What comes to mind when you think about the ultimate place to live? The answer for many people is Southern California (SoCal), and it’s not difficult to understand why. Imagine living where the sun always shines, temperatures are pleasant year-round, and white sandy beaches go on for miles. Whether you prefer city life or the great outdoors, there are plenty of activities to keep you busy. The job market is flourishing, the neighborhoods are diverse, and the real estate looks like something straight out of a magazine.
It’s safe to say SoCal is a dream destination. However, planting your roots in this area isn’t cheap. The median home price is $800,000, and the cost of living is higher than in most regions in the nation. Anyone interested in making Southern California their new home will need to ensure their ducks in a row, particularly their finances. Continue reading for advice.
Since you probably don’t have $800,000 to buy a SoCal home outright, you’ll need to apply for a mortgage. Lenders will evaluate your credit history and score during the application process to determine eligibility. The idea is to assess whether you’re financially responsible enough to handle a loan. Your credit reports provide mortgage companies with a lot of insight, including the types and amounts of credit/loans you’ve received, payment history, debt-to-income ratio, credit utilization rates, and more.
If the data they review is positive and you meet all the other criteria, you’ll receive a loan offer. However, you will get rejected if you have a low credit score, tons of debt, missed payments, collection accounts, or high utilization rates. More than approval for a loan, your credit is used to determine a down payment amount, loan term, and interest rate. Therefore, you want to ensure you present a favorable credit profile to mortgage lenders.
If you believe your credit won’t make the cut (or you’ve already been rejected for a mortgage), you should consider avenues to improve your financial history. Such solutions might include paying debts, making timely payments, and negotiating with creditors to resolve collection accounts. You can also use credit restoration solutions like credit builder cards to establish or improve your credit.
No matter where you move, you’ll need to cover the necessities for yourself and your family. Such expenses include housing (mortgage, insurance, property taxes, and maintenance), utilities, food, transportation, healthcare, and clothing. Create a list of each necessary expense. Then, decide which SoCal city you’re interested in calling home.
Next, research the average cost of each expense in that city. Add the costs together, and the number revealed will give you an idea of how much you need to survive. Remember that this doesn’t include leisure activities, other financial obligations, or unforeseen emergencies. You’ll need to factor in these expenses to get a more accurate idea of your monthly expenses.
Do you have enough money to sustain a decent quality of life? Sure, you may have some money set aside in a bank account, but do you have a substantial income source to maintain your expenses? If you plan to keep your current job or own a business, compare your salary to the average cost of living in SoCal. If you plan to find employment once you move, analyze the average salary for positions that match your experience.
Ideally, you want to dedicate 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment. If you don’t have enough money, you’ll need to consider strategies to reduce your debts, eliminate unnecessary spending, or increase your monthly earnings.
Many people dream of owning a home in popular SoCal destinations like Coronado, San Diego, Costa Mesa, and Venice. While each of these cities has unique attributes that make them an ideal place to live, the life of luxury comes with a price. Before you start browsing real estate in the SoCal area, ensure that you’ve researched and applied the financial principles above so you can actually enjoy your new residence.