Construction and real estate
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The dilemma of saving for a down payment
Why do I need an inspection when buying a home?
What is a short sale in real estate?
When I sell my home, how do I caluculate my net profit?
What is a Leaseback period in a real estate transaction?
What is an Escrow period and why is it required?
What's my strategy in reviewing buyers' offers?
Should I accept a backup offer when selling my home?
What are Disclosures in a real estate transaction?
What's a CMA in a real estate sale?
How should sellers prepare to sell a home?
What inspections will buyers schedule when purchasing my home?
What are contingencies in a real estate transaction?
The dilemma of saving for a down payment
It is no secret that Los Angeles is one of the priciest places in this country to live and actually maintain a relatively decent quality of life. Combine this reality with the downturn of the economy the past few years and the high unemployment rate and you have scores of individuals just struggling to get by. As a result, this would appear to keep homeownership out of reach for a good number of Angelinos. However, the amount most people pay for rent is very close to or equivalent to a mortgage payment. Therefore, the main barrier to homeownership Realtors encounter most often with first time buyers is the dilemma of saving enough money for a down payment.

So how does one tackle the down payment dilemma? To start, determine how much you can afford to buy with and calculate that by at least 3.5%, which is the minimum down payment required for programs such as FHA, geared at assisting first time and modest income homebuyers. The amount a buyer is capable of affording can also be determined by speaking with a loan officer or doing research on the internet using home buying calculators on various websites.

Next, a commitment to saving a portion of your income every pay period must become a priority. If your paycheck is already stretched to the max, consider taking on a part time job to accomplish this. Think of it this way, if you were moving into a new apartment that cost $2000 per month, typically the first and last month’s rent is required, which would total $4000. Funny how people miraculously come up with the money to give a landlord, but struggle when it comes to a down payment for their own home.

The most unpopular advice given to potential buyers is to consider moving in with a friend or relative for a while to tuck away money for their down payment that would normally go towards paying rent. If you do this, keep in mind that you cannot live anywhere free, so do not use this as an attempt to freeload or take advantage of people who are trying to help you.

Some buyers erroneously believe that they can purchase a home with no money down. Not quite sure how this misconception came about, but this could be the furthest from the truth. This may have been done during the real estate boom where creative financing and maneuvering was involved, however, if something sounds too good to be true, it usually is.

At the end of the day, not everyone can afford to purchase a home because of various reasons, but the down payment is one thing that is achievable if one is willing to make some sacrifices and does not become discouraged along the way. In order to save, you must implement the four "S" system of (stop spending, start saving). Remember, as with any goal you are trying to reach in life, there has to be a change in mindset and if you cannot discipline yourself enough to save, then homeownership may not be for you.

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