Author Topic: First Time Home Buyer Advice  (Read 495 times)

0 Members and 1 Guest are viewing this topic.

Offline jessica

  • Newbie
  • Thanks
  • -Given: 2
  • -Received: 0
  • Posts: 1
First Time Home Buyer Advice
« on: November 21, 2020, 07:15:31 AM »
I am a first-time homebuyer looking to buy in Irvine. I have rented in Irvine for about 8 years. I am priced out and have already been discouraged by being outbid numerous times when asking over.

1. What % of your take-home pay does the average person spend on a mortgage in the OC?

2. How do you justify the value of living in an area where your HOA/Mello Roos make up almost half of the principle? Such as below:
https://www.redfin.com/CA/Irvine/519-Rush-Lily-92620/home/112719436

3. Should I wait until Q12021 when there is more inventory or do we foresee prices just going up and up?


Offline Soylent Green Is People

  • Abiding Dude. Housing focused NMLS Licensed
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 905
  • -Received: 1132
  • Posts: 2387
  • Gender: Male
  • Isaiah 58: 6-11
Re: First Time Home Buyer Advice
« Reply #1 on: November 21, 2020, 09:58:28 AM »
Tough times out there for FTHB trying to find a property. First, to your questions.

1) In terms of qualifying, as long as the loan is an Agency Conforming mortgage with at least 10% down, on average 50% of gross income is enough to qualify.  $12,000 = $6,000 PITIHOA providing there is no debt. Your question has to to with "take-home pay". $12,000 per month is roughly $8,400 net. Some buyers are OK then with a $6,000 payment and $1,000 worth of utilities because they are getting $2,500 or so from a roommate. Generally speaking with $8,400 net, most buyers I meet are good up to $4,000 per month - even though they may qualify for $6,000 per month.

2) Very few people care all that much about principal reduction. They are counting on appreciation and low payments to sustain them until their kids are out of the house. They'd rather pay $500 towards principal on a very low 30 year fixed rate and $1,500 towards "amenities" like mello roos subsidized roads and schools, plus HOA's that take care of the quality of life in the community. This is a very broad generalization, but one that fits many of the buyers I interact with (other than those who take out 15 year loans for example)

3) Barring a galactic catastrophe of some sort, prices are not falling. Example - If there is a "rush to the exits" for sales because of an economic calamity, there is an equal amount of investor cash waiting to be deployed to buy up these homes before they even hit the market. High investor demand means stable prices. Inventory will still be constrained because of the refinance activity going on now. Why sell a home with a 1.99% rate that can become an income producing unit as you ladder up to you next property? My guess - and that's all it is - is that with very low payments, the incentive to liquidate property is going to be extinguished. Some areas built in the 1990's will soon see their mello roos taxes paid off, making the cost of home ownership even lower.

Now some hard stuff - and possible solutions.

It's time for FTHB's to ask "What is my compelling reason to live in Irvine?" If it's the commute... that issue is going by the wayside what with all of the new building. Also, work from home is the future, eliminating 3/4 of the "commute distance" question. Is it the schools? OK, but if you don't have kids now, is "the schools" really a reason? Is it that "new home" feeling? Possibly, but with high HOA and Mello Roos, or travelling up 3 stories every day in your new home, does that benefit sustain itself or is your lifestyle at sufferance? Is it "appreciation of irvine homes" AKA the MAX ROI!!!! That benefit is great, but if you can't even get in the game to begin with, it's not a reason to live in Irvine. There are plenty of reasons to live in Irvine and every buyer has specific needs to do so - many that I can't list here. The question though must be asked first - Is it a want, or a need to live in Irvine?

As the Rolling Stones put it so well:

You can't always get what you want,
You can't always get what you want,
But if you try sometimes, well, you might find
You get what you need



Some thoughts on yours and other FTHB's predicament in this current housing market:

If you plan on staying in Irvine, you'll need to expand your risk tolerance. Perhaps a $4,000 payment is comfortable, but you can't find anything in that range. You may qualify for a $6,000 payment so look in that price range. Be sure you have a "Plan B" in case your $2,500 per month tenant doesn't come through. I'd also recommend a Plan C, and have 12 months of ready cash on hand to subsidize the payment for that time period.

That listing on Rush Lilly you posted is a 2br/2ba Condo. The payment with 20% down will come close to $3,300 per month. This home  https://www.redfin.com/CA/Irvine/23-Woodpine-Dr-92604/home/4685938 is priced higher than Rush Lilly, but the payment is $300 additional per month. $300 is $300 but not really all that much in the grand scheme of things. The property is not new, but it's larger and with a yard, and still in Irvine. This home is $350 more per month  https://www.redfin.com/CA/Irvine/6-Del-Italia-92614/home/4659190 compared to the Rush Lilly home because of the lower HOA. There are places still in Irvine that with some compromise can still get close to a FTHB budget.

