As more people seek to become homeowners, Los Angeles is one city in the US that continues to attract these potential homebuyers. The warm weather, cultural diversity and diverse job market are some of LA's features that they find attractive.

If you're considering such a long-term investment as buying a budget-friendly home in Los Angeles, here are practical steps to help you achieve your homeownership goal without breaking the bank.

Key points

• Buying a house in Los Angeles is a big investment, considering the fact that the median home price in Los Angeles in 2023 currently stands at roughly $980,000.
• House budgeting tips for people in Los Angeles include: Setting a realistic budget, figuring out how much you can afford, planning for a 20% down payment and exploring different neighborhoods.
• Working with an experienced real estate agent can be beneficial as they can help you identify properties that fit your budget and guide you through the entire home buying process.

Disclaimers

The contents of this article are for educational purposes only. They are not intended to be a source of professional real estate advice. You will find experts on real estate investing here.

Work with the best real estate agent in Los Angeles

As a potential homebuyer considering investing in the Los Angeles real estate market, partnering with a licensed real estate agent is very beneficial as they will help you navigate the home buying process.

Ila Corcoran is a licensed Realtor and SVP of Real Estate Operations and Advisory services at Bay Street Capital Holdings. Having lived most of her life in Los Angeles, Ila has comprehensive knowledge of the Los Angeles real estate market. So far, she has managed to successfully close real estate transactions worth $10.4+ million.

With a Bachelor's degree and two minors from California State University Long Beach, and an active Real Estate License, Ila's specialty is in residential real estate. As you consider buying your first home in Los Angeles, Ila can assist you to:

• Identify neighborhoods which offer affordable housing options, taking into account factors like price trends and amenities.
• Identify great properties that fit your budget and preferences.
• Secure the best possible deal by negotiating with the seller to ensure that the selling price aligns with your budget.
• Understand whether the current market is a buyer's or seller's market. This information can help you time your purchase so that you get the best terms possible.
• Connect with other trustworthy professionals such as mortgage brokers, home inspectors and contractors.

If you're looking to partner with the best Realtor in Los Angeles and the greater Southern California region, get in touch with Ila today.

How to buy a house within budget in Los Angeles

If you're looking to buy a house within budget in Los Angeles, here are some tips to help you in your home ownership journey.

Be willing to start small

Starting small and prioritizing essential housing needs over luxury features is an important thing to consider when buying a budget friendly house in Los Angeles. Your first home doesn't have to be your forever home, so don't be afraid to start small. It's okay to buy an apartment or smaller single family home as your first house.

The Los Angeles real estate market is very competitive, as a result, being patient, saving consistently, and working with a local Realtor can help you find a property that aligns with your financial goals.

Set a realistic budget

Los Angeles is an expensive city to live in, and the median income is roughly $98,200. According to Redfin, the median sale price of a home in Los Angeles in 2023 is $980,000. Before you start house hunting in Los Angeles, it is advisable that you first come up with a budget to determine how much you can afford.

Some important factors to consider are your average income versus your recurrent expenses such as utility payments, groceries, car payment, health insurance and credit card payment. Once you've run the numbers, come up with a realistic budget that aligns with your current financial situation. It is recommended by experts that you shouldn't spend more than 28% of your gross monthly income on housing related costs.

Another helpful tip would be to separate the needs and wants in your monthly budget so as to have a clear picture of what is a necessity and what's not. That way, you can see how much in total you can regularly set aside to buy your Los Angeles home.

Figure out how much you can afford

After consolidating your earnings, look at the cost of the Los Angeles home you want to purchase and then work backwards to determine how much you can afford in monthly mortgage payments for the house.

A general rule of thumb is that your housing costs should not exceed 28% of your gross income, but this can vary based on individual circumstances. Beyond the purchase price, additional home costs that you should consider include:

• Principal and interest payments on your mortgage.
• Property taxes which are usually paid annually.
• Private mortgage insurance, depending on how much you put down for down payment.
• Homeowners insurance which offers protection for your home in case of an accident or natural disaster.
• Homeowners association fees depending on where your home is located.

Plan for a 20% down payment

Before you start looking at the different mortgage loan options in Los Angeles, it is advisable that you first save up a 20% down payment for the house you want to buy. While it can be tempting to explore low or no down payment options, putting down a 20% down payment can work to your advantage.

To find effective ways to save the 20% down payment, consider the cost of the house you want to buy and how much you can save from your annual income. To further simplify things, take the 20% down payment cost and break it down in months to see how much you can save each month.

Having a bigger down payment when planning to buy a house can help you secure a more favorable mortgage interest rate, which can significantly lower your monthly payments over the life of the loan. Also, paying a 20% down payment reduces the need for private mortgage insurance (PMI), which will enable you to save more money.

