Our first home was in a not so beautiful town (ok so the police helicopters flew over nightly) and only 2 bdrm. It cost us 103K in Oct 2001. We were only 21 at the time so not that many years of credit history so we ended up with a 7.75% interest rate which isnt great but even with taxes and pmi (we only put 3% down) our payment was 947 a month (which is cheaper than rent in southern Cali). We also had 30K on credit cards when we bought that first house.
We looked for a house that we knew we could make some money on by fixing small stuff. It was structurally nice but ugly/needing decor updating. We put in new carpet (700 bucks), paint (cheap), mouldings (cheap), wood blinds (300 from Home Depot), new sod in the yard (300 bucks Home Depot), some pretty flowers/plants (100 bucks), dh made built in entertainment center (free cause he had the materials left over).......small stuff like that. We sold that house 2.5 years later for 220K. We made 117,000 dollars in 2 YEARS. Buying our first home was the best thing we ever did. We paid off our debt, our vehicles, and had enough for a down payment on another home.
Now house prices really went up, so we had to buy a 300K home and our payment is 1800 a month which totally bites but other than that we have no other debts. We have 2 separate loans so that we dont have to pay PMI (80% of the mortgage on one and 10% on home equity loan since we only put 10% down). Already though our house is worth 350,000 (I live way inland, its way cheaper than anywhere beachy).....in less than a year. That's 50,000 profit again (plus my loan is only for 270K so if I sold tomorrow, that would be 80K in our pocket). Now dh and I are planning on moving to the south, where we can pay for half a house with cash and our payment will be like 350-500 bucks a month and we can live simply.
Sure we started off in a not so great neighborhood and not a gorgeous house but that is the ONLY reason we have a little piggy bank today otherwise we would have spent 1000 a month towards nothing and still had big debts on credit and 2 car payments.
You also get better tax breaks when you are a homeowner.
My dh is handy however. He did the woodwork/sod/everything else himself. That helps too. If you have to hire people to do everything.....its more expensive.
I also realize that the market in Cali is different than alot of places. Most people dont get huge gains of money on their home in short amount of time. But you can look for communities that are JUST starting to grow and get in before it goes up even more. Or if you can even get an older house that is near some new more expensive incoming developments......that will bring your house value up too. Avoid trashy neighbors......avoid home owner associations.....check to see if there are any Mello Roos taxes added...(in some places here you have to pay 100 a month on your mortgage towards schools). You can go get pre-approved for free and tell them all your debts, your income, etc and they will come up with a figure you can afford. Look for a bit cheaper of a house than that though because you have to account for property taxes, house repairs, closing costs, etc. (Some sellers will pay part or all of your closing costs, it doesnt hurt to ask, especially if the house has been on the market for awhile). Also look for homes for sale by owner. They dont have to pay a realtor 6% so you can probably offer them 6% lower than asking price and they will take it. All they can say is no, it never hurts to try! LOL
Not everybody has great experiences with owning but I will never rent again. You have to really figure it out on paper to see if it is do-able for your family.
Another suggestion if you plan to stay in your home for awhile. Get a fixed rate loan. If you get an adjustable rate loan, it can start going up in as soon as 6 months (my 4.5% loan is now 5.5% not even a year later causing my payments to go up). If you plan to move after 2 years you can get an arm loan where the interest rate wont go up for 2 years and then you save some interest. It all depends on what your needs are.