When is a reasonable time for us to think about buying a house? (San Jose: sale, apartment)

[NoMoreSnowForMe]

Start by doing your homework on what types of loans would be available to you, be realistic about how much you can afford per month - and don't believe anyone else, including lenders and agents. Then, start looking at where you can buy a house for the amount you can afford.

FHA loans are fantastic. There is even one that will let you wrap in some improvements into the loan, and you don't need as much down. Yes, you would have to probably pay PMI (private mortgage insurance) at first, but once you get enough equity, you don't have to pay it anymore. So, look for something you can not only afford, but that you can afford to pay extra each month on, so you can grow that equity and get rid of the PMI payments.

Talk to your bank and agents, and/or loan brokers - but always with what you know you can really afford in monthly payments in mind.

And, don't let anyone talk you into an adjustable mortgage. I'm old enough to have seen those come in and out of fashion a couple times, and people lost their shirts. So, don't be talked into one, no matter how they present it.

Good luck.

[treedroppings]

Originally Posted by jaylacmail

Hello,

Somewhat of a long-time lurker and feeling a bit apprehensive about looking into home ownership here. My wife and I have been living and renting here in the bay area for about 2 years now. My salary is 160K and hers is 80K. I expect my recurring annual bonus to be approximately in the 40K range but I am not too certain how much this will fluctuate since I've only clocked in one full calendar year and don't know the impact of what a "bad year" has on the company's bonus pool. The wife sees no bonus.

We have no kids but will probably have one within the next year or two. Thankfully we've paid off most of our major debt and all we have currently is a small car loan. I've been socking $ away into my 401k for a while, whereas the wife didn't really know the importance of doing so until I told her to starting last year. I suppose our 401k balance shouldn't really be relevant for when to buy a home anyway right? Anyways, we have about $120K in cash, stocks, and mutual/index funds saved up.

I work in south bay and she works in the northern peninsula so unfortunately, one of us will have to deal with a really ugly commute unless we pick somewhere in the middle where real estate prices are even more outrageous. If her work location weren't a factor, we truly wouldn't mind a Santa Clara / San Jose / Milpitas location to settle.

As bay area transplants, we feel a bit overwhelmed in staring down the path to home ownership. I'm also a bit new to the home ownership process. Can anyone share any advice on what sort of rent range is appropriate for our income, and how much cash we ought to save before even thinking about buying a starter home here?

Happy to share further details if it would help.

At midnight the witching hour!!

[Lanienguyen]

Have you and your wife considered taking BART to work in North Bay? There are 2 new BART stations will be operated in Milpitas and Berryessa in 2018.

[nightlysparrow]

Originally Posted by jaylacmail

We have no kids but will probably have one within the next year or two.

You mention this rather casually, but the sudden drop in your wife's income, the associated out-of-pocket baby expenses, and the outrageous cost of childcare in the area (if indeed your wife goes back to work) should give a prospective homebuyer pause.

[jaylacmail]

Originally Posted by nightlysparrow

You mention this rather casually, but the sudden drop in your wife's income, the associated out-of-pocket baby expenses, and the outrageous cost of childcare in the area (if indeed your wife goes back to work) should give a prospective homebuyer pause.

Valid points. Her income wouldn't necessarily drop as we'd expect her to be paid throughout her maternity leave of course. We'd possibly look to stagger our bonding leave somewhat. But unexpected events can always happen. She may not feel ready to return to work. Et cetera.

But yeah, if she plans to keep working and we end up finding a nanny, I'd have to factor those costs in as well of course.

[Perma Bear]

Originally Posted by jaylacmail

Hello,

Somewhat of a long-time lurker and feeling a bit apprehensive about looking into home ownership here. My wife and I have been living and renting here in the bay area for about 2 years now. My salary is 160K and hers is 80K. I expect my recurring annual bonus to be approximately in the 40K range but I am not too certain how much this will fluctuate since I've only clocked in one full calendar year and don't know the impact of what a "bad year" has on the company's bonus pool. The wife sees no bonus.

We have no kids but will probably have one within the next year or two. Thankfully we've paid off most of our major debt and all we have currently is a small car loan. I've been socking $ away into my 401k for a while, whereas the wife didn't really know the importance of doing so until I told her to starting last year. I suppose our 401k balance shouldn't really be relevant for when to buy a home anyway right? Anyways, we have about $120K in cash, stocks, and mutual/index funds saved up.

I work in south bay and she works in the northern peninsula so unfortunately, one of us will have to deal with a really ugly commute unless we pick somewhere in the middle where real estate prices are even more outrageous. If her work location weren't a factor, we truly wouldn't mind a Santa Clara / San Jose / Milpitas location to settle.

