Instructions to my son on how to buy a house in the SF Bay Area (San Jose: median income, living in)
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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.
That would not be under the required numbers given taxes and insurance.
There are exceptions to every rule. In general though in that given situation though it's not plausible.
You can go about trying to find the perfect cut off for each debt free, lower income person, and eventually you'd find a sweet spot.
The OP goes about a 115K or so salary, and for sure- that's very doable.
I should have read the litany in depth a little longer, but frankly, "Make above average income and be frugal" seems more like common sense than advice.
The catch 22 is not everyone CAN make above average income. It's statistically impossible.
Not saying every should be able to afford to live wherever they want... however the disparity of incomes have made two very bifurcated classes.
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.
I don't know either (especially when people claim they read the original post...but obviously they didn't). And it's still being misquoted (either that or people are math challenged). I'm not the one that has extended this post for 32 pages. If some of the people on here could have just actually read the original post in its entirety, I'm guessing this thread would be 1/3 as long as it is.
That would not be under the required numbers given taxes and insurance.
There are exceptions to every rule. In general though in that given situation though it's not plausible.
You can go about trying to find the perfect cut off for each debt free, lower income person, and eventually you'd find a sweet spot.
The OP goes about a 115K or so salary, and for sure- that's very doable.
I should have read the litany in depth a little longer, but frankly, "Make above average income and be frugal" seems more like common sense than advice.
The catch 22 is not everyone CAN make above average income. It's statistically impossible.
Not saying every should be able to afford to live wherever they want... however the disparity of incomes have made two very bifurcated classes.
Say what you want, but most programs allow you to have a back-end DTI of 43%. And yes, the numbers do work. Let me spell it out for you. $90,000 income is $7,500/mo. Monthly PITI on a $500k mortgage is $3,080 which is 41% of DTI and there are many lenders that will loan up to 43% DTI, so not sure why you say this. Oh well, again don't know why you guys can't understand numbers or you just want to argue like others say.
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.
I responded to YOUR post, below, which has them living for 6-8 years RENT FREE. (I assume with the parents of one of them?)
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Originally Posted by MountainHi
Starting out at 40K, saving for 6-8 years, by then they'd be making at least 100K combined, without any part-time jobs, if they get periodic pay raises and start moving up in their field. Even with no promotion or moving up, pay increases would put then at that 96K.
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Few people in their 20's and early 30's have a major illness
I can think of several kids of friends who've had one, including two accidents and one major mental health issue, all three quite expensive.
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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.
You live in a rental unit. They're living with mom and dad. For 8 years, an older couple is going to fund their major expenses....in addition to their rent? This is just not realistic.
I responded to YOUR post, below, which has them living for 6-8 years RENT FREE. (I assume with the parents of one of them?)
I can think of several kids of friends who've had one, including two accidents and one major mental health issue, all three quite expensive.
You live in a rental unit. They're living with mom and dad. For 8 years, an older couple is going to fund their major expenses....in addition to their rent? This is just not realistic.
Yes, rent free is part of the OP's advice to his son. The OP lives in the Bay Area, and is saying he'd offer his son and his wife, when the son marries (assuming he does) a free place to live, as a gift to help the couple save for home ownership.
I've known young people just out of college who required back surgery. It didn't interfere with their jobs, though. They went on medical leave. It's unusual for people that age to have debilitating illness that would cause them to lose their jobs. That would be a valid point, potentially, though, with respect to taking on a 30-year mortgage. Someone else also mentioned that it's not a good idea to have a mortgage depending on 2 people working and paying into it, without room for rainy-day emergency savings. That's a good point. But I think the OP assumes that a couple doing that would see their income increase over 30 years to the point that there could be all manner of savings.
The couple would be living with mom and dad, and mom and dad would replace their own appliances. I'm not sure what you mean by mom and dad would fund the kids' major expenses. What major expenses? Presumably the couple would have their own car.
I've had rental units and have done home ownership for over 15 years. Never had to replace an appliance. Never.
