Dear Phyllis,
We have been married for five years and managed to save over $50,000. Although, we haven’t started a family, we really want to purchase in La Crescenta because of the school district. With a starter home going for well over $700,000 I just don’t see how we can ever save enough for a down payment. I know there are low down payment options but then we can’t afford the monthly payment. Although our parents are supportive they are not in a position to help financially. Do you have any secrets as to how we might achieve our dream? First Time Buyer Woes,
Dear First time buyer woes,
Sadly, the home ownership rate is at its lowest since 1965. You are not alone, owning a home is becoming more and more elusive.
Last year the median La Crescenta home sold for $795,333. If you want to purchase an $800,000 home with 10% down you will need $80,000 (plus closing costs). Your loan amount will be $720,000. At 4% interest your principal and interest payment (mortgage payment to the bank) will be about $3,440. As your down payment is less than 20%, the bank typically requires private mortgage insurance of $350 monthly. However, if you can accumulate 20% down – $160,000, your mortgage payment drops to about $3,050 and you eliminate the $350 for mortgage insurance. The additional $80,000 (down payment) saves you more than $700 a month. (For precise mortgage information, please contact a lender or mortgage broker).
I am sure you have tried all of the tricks to save money…. The biggest budget buster at our home is dining out. Your next high-ticket items are likely rent and car payments. Let’s assume you are paying $2,000 a month in rent. If one of your family’s would welcome, you back home you could save $24,000 a year just by not paying rent.
The two of you need to sit down and have a very serious conversation as to how you can turn your dream into reality. Tough, realistic decisions need to be made. Perhaps you won’t be able to afford a home but will need to settle for a La Crescenta condo or townhome. Or maybe this is out of reach as well. If this is the case, consider buying a starter home in Sunland and renting it out. This will not be ideal, but you will still qualify for the tax savings that home ownership provides and the opportunity to amass equity over the long term.
I know without financial help from family this will be a struggle but if you make some difficult decisions, it will be well worth the sacrifice. Sadly, not prioritizing homeownership is a very costly mistake. Purchasing a home is the pathway to wealth. The average homeowner is nearly 40% wealthier than a renter. Best Wishes to you!
