Instructions to my son on how to buy a house in the SF Bay Area (San Jose: mortgage broker, buyer)

[neutrino78x]

Originally Posted by bodyforlife99

San Francisco Demographics & Statistics

Silicon Valley is not San Francisco. Again, no one is going to rewrite this thread for you (nor am I going to read your comments that misquote me). If you choose to not read the thread, that's up to you. Have a nice day.

Again, let's say you're right and the median income in SF is 78k or whatever. That speaks to my point, not yours.

You DEFINITELY can't buy a one million dollar house at 78k.

You need 200k. That can come from one income or two, but the total has to be 200k or higher (after taxes...income before taxes doesn't do much for you lol).

[bodyforlife99]

Originally Posted by neutrino78x

Again, let's say you're right and the median income in SF is 78k or whatever. That speaks to my point, not yours.

You DEFINITELY can't buy a one million dollar house at 78k.

You need 200k. That can come from one income or two, but the total has to be 200k or higher (after taxes...income before taxes doesn't do much for you lol).

I am right and proved it to you, but unfortunately you continue to misquote me on the rest so I'm not going to waste my time with you. You've made a conscious effort to ignore what's already been written so there's no sense in arguing with you.

[neutrino78x]

Originally Posted by ssmaster

I completely disagree.the trappings of an upper middle class lifestyle are the same throughout the United States.

lol...so basically nobody in a major city is in the middle class? I don't think many would agree with that.

It is a big city. It has to be dense. That means condos and apartments instead of SFHs. Therefore, most people are not going to own their own building. Hence, logic dictates that middle class in a major city is not achieved by home ownership.

At least, not home ownership in terms of owning your own building.

In a major city, only people of very high income own their own building. How can it be said that the highest income in the area is somehow middle class? Does not the phrase "middle class" suggest "middle" as opposed to "high"?

[neutrino78x]

Originally Posted by bodyforlife99

I am right, but unfortunately you continue to misquote me on the rest so I'm not going to waste my time with you. You've made a conscious effort to ignore what's already been written so there's no sense in arguing with you.

or maybe your point is incorrect.

Mathematically, you must have a certain income to buy property that has a given value. A single family home in SF or SJ is about one million dollars, median value. Therefore you need 200k in income, after taxes, to own that. Your home is supposed to be about five times your post-tax income.

You can still own a dwelling if you make a significantly lower income, but you not own the land underneath, and it will be inside of a building containing other dwellings belonging to other people. Obviously, many people don't have a problem with such a lifestyle, as they live in condos in San Jose and San Francisco.

[bodyforlife99]

Originally Posted by neutrino78x

or maybe your point is incorrect.

Mathematically, you must have a certain income to buy property that has a given value. A single family home in SF or SJ is about one million dollars, median value. Therefore you need 200k in income, after taxes, to own that. Your home is supposed to be about five times your post-tax income.

You can still own a dwelling if you make a significantly lower income, but you not own the land underneath, and it will be inside of a building containing other dwellings belonging to other people. Obviously, many people don't have a problem with such a lifestyle, as they live in condos in San Jose and San Francisco.

Again, you've chosen not to read what's already been written that has already addressed your point. What you are doing is simply very inconsiderate to the rest of the people that have spent the time articulating thoughts on the topic. No one is going to rewrite it for you or spoon feed the information to you. I've done my best and already referenced two posts for you. Unfortunately, you clearly didn't even read the original post (let alone any others). And it's not even a comprehension thing as you've completely misquoted me. Enough.

[neutrino78x]

Originally Posted by bodyforlife99

Unfortunately, you clearly didn't even read the original post (let alone any others).