Most of the points that have been raised on the thread don't address any deficiencies in the OP's plan. The one about a mortgage depending on 2 healthy working adults stretching their budget to the max is the only one that addresses a weak spot in the OP's scenario, so far.
I think people misread the original post. Contrary to what people think, it's saying that home ownership in the Bay Area is well nigh impossible to middle earners without parental help and a fairly draconian lifestyle. This leaves a lot of people out, except the high earners. It also leaves out middle-earners unwilling to bite the bullet and make sacrifices, and it leaves out people without parents willing to house them, or parents who don't live in the area, unless a couple is willing to find a cheap room and split the rent while they save for their downpayment. His post is designed for a narrow demographic. I think the OP laments that it's so difficult, and realizes he needs to pitch in, and that his son will need to make serious sacrifices if he wants to live in the Bay Area, or in any high-demand area, like Seattle, or anywhere in coastal CA, or Florida, or NYC.
I guess I'm the only that disagrees with the idea that one must get married to a woman in order to buy a house:
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Marry a woman than understands that buying a home here requires both partners to work - This has been the case for years so any lists talking about a family with a single income earner not being able to afford here are just stupid (virtually no profession on its own could buy a house here). The average household income in SF is roughly $105K. You and your wife will need to earn at least 1 1/3 of that amount. Shoot for that goal. If that means picking up an extra 8 hours on a weekend for a side job, so be it. Keep in mind, even if your debt ratio on the mortgage ends up being in the low 40% range, that remaining amount is still much higher than most areas of the country. You'll survive (we did and we started off at roughly 42%).
Personally I think making a decision like getting married because you want to achieve certain financial goals is not a great idea. I don't see anything in this advice though that would be necessary for him to marry a woman instead of a guy for example besides the fact that you say to do so, either way I'm not comfortable with advising someone to get married in order to afford a house. You do say that no single income could afford a place, but then put the goal at $140k/yr which is totally doable on a single income, so why the two incomes, for a safety buffer?
I guess I'm the only that disagrees with the idea that one must get married to a woman in order to buy a house:
Personally I think making a decision like getting married because you want to achieve certain financial goals is not a great idea. I don't see anything in this advice though that would be necessary for him to marry a woman instead of a guy for example besides the fact that you say to do so, either way I'm not comfortable with advising someone to get married in order to afford a house. You do say that no single income could afford a place, but then put the goal at $140k/yr which is totally doable on a single income, so why the two incomes, for a safety buffer?
I didn't read the OP as advocating getting married in order to double one's income to afford a house. I read it as fatherly advice to the effect of "when you marry, make sure she supports your goals and can contribute". The OP assumed his son would marry a women, not a man, because his son hasn't come out to him as gay, and the OP may be old-fashioned that way, in making an assumption. He was aiming his advice to middle-earners, not people earning 6 figures upon graduation or shortly thereafter. For those, a good deal of the advice isn't necessary at all. There would be no need to make a thread on the topic at all for people earning 100K+.
Is it really necessary to explain all this?
Last edited by MountainHi; 03-07-2016 at 07:35 PM..
.. so, if you live at home with your wife and parents for 8 years...
And apparently they're not alone.
Five years into the economic recovery, things are looking up for young adults in the U.S. labor market. Unemployment is down, full-time work is up and wages have modestly rebounded. But, according to a new Pew Research Center analysis of U.S. Census Bureau data, these improvements in the labor market have not led to more Millennials living apart from their families. In fact, the nation’s 18- to 34-year-olds are less likely to be living independently of their families and establishing their own households today than they were in the depths of the Great Recession.
In 2000, only 24.6 percent of those age 18 to 34 were living at home with a parent in California. That number has increased by nearly 10 percent to 34.5 percent today (Nov, 2015) http://www.doctorhousingbubble.com/y...rs-california/
I guess I'm the only that disagrees with the idea that one must get married to a woman in order to buy a house:
Personally I think making a decision like getting married because you want to achieve certain financial goals is not a great idea. I don't see anything in this advice though that would be necessary for him to marry a woman instead of a guy for example besides the fact that you say to do so, either way I'm not comfortable with advising someone to get married in order to afford a house. You do say that no single income could afford a place, but then put the goal at $140k/yr which is totally doable on a single income, so why the two incomes, for a safety buffer?
