Saving 20% down to buy a home in Los Angeles typically means putting aside a BIG chunk of change. There are alternatives to a 20% down loan that just recently became more appealing however.
From Motley Fool: "In late 2014, Fannie Mae and Freddie Mac both announced new lending guidelines, as well as new lending programs for first-time homebuyers. Under both programs, borrowers who have a credit score of at least 620 can qualify for a conventional mortgage with just 3% down."
The catch to the 3% down is that you have to pay mortgage insurance - however, with these new lending guidelines passed at the end of 2014, the annual premium was reduced from 1.35% of the outstanding loan balance to 0.85%. So, $100,000 loan means $850 a year in premiums. Say you've got a $400,000 loan, that's $3400 a year/~$285 a month in added insurance costs. Yes, it's lower than it was, but still, UGH!
Motley Fool: "The biggest difference between an FHA loan and conventional low-down-payment options is what happens a few years down the road. Specifically, if you put the required 3.5% down on a 30-year FHA loan, you'll be stuck paying mortgage insurance for the entire term of the loan, no matter how much of the loan you paid back. With conventional loans, you can request that your mortgage insurance be canceled once you've paid down the balance to 80% of the original value of your home."
Lots to consider with the type of financing to get and varies based on your credit score, down payment amount, loan amount, interest rate considerations and more.
Read the full article at Motley Fool for more detail or I can put you in touch with my preferred lender for more information: http://www.fool.com/investing/general/2015/01/25/dont-be-fooled-by-the-new-fha-mortgage-insurance-p.aspx