Houses For Sale in Manhattan Beach, Beverly Hills, Rancho Palos Verdes, California
What is the best choice: To Buy? Or Not To Buy? buying or keep renting?
A few exceptions are for people who have very low rent, or who plan on moving frequently or in a few years. It’s important that you to figure out whether buying is a good idea or not for your situation. A proof of this is the 3 millions searches results when people search for “home for sale Manhattan Beach”, or “home for sale Beverly Hills or “home for sale Rancho Palos Verdes”.
Basics of buying a Home
When you buy a house you don’t pay cash. You rather take a loan (called mortgage) and pay your home in monthly installments. You make a small down payment in cash (usually 3.5 to 20% of the home sale price), and you get a mortgage loan from a bank for the rest of the house payment. You make payments on this loan every month for 15 or 30 years, until the mortgage is paid in full.
What kind of home can I afford?
When buying a home in Rancho Palos Verdes, Manhattan Beach or Beverly Hills, the rule of thumb is that you can afford a home worth about three times your annual household income. If your combined income is $250,000, you could afford a $750,000 house. What about selling a house in Martha’s Vineyard?
On occasions you could afford a certain home, then consider getting a bigger home than you need and renting out part of it. This is especially a good investment for single people, where the smallest home they can find might be too big for their needs. Later as your income increases and you can afford to live without renters you can do so, and you’ll come out ahead by having bought sooner rather than later.
Here’s a comparison table on how the costs when you rent out part of a home you buy:
|House Size||Total Cost||Rent out…||Your Net Cost|
|2 bedroom||$1,400/mo.||1 room for $500/mo.||$900/mo. for 1 room|
|4 bedroom||$2,200/mo.||2 rooms for $1100/mo.||$1,100/mo. for 2 rooms|
|Duplex (2 rooms each side)||$2,000/mo.||One side for $900/mo.||$1,100/mo. for 2 rooms|
A friend of mine was paying $700 to live in a tiny 1-bedroom apartment. He bought a 4-bedroom house that cost her $1,400/mo., and rented out two of the rooms for $800/mo. total. His net cost per month is only $600. He’s spending $100/mo. less, and he has twice as much room, a yard for her dog, and he owns her own house.
Money you’ll need up front when buying a house
- 3 to 20% of the purchase price for a down payment. The actual amount depends on the kind of loan you get and your credit score. Your bank might offer a zero-down loan, however if you can afford to make a down payment, you should do so, because you’ll get a lower interest rate and because your monthly payments will be lower.
- Closing costs varies between 1 to 8% of the purchase price of the house. You might not have to pay this up front. The bank might be willing to add it to your mortgage. (Add them to the mortgage if you need the cash, and pay the closing costs up front if you don’t.) The actual amount of closing costs depends on how good a deal your lender is willing to give you, and the price of the house. The more expensive the home, the less the closing costs are as a percentage of the total price.
- $250 to $800 in Miscellaneous Costs. These are things like the application fee for the loan, the fee for the bank to run your credit report, professional inspection of the home, and an appraisal (if you can’t get the appraisal added to the closing costs).
- Putting these three things together, on a $150,000 house you’ll need
o $4500 to $30,000 for the down payment (unless you get a 0% down loan)
o $0 to $12,000 for the closing costs
o $250 to $800 for miscellaneous costs
Total: $4750 to $42,800. Yes, that’s quite a difference. You’ll learn more about estimating the costs for your own situation as you go through this guide.