Frequently Asked Questions When Buying a Home in L.A. What Can I Afford?

If you are buying a home in Los Angeles, especially if you are a first-time home buyer, you probably have a ton of questions.  I am not going to be able to cover them all, but hopefully this series will answer the main ones.

Q:  What can I afford?

A:  The first step you will want to take is to consult with a lender.  They will determine if and what you can afford to buy. This will be based on:

  • Your gross income
  • Available cash for downpayment, closing costs, and lender-required reserves
  • Outstanding debts
  • Credit history
  • Mortgage type
  • Interest rates

Also taken into consideration is your debt-to-income ratio, also known as front-end and back-end ratios.

The front-end ratio standard is around 28% and factors in how much of your gross income will go towards your mortgage payments.  These payments include principle, interest, taxes and insurance (PITI).  Simply put, if you are earning $100,000 a year, your monthly payments should not be more than $2,333 a month.

The back-end ratio is your total debt-to-income ratio, i.e. all your debts, including credit cards, monthly homeowners dues (if applicable), car payments, loans, etc.  This should not exceed 36% of your gross income.  In this case, based on your  $100K salary, not more than $3,000 per month.

This is a simplified explanation of a lender’ requirements, but will give you an idea of what to expect.  For a more in-depth explanation you will need to contact a qualified mortgage lender.

More frequently asked questions

What Can I Afford?
What are the Closing Costs?
How to Read an MLS Listing
What are the Different Listing Statuses?
Understanding the Purchase Agreement
What is Title Insurance?
How to Take Title
Should I Buy a House or a Condo?
What is Escrow?

Need Help? Have questions? Fill out the CONTACT FORM or call Jane at 310-351-9208

Leave a Comment

Scroll to Top