"Irvine Adjacent" area homes are larger, no longer just Condo's, and about the same commute time (20 min door to door). Examples include: https://www.redfin.com/CA/Lake-Forest/21372-Falkirk-Ln-92630/home/4817233 https://www.redfin.com/CA/Foothill-Ranch/32-Carriage-Dr-92610/home/4810269 or https://www.redfin.com/CA/Mission-Viejo/26575-Via-Cuervo-92691/home/5082925

Finally, there are "radical" choices to consider. In the Bay Area there is a trend called "Tenant In Common" buying (TIC). Prices are sooooo high up there that rather than settling for a $700,000 home, two unrelated buyers (co-workers, etc) will purchase a $1,400,000 priced duplex or a property with an ADU, even "two on a lot". These multifamily properties are very common in the Bay area but rarely found in Irvine. There are some in surrounding areas. Some examples:

Irvine: https://www.redfin.com/CA/Irvine/17541-Manchester-Ave-92614/home/4655867

Newport Beach/Costa Mesa: https://www.redfin.com/CA/Costa-Mesa/382-E-18th-St-92627/home/3557347

Tustin: https://www.redfin.com/CA/Tustin/14652-Carfax-Dr-92780/home/4610360


Some food for thought as your home search continues. Best wishes for success.

My .02c






« Last Edit: November 21, 2020, 11:10:47 AM by Soylent Green Is People »
My .02c

SGIP

Offline USCTrojanCPA

  • Your CPA Realtor
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2387
  • -Received: 1887
  • Posts: 9236
  • Gender: Male
Re: First Time Home Buyer Advice
« Reply #2 on: November 21, 2020, 10:28:24 AM »
I am a first-time homebuyer looking to buy in Irvine. I have rented in Irvine for about 8 years. I am priced out and have already been discouraged by being outbid numerous times when asking over.

1. What % of your take-home pay does the average person spend on a mortgage in the OC?

2. How do you justify the value of living in an area where your HOA/Mello Roos make up almost half of the principle? Such as below:
https://www.redfin.com/CA/Irvine/519-Rush-Lily-92620/home/112719436

3. Should I wait until Q12021 when there is more inventory or do we foresee prices just going up and up?



Hi Jessica, you are not alone in being a frustrated buyer who keeps getting outbid (one of my buyers got outbid for the 9th time on a home in Lake Forest that got 13 offers).  Most of my buyers keep getting outbid, whether it be in Irvine or other neighboring cities. There is a serious lack of inventory while there is strong buyer demand from folks who want to stop renting to folks who want to upgrade their homes (get another bedroom, more space, get a yard, etc).  If you are you within in the jumbo conforming loan limit of $765,600 lenders (non banks) will allow you to borrower up to 49.99% debt to income using your annual income plus your avegage bonus. Most of my buyers don't go up to their maximum loan amount, they buy generally somewhere between 60-80% of the maximum purchase price or they use a loan amount of approx. 2-4x their annual salary. 

Unfortunately, the newer the property is in Irvine the higher the Mello Roos and HOA will have.  Newer attached condos in Irvine will typically have HOA of $330 to $350+ per month and even higher at the Great Park.  There are older properties like this one that has HOA of $262/mo and Mello Roos of around $500/yr...https://www.redfin.com/CA/Irvine/27-Ardmore-92602/home/5844635 

Inventory levels tend to be seasonal.  The lowest amount of inventory will be around Christmas and New Years Day and the highest amount of inventory will be in the summer time. Currently the amount of newly listed homes everywhere, including Irvine, is decreasing from what I'm seeing on MLS so there are fewer properties for buyers to pick from which is causing more panic buying. You will typically see more inventory start coming onto the market in middle Jan and that'll keep increasing as you head into the summer. To answer your question, it's hard to say where prices will go but the relative level of inventory (#s of months of inventory....total inventory of homes divided by the average number of monthly sales) will be a good guide where prices may be heading.  One thing that may prevent prices from going up is materially higher interest rates which I don't think is going to happen next year.

All that being said, I have listings all the time and post on TalkIrvine if I get a heads up of a future listing so folks on here can contact me about buying one of my upcoming listings.
« Last Edit: November 21, 2020, 01:13:10 PM by USCTrojanCPA »
Martin Mania, CPA
AgencyOne
CA BRE License # 01799007
CA CPA License # 107675
mmania001@yahoo.com
714-747-3884 cell

Often imitated....Never duplicated!

Offline Cares

  • Real Estate Broker & Mortgage Loan Originator
  • O.C. Resident
  • ***
  • Thanks
  • -Given: 5
  • -Received: 139
  • Posts: 709
Re: First Time Home Buyer Advice
« Reply #3 on: November 21, 2020, 04:39:04 PM »
It's a rough market for entry level first time buyers honestly. Several of my buyers are bidding 10% over asking and still not getting the property.
« Last Edit: November 23, 2020, 08:32:18 AM by Cares »

Offline USCTrojanCPA

  • Your CPA Realtor
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2387
  • -Received: 1887
  • Posts: 9236
  • Gender: Male
Re: First Time Home Buyer Advice
« Reply #4 on: November 21, 2020, 06:17:54 PM »
It's a rough market for entry level first time buyers honestly. Several of my buyers are kidding 10% over asking and still not getting the property.

And you can't even use closed comps for homes that closed one or two months ago which is tough for some buyers to understand.
Martin Mania, CPA
AgencyOne
CA BRE License # 01799007
CA CPA License # 107675
mmania001@yahoo.com
714-747-3884 cell

Often imitated....Never duplicated!

 

Talk Irvine Links

[Recent Posts]
[FAQ / Rules]

Site Supporters


SimplePortal 2.3.7 © 2008-2020, SimplePortal