Fun Fact: It’s easier to Buy than Rent in Los Angeles

I’ve worked with a wide array of clients.  From tenants to landlords, first time home buyers to repeat sellers.  I’ve seen the struggles that tenants are facing.  Low inventory, landlord’s high standards, and more.  But what if we look at it from a different perspective.  I would argue that it is easier to buy than rent.  Here’s why:

1. Credit Score Requirements: To obtain an FHA loan, you need a minimum of a 580-credit score.  Show that to a landlord, and it raises eyebrows and causes frowns.  Show that to a loan officer, and you are on the right track.
2. You can have a lot of debt when buying:  Although I strongly encourage everyone to seek professional financial help, with an FHA loan, you can have up to  a 55% debt-to-income ratio (total monthly debt in comparison to your monthly income).  For conventional loans, it can be in the range of 43%.  For landlords, most want in the range of 33%.
3. No pets, no rules, no problem:  Some landlords are okay with pets (usually for a fee), others not.  Some require certain inspections, or even general oversight.  For the lender, once the loan funds and you buy the home, if you make your payments on time, they leave you alone.  If you want to have three dogs and/or two cats, go for it.  Want your family of five in a two bedroom?  Have fun. 
4. Now, before you mention the down payment, you can go as low as 3% down.  By California law, a landlord can charge up to two times the rent for the security deposit (three times if furnished), plus the first month’s rent.  For a $2,000/month rent, that can be as much as $6,000.  For just a little more, you can put down on a 2-bedroom condo in some parts in town.  Even if the mortgage is higher than what you would be paying in rent, you could now be eligible for the tax write off benefits and every year that rent would go up, your mortgage payments would be the same.  Hopefully, you make more money each year, widening the positive gap between your income and your biggest expense.  Plus, as you pay off the loan and if the value go up, you can refinance (replace the existing loan with a new loan).  I did two refinances on my condo in 6 months and did one refinance on the house about a month after the construction was completed.

Don’t believe me?  It’s free to talk to a qualified loan officer to see what they say.  Worst case scenario, you can at least set up goals on what is needed to take that next step.