Instructions to my son on how to buy a house in the SF Bay Area (San Francisco: lenders, job market)

[TR95]

Originally Posted by WithDisp

90K Salary, with 200K down on a 700K place is still not enough to meet the income requirement for the mortgage. At 3.5 % interest you'd require a income of 96K- if by that point all student loans are paid off.

EDIT - 128K with Taxes and Insurance.

That's where you are wrong. A $500k mortgage at 3.625% is only 41% of gross monthly income, leaving $145/month for other debt and still be able to get approved. Almost all lenders use a DTI ratio up to 43% to get approved. Not saying, that one can truly afford going up to 43%, but you have to factor in annual increases just as we all did when we bought our first house. Again, it has been said before that this has been going on for generations.

[2sleepy]

Originally Posted by TR95

That's where you are wrong. A $500k mortgage at 3.625% is only 41% of gross monthly income, leaving $145/month for other debt and still be able to get approved. Almost all lenders use a DTI ratio up to 43% to get approved. Not saying, that one can truly afford going up to 43%, but you have to factor in annual increases just as we all did when we bought our first house. Again, it has been said before that this has been going on for generations.

Have you actually called a mortgage company and actually asked what interest rate you qualify for with a 43% DTI ratio?
Why Debt To Income Matters In Mortgages | Bankrate.com

[TR95]

Originally Posted by 2sleepy

Have you actually called a mortgage company and actually asked what interest rate you qualify for with a 43% DTI ratio?
Why Debt To Income Matters In Mortgages | Bankrate.com

Ok, let's rely on some random website and income calculators from the internet, rather than actually going out and obtaining one. That's the problem with all of you. I know for a fact. Also, credit score has much more to do with rates than DTI. People can have several properties/mortgages and take the limit up to 43% and easily get a 3.625%-3.75% rate right now. But go ahead and rely on Bankrate.com...If it's not on the internet, then it must not exist. Think for yourselves please.

[MountainHi]

Originally Posted by CA4Now

What person, much less couple, works for 6-8 years straight without a major expense? Car breaks down, a pregnancy, a health issue, the company of one of them cuts back on its staff, a major appliance or two needing to be replaced, etc?

And how are they able to live RENT FREE for 6-8 years? This is a completely unrealistic scenario.

You need to refer back to the Plan, the original post. Postpone pregnancy is in there. What sane, responsible adults have kids by accident, right out of collelge? I don't know any. Car was covered there, too--if your old car wears out, get a good, reliable Toyota for $2000 that will last you 10 more years. Few people in their 20's and early 30's have a major illness that would debilitate them. A major appliance? You're really grasping at straws here. I've never had to replace a major appliance, not for myself, not in my rental unit. They're not that expensive, anyway. You can get discontinued models for cheap at the Habitat For Humanity ReStore. And remember, you're talking about the period of time that they're living with their parents. The appliances aren't theirs to replace; they're the parents' appliances.

Now, after all these pages, you're questioning the rent-free part? It's all there in the OP. Go back and read the original post. This was a plan put together by a Bay Area resident for his kid. It's not a plan for everyone and anyone. It's applicable to college grads whose parents live in the area. The OP never claimed to have a plan that was for any random person.

[TR95]

Originally Posted by 2sleepy

Have you actually called a mortgage company and actually asked what interest rate you qualify for with a 43% DTI ratio?
Why Debt To Income Matters In Mortgages | Bankrate.com

Did you even read your own article? See below. It clearly says lenders accept higher ratios and nothing about a higher interest rate just because of a higher DTI. Again, go ahead and ignore an actual example with real numbers and point to some random article. Keep up the good work.

Recommended debt-to-income ratio
Lenders typically say the ideal front-end ratio should be no more than 28 percent, and the back ratio, including all expenses, should be 36 percent or lower.


In reality, depending on credit score, savings and down payment, lenders accept higher ratios. Limits vary depending on the type of loan.



Read more: Why Debt To Income Matters In Mortgages | Bankrate.com
Follow us: @Bankrate on Twitter | Bankrate on Facebook

[likealady]

Outer Sunset teardown goes for almost a million

Welcome to Bay Area real estate at the moment. When dumps like this are going for that much, thanks but no thanks.

ETA: If you noticed, 27 offers for it. Most cash.

[boulder2015]

Originally Posted by likealady

Outer Sunset teardown goes for almost a million

Welcome to Bay Area real estate at the moment. When dumps like this are going for that much, thanks but no thanks.

