this is usually a great first option, I can provide referrals for other reliable lenders and brokers. It is always good to have options!
With these important factors in place you are ready to go out and start looking for your dream house. A great agent to represent you is imperative … and, of course, I can help you with that!
All the best!