Hi Moustachians,
Would love to get your advice. Here's the deal: we (me, wife, 1 year old) currently rent, and we're exploring first time homebuying in LA. We're looking to buy a home primarily b/c our apartment isn't the ideal place we want our baby to grow up in. Little natural light, energy inefficient, 850 sq feet but poorly designed, no yard, etc. With Covid, wife currently works from home and may do so for another year. Caveat: we do pay well below market rent - $1450/mo.
Of course the LA market is insane, but w/ my wife's roots and my job in entertainment, we feel like we'll be here for a while and we'd love our daughter to grow up in a diverse, multicultural place. The region of LA we currently live in and where we're looking is Northeast LA: Highland Park, Eagle Rock, Glassell Park, etc. Ideally, we want a 3BR and a backyard where baby can get her hands dirty. Places we've seen, mostly online, that meet our criteria, range between $750k-$900k (I can see your heads explode in unison). Homes tend to go 10-ish percent above listing right now.
Financial picture below. Note too that based on my research, despite the insane price-rent ratio in LA, there don't seem to be many, if any, homes available to rent that match what we see on the sale listings. Those that do have rent similar to mortgage. Recent spin on NYT buy/rent calculator says it's better to buy based on "if you can find a similar home for $X" basis.
Here's where we are:
Me, 42. Wife: 38. 1 year old and possibly another but who knows?
Debt: $0
My retirement: $280k
Wife retirement: $60k
Wife CAL teacher pension: $55k
1 year old's 529: $4.5k
Liquid cash on hand: $80k (we know we'd need a buffer for emergency fund and closing costs of about $12k per a lender we spoke to). So realistically we have $60k down as of today.
Combined salary: $265k/yr. Both wife/I got new jobs within the last 4 months that pay us far more than before, so we're just now starting to aggressively save for a downpayment
Yearly expenses: We know we need to massively cut down on fancy groceries, take-out, booze (damn you Covid!) "stuff" from Amazon (everything from baby stuff to scissors, etc). Biggest non edible/material expense, other than our low rent, is our nanny ($21k/year). We anticipate preschool will be a bit cheaper, and we'll do either public or charter school once she's 5 ish.
We know we don't have enough for a big downpayment. And even with a purely moustachian life, it could take a while for us, even with aggressive savings plan, to reach 20% for a home in our area. (Note: we both love our jobs so we're not interested in pure FIRE, but we do want to be as FI as possible.) A lender said we could get approved today for a 30 year at $825k with 7% down at a 2.85% interest rate. That interest rate is the only thing making me think this could work. But Moustachians, tell me: is this nuts? Could it work? Do we prioritize recently-remodeled places with nice kitchens and HVAC systems (both very important to us), or get a better deal on a fixer-upper even though we're not the handiest people - especially me. Thanks so much in advance for any help you can provide.