ETA: If you noticed, 27 offers for it. Most cash.

Well, they are just paying for the lot... so, if you live at home with your wife and parents for 8 years, get the crappiest health care allowed under obamacare, take muni, spend no money on fun and vacations... all this could be yours! Oh and add on another 8-10 years to save up for the new house materials... and you,too, will be able to brag to your east coast relatives how you are living the cali dream! You can instagram and facebook pics of you and your honey in front of a beach sunset in february and make them eat their little snowshoveling hearts out! Meanwhile your crows feet are starting to show...and your pals in flyover land paid off their house 15 years ago...

[Ruth4Truth]

Originally Posted by Ultrarunner

I want to add one more path that I have suggested to friends and it worked out very well...

Skip the single family home... buy a duplex, triplex of fourplex.

I have bought all of the about and all had rents from the start that covered the mortgage...

The duplex with a 3 bedroom home with a 1 bedroom cottage in back... I lived in the cottage.

The triplex was a 3 bedroom home with a duplex on the property... I lived in one of the duplex units.

Buying income property and living in one of the units is the quickest way to build equity and have trim the tax bill that I know.

Friends that have done it said it was 5 years of being an onsite manager... with all that entails.

It also let them make enough to get out of the landlord business and buy the home they wanted in Santa Clara...

What I am saying is sometimes thinking outside the box can be lucrative.

This is what I did in Seattle, twice. The first house was an old 2-br. craftsman style from 1915 that had a full daylight basement the previous owners had added a 3/4 bath to, so I converted the basement to a 2-br. apartment. The next property was a 4-br. house with a run-down cottage in back that was a freebie, it wasn't calculated into the price of the property, because the neighborhood was zoned for single-family homes, only. I gradually fixed up the cottage while renting out the family-sized house.

However, this type of thing, nowadays, depends on being able to find properties that are either undervalued, which is hard to do except in parts of Oakland (no longer possibly in Seattle), or that have a convertible space, like a garage or basement. A couple that's squeezed for the downpayment and mortgage wouldn't have the resources needed to convert the extra space, unless only a minimum of investment (a few small appliances to create a studio apt. or something) is enough. Buying a duplex or triplex would mean coming up with more money than they might have, as a building like that could be out of their budget.

But yes, if you can swing it, that can be a great deal.

[Ruth4Truth]

Originally Posted by WithDisp

So the requirement presented here is two college grads, getting married, with no existing debt, and having the ability to live at home until they are late 20s or early 30s to buy.

It sounds quite like the situation presented, but still is alienating to more than half the population.


My parents lived in a somewhat equally unfordable suburb. Neither had a college degree.
What has changed -so much- (or hasn't) in the last 30 years that much of the country is in a dire housing crisis.

I'm actually aware of some of the answers to that question (gov't policy + property investment as a major portfolio component). However, there's other components of the boomer era I can't really say I understand.

It's naive to say it 'can' be done, people just aren't working hard enough. We all probably do know that it CAN be done, though there are "sky is falling I only make 200K people around'. The problem is your average person can't do it. Which means 50% of the people who are BELOW average can't either.

Well, yes. That's the requirement, the OP was very clear about that in the first post. I don't know why it's taken 28 pages for it to sink in. He wasn't presenting a strategy that's workable to a broad segment of people. If you understand from the start that he was addressing a relatively narrow demographic, there's nothing controversial about it.

Home-buying has been an problem, even for employers, since the 80's, at least. UC hasn't been able to recruit some of the faculty they would have liked to have on board, because people would come to interview for open positions, they'd take a look at housing costs, and would walk away in shock and disgust. The university wasn't able to offer salaries that enabled home ownership nearby. If PhD's couldn't afford housing at the time, how do university staff, civil servants, etc. manage to live anywhere in the area at all these days, with rising rents pushing them farther and farther out? To say nothing of retirees on a fixed income. It's a crime. I guess everyone has to either occupy studios, or do apt. or house shares. It's like Moscow, where even federal gov't employees can't afford to live.

[Ultrarunner]

Originally Posted by likealady

Outer Sunset teardown goes for almost a million

Welcome to Bay Area real estate at the moment. When dumps like this are going for that much, thanks but no thanks.

ETA: If you noticed, 27 offers for it. Most cash.

Real Estate has always been about location... sometimes having an existing dwelling is a negative...