WatchPatrick:
I wanted to clarify my knowledge based on extensive readings of your
links. I am currently renting a 1 bedroom for 1200 dollars in Los
Angeles. Based on Zillow’s mortgage calculator I could buy a 250,000
house with a 20% down and have about a little over 1200 mortgage per
month based on current rate of 3.5%. Another issue with comparing
rental prices of 1 bedroom apts to 1 bedroom houses is that 1 bedroom
houses are not common. Most houses will start at 2 bedrooms. There
are decent houses in Norwalk and Long Beach going for 250,000. My
household income is 100k annually and cost of maintenance will put the
monthly housing cost to about 1500 conservatively speaking.
The ultimate question is should I buy it based on the rental price
comparison or should I wait because the economy is still in shambles,
and we are in another low interest housing bubble about to burst in a
matter of time, not to mention the number of distressed inventory or
foreclosures?
thanks
Ed
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Clearwater, FL
You're forgetting property tax and house insurance. Which will run between 300-400 for Property tax and about $100 a month for insurance (depending where you live). making that $1500 a month number really about $1900 a month.
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FloridaBill says
I don't think so. P+I on a $200K loan is only ~$900/month. And $300+ of that $900 is principal.
$1200 should be pretty close to PITI.
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If price is near rent now you should be fine to buy.
Of course, As Bill said, don't forget to calculate property taxes into it. On 250,000 you are looking at annually around $2,500 in taxes plus $100 to pay the LAUSD racket fee.
If you are sitting on cash I'd wait for rates to go up where prices will go down and you'll benefit with lower taxes, more tax write offs, and an obviously lower prices.
Personally I don't think housing prices have room to grow with all the speculation there, even if economy rebounds.... which is a big if. So there is no rush. Just do what makes you comfortable.
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Check it at 4%, which is more of a realistic rate that you'll be able to get.
3.4% is the rate you can get on a 15 year loan, not 30... unless in the last week something changed.
http://www.nytimes.com/interactive/business/buy-rent-calculator.html - should help you compare rent vs buy scenario.
CA is generally a bad place to buy, so I'd approach any purchase with a lot of caution to make a prudent financial decision.
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FortWayne says
My friend just got a quote of 2.875 on 15, and 3.5% on 30. This is for somewhere between 500 and 729k. I think that a 250k mortgage would be less, there's some breakpoint between 250k and 500k.
rates did drop this week.
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Los Angeles, CA
Earlier in the week on unionbank.com I saw they have 3.2% 5 year IO ARM. This gives 400k loan for 1183 a month.
The intrest only loans basically dissapeared in 07 I thought. Get it while you can.
Im OK with an ARM loan, the most you can lose is your DP. Also I predict low rates the rest of our lives due to large govt deficits to eternity. And you can always refi into another ARM if your 'arm explodes' and if not just squat for 3 years till you 'get your dp back' from not making mortgage pmts for 3 years.
The real risk is not if rates go up, you are gold then. But if rates continue downward spiral the bubble gonna get crazy. Again.