As bay area transplants, we feel a bit overwhelmed in staring down the path to home ownership. I'm also a bit new to the home ownership process. Can anyone share any advice on what sort of rent range is appropriate for our income, and how much cash we ought to save before even thinking about buying a starter home here?

Happy to share further details if it would help.

I'd say about 2011 or 2012.

[Wintermomma]

Since you are planning to have a child, I would strongly recommend researching schools if you plan to choose a public school, or plan to have money available for private (if you both plan to work remember to think of daycare/nanny, then preschool costs, too). Values depend SO much on the schools here.

[bobby_guz_man]

Originally Posted by SanJoseMan

With that salary and only $120K saved up. You won't find a detached home in the Bay Area that wouldn't require a good renovation or a compromise with the commute and or surrounding neighborhood. If someone knows where, prove me wrong. Because I would love to buy that tomorrow and use it as a rental.

And even if you got into a home, you'll be paying a major monthly mortgage on top of a property tax assessed for the high purchase price. What money is left for actually living?

I'm sorry but that isn't comfortable living. Unless you're like many Asians in the Bay Area who know how to save or share living spaces with multiple/extended families you're in a tough space if owning a home is a priority.

My recommendation is to continue to save/invest and rent for the time being. Enjoy life and don't make owning a home a priority. Sad truth is the only folks in the Silicon Valley buying homes are the lucky ones with vested stocks. Salary ain't buying you anything around here.

THIS.

I also think $120K is definitely not even close to enough yet. You're really going to need over $200K, then money for furnishings and fixing things here and there (no house is ever perfect to your initial liking, there'll always be things you'll fix right away), and emergency fund money.

[bobby_guz_man]

Originally Posted by jaylacmail

I'm looking at 2BR apartments, modern appliances and updated interiors are nice but I get that that boosts rental rates significantly.

Honestly, as a one-couple household, and wanting to save money, you really want to minimize your current rents as much as possible, and that means 1BR apartments. Even if you have a kid the kid can stay with you in your room for the first 2 years.

Originally Posted by jaylacmail

I work in south bay and she works in the northern peninsula so unfortunately, one of us will have to deal with a really ugly commute unless we pick somewhere in the middle where real estate prices are even more outrageous. If her work location weren't a factor, we truly wouldn't mind a Santa Clara / San Jose / Milpitas location to settle.

One of you will have to suffer a commute, so why not pick where the cheapest location to rent? That way you'd both save up more money. Your wife may have the longer commute if you guys rent in the southern bay area, but knowing that she is indirectly contributing to saving more money than before to put towards that home, should be a great incentive for her.

Originally Posted by jaylacmail

Anyways, we have about $120K in cash, stocks, and mutual/index funds saved up.

Can you elaborate? Is this $120K liquid? You can immediately access it without any penalties? $120K is not enough, and if that money is actually tied up in funds and stocks where you have to sell and pull out with penalties, then they should not be used.

When we bought our house in SJ, we used cash for the down payment. No stocks or funds were pulled.

[jaylacmail]

Originally Posted by SanJoseMan

With that salary and only $120K saved up. You won't find a detached home in the Bay Area that wouldn't require a good renovation or a compromise with the commute and or surrounding neighborhood. If someone knows where, prove me wrong. Because I would love to buy that tomorrow and use it as a rental.

And even if you got into a home, you'll be paying a major monthly mortgage on top of a property tax assessed for the high purchase price. What money is left for actually living?

I'm sorry but that isn't comfortable living. Unless you're like many Asians in the Bay Area who know how to save or share living spaces with multiple/extended families you're in a tough space if owning a home is a priority.

My recommendation is to continue to save/invest and rent for the time being. Enjoy life and don't make owning a home a priority. Sad truth is the only folks in the Silicon Valley buying homes are the lucky ones with vested stocks. Salary ain't buying you anything around here.

Thanks for the advice and dose of realism. I agree, I don't think $120K is anywhere close to being enough, which is why I wanted to get in touch with the community to see if we're on the right path. My wife and I have only somewhat recently hit these income levels and have only recently become debt-free (mostly, I still have the 4-digit car loan at a low interest rate).

It's my goal to at least save up $60K in cash for the next year of our rent but as another has mentioned, that's still short of $200K which still limits our options and such. I do agree that it is in our best interest to continue saving and renting and enjoying our flexibility without feeling like we HAVE to own a home. The Bay Area is so expensive - and what's to say that in 2-3 years we decide that we may want to move to a lower cost of living area... we'll see, we'll see