Or maybe I did and I just disagree with you. For example,

Originally Posted by bodyforlife99

Don't listen to people on internet forums that claim it's impossible unless you earn ungodly amounts of money - Be mindful that if you surround yourself by people that say you "can't" (complete with all their little snarky comments), you will eventually believe their lies. Rid yourself of people like that and hang around with people that are financially savvy enough to understand it's doable

It is doable, but it requires a certain income. 200k at least. So if you make 78k and you marry somebody who also makes 78k, you're still a little low. 160k would be enough for a condo but not a SFH. Now I'm not sure if 200k is an ungodly amount of money, but it is what is required.

[bodyforlife99]

Yawn. Neither myself, nor is anyone else going to waste time with you selectively editing and picking and choosing what you want to read. The comment is there, in its entirety, for everyone to read Enjoy the rest of your day. I'm done with you now as this is just another specious argument from someone that chooses not to read what's written.

Don't listen to people on internet forums that claim it's impossible unless you earn ungodly amounts of money - Be mindful that if you surround yourself by people that say you "can't" (complete with all their little snarky comments), you will eventually believe their lies. Rid yourself of people like that and hang around with people that are financially savvy enough to understand it's doable

Accept the fact that buying a home in this area requires sacrifices and will probably result in your being house poor for anywhere from 3 to 5 years - So, get rid of that handy dandy phone with the internet, unlimited texting, and the ability to toast bread. You don't need it and it will just run up your expenses. Get a cheap phone and use it to talk, and a cheap phone plan (have a computer at home if you need internet). Cable TV..gone. Get an energy efficient TV and buy an antenna (you can watch local programming and some other channels you probably didn't know existed because they're not on cable). Buy energy efficient appliances, lighting, etc., and be mindful of electricity costs (i.e. not having lights on you don't need, etc.). Bundle up during cold times and keep heat at a minimum. Brown bag it! Eat at home (including brewing your own coffee). Forget the night clubbing and bar hopping. Buying drinks out is expensive (you can have that fun again in about 5 years after you've gotten some promotions at work). You love the area, you want to live here. So enjoy the area. Your vacations will be stay-cations. People pay all sorts of money to vacation in the Bay Area. You get it for free. Enjoy it. You can travel away from the area down the road. Your mother and I love you and want to see you. So plan on coming over at least once a week for a home cooked meal.

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%).

Save money for a down payment - What a novel concept. You'll constantly hear people whine about the people that come here penniless and can't save for a down payment. That's because that's dumb and they apparently think the way banks did things prior to the last recession was a good way to go. Anyone I know that came from out of the area saved in their low COL area before they got here. Those that I grew up with here either got help from their parents or were allowed to stay at home rent free so they can save for their down payment (that is the gift your mother and I are giving you...and I encourage you to put away every dime). Also realize that you don't necessarily have to put 20% down and their are currently vehicles out there that will prevent you from paying PMI.

Realize that the further away from the city you buy, the less expensive the cost (keeping in mind your commute). Run the numbers. You're going to pay exorbitant rent anyway so you might as well buy if you plan on staying in the area. To rent a 2 bedroom in or very near the city, you'll be looking at roughly $4k in rent. Your after tax cost is going to be similar if you buy. If you look further away, it will be less so figure it out and how long a commute you can deal with (I recommend being closer if you're working in the city). Use our best friend (realtor) to help you with your home purchase. He'll make sure it's in good enough shape so you're initial maintenance costs in the first 5 years are small. Also, be mindful of the ebbs and flows in the real estate market here and Economist predictions. We typically have had runs in the ballpark of 7 years. The housing costs come down, rebound, and exceed the previous high. The next recession is predicted for 2017 (it's not a guarantee but at least something to be mindful of). People that bought in 2010 are quite pleased right now. However, even during these recessionary times, rents still remained relatively high in relation to the drop in housing prices (just another reason to buy instead of rent). Hopefully you pick a good time to get in, but don't get scared off as you can still find opportunities if you're persistent and do your homework.

Buy a reliable, fuel efficient used car with a reasonable insurance rate - You don't need a BMW and for that matter, you don't need an expensive Prius (regardless of the fuel economy). Buy yourself a used car that gets good gas mileage (i.e. maybe a corolla with 50-60k miles on it). If you take care of a car, you should expect to get at least 200K miles on it. And buy it outright with cash.