If you don't have a 20% down payment, that doesn't mean you can't buy your dream house in Los Angeles. VA loans, FHA loans and conventional loans are some of the loan options that can allow you to get a mortgage with as little as 3% down payment.

Work with a local real estate agent

Another way to get the best deal in the Los Angeles housing market is by working with a local real estate agent who understands the housing market. A local agent can help you identify properties that fit your budget, negotiate effectively on your behalf and guide you through the entire buying process. With the median priced home in Los Angeles standing at $980,000 according to Redfin, working with an experienced real estate agent can help you find a home that fits your budget.

Explore different neighborhoods

Los Angeles is known to be one of the most expensive cities in America, but that doesn't mean you can't find an affordable house in a safe neighborhood. By expanding your search beyond the city's most expensive areas like Beverly Hills and Santa Monica, you can find good houses in affordable and safe areas like Lancaster and Baldwin Park.

Consider neighborhoods that may be slightly further from the city center yet offer attractive amenities such as good schools and convenient access to public transportation. These areas often have more affordable housing options while still providing a high quality of life. If you work remotely, you can easily explore areas away from the city center with affordable housing as you don't have to worry about commute time and transportation costs.

Working with a Los Angeles real estate agent might also be a good move as they can help you find your ideal home that is well within your budget.

Prioritize your needs vs. wants

For many aspiring home buyers in Los Angeles, the hope is to find a house that ticks off all the boxes on their checklist. However, this may not be the case if you're working on a budget as you may have to prioritize the things you need over those that you want.

Therefore, before you get started on the house hunting process, it is important that you first define your non-negotiable needs, which would include the type of house that you want, be it a single family home or an apartment, number of bedrooms and other essential amenities. These non-negotiable features can be informed by your lifestyle and family set up. Once you've established your must-have features, you can then identify your wants, which would ideally be features like an outdoor pool or wine cellar that you desire, but can live without in your day-to-day life.

By having a clear distinction between your needs and wants, you can focus your search on homes in Los Angeles that meet your needs while avoiding the temptation to overspend on extravagant features or unnecessary upgrades. With this approach, you can stay within your budget while enjoying the benefits of homeownership without straining your financial resources.

Get a home inspection done

Before you settle on a home, ensure that you get a home inspection done. While it may seem like an additional expense, it's actually an investment that can save you money in the long run. A professional home inspection can uncover hidden issues or potential maintenance problems with the property, allowing you to make informed decisions about the purchase.

In Los Angeles, where home prices are high, you want to ensure that the house you buy is in great condition. A thorough home inspection can help identify structural problems, plumbing issues or water damage. Identifying these problems early on can give you leverage in negotiations with the seller and may lead to necessary repairs being made before you close the deal.

By investing in a home inspection, you free yourself from the burden of unexpected post-purchase expenses.

Factor in closing costs

As you budget for your home in Los Angeles, be sure to factor in closing costs as they can affect the total price of the home you want to buy. Closing costs include different fees and expenses associated with finalizing the real estate transaction such as lender fees, title insurance, escrow fees and home inspection fees.

In Los Angeles, where real estate prices can be high, closing costs can come up to a substantial amount. To avoid any surprise costs, be sure to consult with your real estate agent and lender to estimate your closing costs accurately.

Be prepared for competition

The Los Angeles real estate market is known to be very competitive, and so when you find a house that fits your budget and needs, be ready to act quickly. Having pre-approval for a mortgage can help you when negotiating with the seller.

In Conclusion

Buying a house within budget in Los Angeles requires careful planning and having realistic expectations. By doing thorough research and working with a reputable real estate agent, you can find a home that aligns with your budget and needs. If you're in the market for a qualified real estate agent to work with as you plan your home purchase, schedule an appointment with Ila today.

Bay Street Capital Holdings

Bay Street Capital Holdings is a well-established, Black-owned wealth management firm that offers financial planning, investment advisory and risk management services to its clients. Founded by William Huston, Bay Street is driven by a mission to champion diversity among entrepreneurs and founders.

What truly sets Bay Street apart is its innovative approach to addressing risk and volatility in investment strategies, all while ensuring excellent profitability for its clients.

In 2023, Bay Street managed to secure a finalist position in the prestigious Asset Managers: Diversity, Equity and Inclusion category at the 2023 WealthManagement.com Industry Awards. This recognition was a direct result of their successful partnership with Resthaven Properties, demonstrating their commitment to fostering diversity and inclusion in the real estate sector.

Sources

https://www.rocketmortgage.com/learn/how-to-budget-for-a-house

https://www.moneycrashers.com/stay-budget-buying-house/

https://www.ramseysolutions.com/real-estate/5-steps-to-buying-home-wont-bust-your-budget

https://www.redfin.com/city/11203/CA/Los-Angeles/housing-market