10 Steps in Buying A House in Los Angeles
Buying a house in Los Angeles can certainly seem like an overwhelming process, especially if you just happen to be a first-time buyer. Currently, it’s an extremely competitive marketplace. There is very low inventory and the average price of an entry-level home is substantially higher than many other parts of the country. Educating yourself on the home-buying process is of the utmost importance. You must prepare in order to compete. If you don’t prepare, it could end up costing you more than you’re willing to give up — your dream home.
I appreciate my clients’ demanding lives and aim to make efficient use of their time, as well as my own. My goal is to streamline every transaction so that every detail is handled with the least disruption to my client. Education and communication both play important roles in that process.
This following article is the first of a ten-step series, in an effort to help you better understand the process of buying a home in Los Angeles. Clarity around this process will not only prepare you to compete and help you buy that dream home, but it will also help you walk away feeling confident about your real estate transaction.
Step 1: Getting Pre-Qualified for A Mortgage
Unless you happen to be looking to purchase a house in Los Angeles all cash, you will need to find a lender, and or lenders, to speak with and begin the process of getting pre-qualified for a mortgage.
How do I find a lender? If you’re already working with a Realtor®, or there’s an agent in Los Angeles you have in mind, they should be happy to provide you with recommendations. More than likely, they have a good relationship with a preferred lender or perhaps even multiple lenders. If your Realtor® works with a ‘full-service brokerage’, that brokerage may even a have a lender in-house. The good thing about getting recommendations from an agent is that they will direct you toward those who understand the Los Angeles market, with whom they have worked in the past, and whom they know are responsive. The one thing you don’t need in this competitive market is a lender who does not communicate or doesn’t understand the local market. The lender is pivotal to a successful real estate deal. If you don’t have a Realtor® yet, ask friends, family, and colleagues who have recently purchased a home, if they’ve had a positive experience, and what lender they used. I always think personal experiences and recommendations are the best way to go, and I always highly advise that you speak to a couple different lenders to find out which one is the best fit for you.
When should I talk to a lender? If you are thinking of buying a house in the next 6–12 months, my advice to you is to get with a mortgage professional as soon as possible. If you’re reading this article because you are looking to buy now, don’t freak out. The reason I suggest 6–12 months before you’re looking to buy is because the lender will look at your credit and if it needs repairing, they’ll formulate a plan to help you repair it to where it needs to be. If you do have bad credit, with their help, you can see results in 12 months and sometimes as little as 6 months.
Why do you need to talk to a lender? The most important reason to speak with a lender is that, unless you’re paying all cash, you will not be able to make an offer on a property without a *pre-approval (pre-qualification) letter. It will not be accepted.
In order to shop for a house in an effective and successful manner, it’s naturally important to know how much home you can afford. Many people think they know how much they can afford, but a lender will give you clarity around this. You may not be able to afford as much home as you think, or maybe learn that you can afford more. At the end of the day, what the lender says you can afford is what matters since they will be the ones qualifying you for a loan. After talking with a lender you will have a much better understanding of the type of home you will be looking for.
Your lender will walk you through the process of getting pre-qualified for a loan. Getting pre-qualified is the initial step in the mortgage process, and it’s generally fairly simple. After evaluating your information, a lender can give you an idea of the mortgage amount for which you qualify. The difference between ‘pre-approval’ and ‘pre-qualified’ can be confusing and not everyone uses these terms correctly, but the actual pre-approval process does not begin until you are in escrow and the lender starts the actual loan application. Being pre-qualified for a loan does not always necessarily mean you’ll end up being approved for a loan.
When you sit down with your lender, they will discuss the various loan options available and help you decide which one is best for you. They can also help you decide how much money you will pay in your down payment. You can put more money down which will give you less monthly payments. Putting less down which may incur mortgage insurance payments (less than 20% down).
Discuss with your lender what your total monthly payments you can afford including principal, interest, tax, and insurance (PITI). Don’t forget to factor in your closing (the charge for the loan), escrow and moving costs into your budget.
In this low inventory market, you need to have your financials in order before you go looking for houses. When you see something you like, you need to act fast, be one hundred percent ready to go and be ready to pull the trigger. Chances are you will be in competition with other buyers, some of whom are likely to be cash buyers. Learn how to compete with all cash buyers. Getting solid financial information before you start looking for a home will help make you a more educated and successful buyer.
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