Own vs. Rent: Where in OC Can You Own for less than $3,000 or $4,000 a month?
In Orange County, the median rent price is $3,022 and that amount is slightly above the Los Angeles MSA based on real estate data providers.
According to real estate data provider RentCafe, in the city of Irvine, the median rent price for a 3 bedroom is $2,988. In nearby Aliso Viejo, it is $2,650.
The median sales price of a home is $802,0001. With a 15-percent down payment of $120,000, that would place the loan into a high-balance conforming loan which offers a current rate of 4.625%. That will translate to a monthly payment of $3,494 which does not include taxes and insurance.
So, the payment is $500 more per month but you get potential price appreciation. According to Zillow, in 2017, median home prices in Irvine rose by 1% which means roughly $8,000 or $660.
That leaves your property taxes and insurance which are estimated to be $11,600 a year combined or less than $1,000 per month. With the tax deduction limit at $10,000 for mortgage interest, you are basically paying $1600/year to live in your own home in Irvine, one of the top housing markets in the country.
The median price of homes currently listed for sale in Aliso Viejo is $556,444 while the median price of homes that sold is $554,400. This means a homebuyer who can qualify for conventional financing with 5-percent down on a $550,000 home could have a monthly principal and interest (P&I) payment of just $2,609. This is less than the average rent and sign that it is better to own than rent in Aliso Viejo.
Additional monthly costs to consider are private mortgage insurance (PMI), property taxes and homeowner’s insurance. The monthly amount for PMI will be $178, $550 for property taxes, and $60 for homeowner’s insurance. The grand total for these is $788.
Another great location is Mission Viejo with an average rent price of $2,2002 and $2,850 2 for a 2 and 3-bdroom home respectively. The median price for sold homes is $649,800. A qualified homebuyer can into a $560,000 home with just 3-percent down and have a payment that is $2,926 to equal the average rent price with a 3.75% rate on an FHA loan. This amount includes FHA’s mandatory mortgage insurance.
If you’re eligible for a VA loan, the home price can be as much as $628,000 with the payment remaining around $2,900/month. VA loans are available to eligible military veterans, active duty, reserve personnel, and surviving spouses. These loans permit 100% financing, or no down payment, without paying monthly PMI.
Price appreciation is definitely a reality in highly desirable Orange County with it being a long-standing hub for technology and pharmaceutical companies. For home buyers seeking to buy a home to gain equity, it is recommended to own real estate for at least 10 years to realize a gain due to price corrections along the way.
Loan programs to help you enjoy the benefits of homeownership are plenty. A conforming loan or jumbo loan should offer you an attractive rate as long as you are qualified.
Sources:
- Zillow home values
- Rent Café – https://www.rentcafe.com/average-rent-market-trends/us/ca/mission-viejo/