Sigh. If you were to look at page 2 and going on for a few pages, we had one poster claiming I was anti-women and going on a rant saying I looked at women as "workhorses". The claim couldn't be further from the truth, and even after an apology, it continued to go on to no avail. Now it appears you are calling me homophobic. Another claim that couldn't be further from the truth. At this point, I don't believe it's as much the wording as just posters wanting to see what they want to see (very similar to about 60-70% of the responses from people that clearly never even read the first post in its entirety or are looking to selectively edit and twist the meaning of what was said). Even after Ruth reworded it (and people said they liked it), the same people continue on for pages still arguing (Ruth and I had a private chat and laughed about it). It's obvious no matter how it's worded, certain people will not accept it (I won't be surprised if this thread goes on for 50 pages or more).
I simply was stating that a dual income would be required to get to a level of just under $140K for someone to purchase a home here. Apparently you think that's not the case and that the income range is "totally doable". If indeed that is the case (we can agree to disagree), then toss out the list. The parameters were set as a minimum starting point (not that I think there's anything wrong with being frugal regardless of where you're at on the income ladder).
I really don't think it was necessary to explain this either
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Originally Posted by CA4Now
And apparently they're not alone.
Five years into the economic recovery, things are looking up for young adults in the U.S. labor market. Unemployment is down, full-time work is up and wages have modestly rebounded. But, according to a new Pew Research Center analysis of U.S. Census Bureau data, these improvements in the labor market have not led to more Millennials living apart from their families. In fact, the nation’s 18- to 34-year-olds are less likely to be living independently of their families and establishing their own households today than they were in the depths of the Great Recession.
I have no idea what the point of this post is. If this is indeed correct....
In 2000, only 24.6 percent of those age 18 to 34 were living at home with a parent in California. That number has increased by nearly 10 percent to 34.5 percent today (Nov, 2015)
...then all we are saying is 65.5% of those ages 18-34 are not living at home (and it's fair to say they are either renting or own a home). For those that own a home, I would simply say "congrats" and I hope you were able to save up enough to put a sizable down payment and possibly have a nest egg. To those who are renting, feel free to look at the original post and other excellent recommendations throughout this thread to get an idea at what the minimum requirements would be to actually purchase a home here. To those that are still at home (and have parents that are fine with that), I would say "congrats", and if you decide to purchase a home, it sounds like you're on the path to having a good deal of savings and well prepared for it. Again, I have no idea what the point of the post would be. We are talking about what it would take for someone to purchase a home. If some of them are not quite at the income level they need to be at and have an opportunity to stay at home longer, progress on their jobs and save more....good for them. The unemployment rate in San Francisco is at one of its lowest rates in years (3.2%). People on their first year of their jobs are averaging roughing $60K (sounds in line with the average household being at $105K). Doesn't sound like a bad trend to me. I should also mention that Pew Research is talking about the entire country, not specifically SF (location, location, location). What else should one say about this?
Last edited by bodyforlife99; 03-08-2016 at 01:29 PM..
Five years into the economic recovery, things are looking up for young adults in the U.S. labor market. Unemployment is down, full-time work is up and wages have modestly rebounded. But, according to a new Pew Research Center analysis of U.S. Census Bureau data, these improvements in the labor market have not led to more Millennials living apart from their families. In fact, the nation’s 18- to 34-year-olds are less likely to be living independently of their families and establishing their own households today than they were in the depths of the Great Recession.
It sounds like maybe college grads these days are onto the OP's plan. Could be that they're living at home to save for a condo, or whatever. Good for them! I've come across several 20-somethings on other sub-forums here who did just that; lived at home after graduation and after saving for a few years, paid cash for their own condo. These kids aren't dumb.
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