Get the least expensive health plan possible - Unfortunately Obamacare eliminated catastrophic plans, but just plan on getting a low cost plan with the highest deductible possible. You can pay for a checkup. Eat right, exercise, and don't get hit by a bus

Don't be in a rush to have kids - to raise a child from birth through college is probably going to cost you in the ballpark of $500-750K. Wait.

Never carry a balance on a credit card and maintain your FICO score - The last thing you want to do is pay interest charges on a credit card. I suggest a couple of cards so you can establish a score, but get ones that you don't have to pay an annual fee and actually reward you for your purchases (a nice spiff). Use them for any bills you would normally pay, groceries, etc. Heck, you might be able to get a short vacation paid by the credit card company. But ALWAYS have the full balance paid off at the end of the month

Always continue to educate yourself - Whether it's training for your job or something else you can segue into. The worst thing that happened in the last recession is people getting laid off of jobs they had for years and their inability to reinvent themselves. I've had 3 different occupations in my lifetime. Sometimes it's necessary.

Put in the extra time at work and do the little things that will result in your getting promoted

Be mindful of your tax write offs. Do everything you can to give as little to the government as possible. Owning a home in this area opens the door for you to itemize your deductions. Educate yourself on what you can write off and take full advantage of it. Run the numbers on your net difference regarding retirement savings and its impact on your taxable income. Your mother and I have gotten as low as an effective Federal tax rate of sub 8%. Always keep as much as you can and then you decide how you want to spend it (that includes any charities but at least you can give it to causes you care about instead of just letting the government decide where it should go).

AND I'M SURE THERE'S PLENTY MORE IN THE THREAD THAT WILL ADDRESS THE NEXT COMMENT YOU BRING UP.

READ!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Ultrarunner]

Originally Posted by neutrino78x

or maybe your point is incorrect.

Mathematically, you must have a certain income to buy property that has a given value. A single family home in SF or SJ is about one million dollars, median value. Therefore you need 200k in income, after taxes, to own that. Your home is supposed to be about five times your post-tax income.

You can still own a dwelling if you make a significantly lower income, but you not own the land underneath, and it will be inside of a building containing other dwellings belonging to other people. Obviously, many people don't have a problem with such a lifestyle, as they live in condos in San Jose and San Francisco.

I guess I've always been an outlier...

Make up for modest income by Bay Area standards with cash...

Did the same thing as several of my friends... keep improving and trading up.

[neutrino78x]

Originally Posted by Ultrarunner

I guess I've always been an outlier...

Make up for modest income by Bay Area standards with cash...

You can't, though. The cash would come from your income. What, you're going to save 100/month for 60 years and then buy a one million dollar house in cash? The income requirement to get a one million dollar house is 200k. Sure you could buy in cash in Nowhere, Kansas, but again, that defeats the purpose.

Either the 200k is going to come from one person, or from multiple people buying the house together. Two Google programmers could do it; a heart surgeon could do it by themselves. But 200k is the income requirement. That's just to cover the monthly mortgage payment.

[neutrino78x]

Originally Posted by bodyforlife99

Yawn. Neither myself, nor is anyone else going to waste time with you selectively editing and picking and choosing what you want to read.

I've read the whole thing, man. I gave you a mortgage calculator. You're simply wrong.

There is an income requirement to purchase a one million dollar single family home. That requirement is 200k.

That can be your income by yourself, or you can get together with someone else (a spouse) and do it. But you're not going to buy one if your income is 100k. You can't afford it.

So your point is wrong.

My point is that most people in the area don't actually WANT a single family home, and are happy with a condo inside of a building containing other condos. Why do you think so many people do it? It is what they want. They want to live in San Jose or San Francisco. If you live here you most likely don't own a SFH, unless you bought it decades ago when it was cheap.

QED.