Quality of life for families in Silicon Valley? (San Jose, Newport Beach: for sale, real estate)

[jbunniii]

Originally Posted by JohnSoCal

Your payment would be approximately $4,500 on a $1,000,000 loan at today's interest rates for a 30 year fixed. Your take home pay will be higher than $8k especially seeing as your mortgage interest is tax deductible.

Your numbers are way off. There's no way you can afford a $4500 mortgage payment on a $150k income while still being able to cover your other expenses (including house maintenance, property tax, etc) and save for retirement.

As a general rule of thumb, prudent lenders will not approve a mortgage if the PITI payment (principal, interest, tax, and insurance combined) exceeds 28% of your gross income, which would be $3500/month. This translates to a maximum loan of approximately $575k assuming a 30-year fixed mortgage at 3.5%, purchase price of $718k (20% downpayment), and property tax at 1.25%, or $9k/year, and insurance of approximately $1500/year.

You might find a lender which will give you a slightly larger mortgage than this, but not much larger, because the days of funny-money interest-only option ARMs are over.

[roadwarrior101]

Originally Posted by jbunniii

Your numbers are way off. There's no way you can afford a $4500 mortgage payment on a $150k income while still being able to cover your other expenses (including house maintenance, property tax, etc) and save for retirement.

As a general rule of thumb, prudent lenders will not approve a mortgage if the PITI payment (principal, interest, tax, and insurance combined) exceeds 28% of your gross income, which would be $3500/month. This translates to a maximum loan of approximately $575k assuming a 30-year fixed mortgage at 3.5%, purchase price of $718k (20% downpayment), and property tax at 1.25%, or $9k/year, and insurance of approximately $1500/year.

You might find a lender which will give you a slightly larger mortgage than this, but not much larger, because the days of funny-money interest-only option ARMs are over.

Maybe, as he mentioned earlier, his home is paid off and the $150k is retirement pension. If this were the case, then yes, he could afford this.

[WeakandDizzy]

Originally Posted by roadwarrior101

Maybe if you have a large down payment. If you're making $150k, that's $12.5k per month, before taxes. A mortgage of $1M would probably be around $6k per month. Perhaps $5k if you have a significant down payment or low interest rate. Your take home pay after taxes would only be around $8k/month. This doesn't even begin to factor property taxes, maintenance, insurance, savings for retirement, kids 529 plan, healthcare, transportation, utilities, food, clothing, etc. I just don't know how you would make it work without being EXTREMELY house poor.

That has been the problem with the Silly Valley for several decades. Many of the people who live there are HOUSE POOR. All of their income goes to the house payment and related expenses. But people do it because they figure all the money they are paying on housing will come back to them many fold when they cash out at retirement and leave the area. Or they are like my parents and in laws who have no desire to leave due to the benign climate and can only afford to live there due to the ridiculously low taxes from Prop 13. I have the highest income of any of my siblings and yet I would not move back to the Silly Valley because I refuse to spend $1,000,000 plus on a 1950's rancher in Los Altos/Saratoga/Los Gatos, etc. even though I could qualify for the mortgage with a 20% down payment. I left the Valley in my mid 30's for several reasons not the least of which I was spending all my time working and never saw my wife and children. I have a much more balanced life since I left, but I do miss the weather and frequent visits with my family. My wife and I visit at least twice a year and we still seem to have way more discretionary income than most of our relatives.

[80skeys]

Originally Posted by WeakandDizzy

I left the Valley in my mid 30's for several reasons not the least of which I was spending all my time working and never saw my wife and children. I have a much more balanced life since I left, but I do miss the weather and frequent visits with my family. My wife and I visit at least twice a year and we still seem to have way more discretionary income than most of our relatives.

If you're an average professional worker here earning the typical professional salary and bought a house, you're not going to have any discretionary income!

[easybay]

$1,000,000 plus on a 1950's rancher in Los Altos/Saratoga/Los Gatos,

You are going to have to DOUBLE that to find a '50's rancher in those neighborhoods.

[roadwarrior101]

Originally Posted by easybay

You are going to have to DOUBLE that to find a '50's rancher in those neighborhoods.

Yes, and figure on spending another $200-300k in fixing it up to 2013 standards (updating kitchen, bathrooms, centralized A/C, etc).

[vrhunski]

@jbunniii what you think what is maximum amount that we can borrow as mortgage on 30yr fix rate?

$200.000 income
We own condo 300.000$ no payments no mortgage no any debts so far.
We own two cars without payment.
So that means our expenses are quite low ~$2000 month. We will have 20% cash for down-payment. Excelent credit history.

[JohnSoCal]

Originally Posted by vrhunski

@jbunniii what you think what is maximum amount that we can borrow as mortgage on 30yr fix rate?

$200.000 income
We own condo 300.000$ no payments no mortgage no any debts so far.
We own two cars without payment.
So that means our expenses are quite low ~$2000 month. We will have 20% cash for down-payment. Excelent credit history.

You should qualify for a $1,000,000 - 1,200,000 mortgage.

[ANIM]

Originally Posted by vrhunski

@jbunniii what you think what is maximum amount that we can borrow as mortgage on 30yr fix rate?

$200.000 income
We own condo 300.000$ no payments no mortgage no any debts so far.
We own two cars without payment.
So that means our expenses are quite low ~$2000 month. We will have 20% cash for down-payment. Excelent credit history.

150K for 1M loan is insane (unless it is tax free..??)

For $200K - if you have kids, depends whether it is one person income or dual income. Dual income - means likely need day care or after school care. Day care for small children is expensive. One income - meaning the second parent stays at home with kids = no need to pay for that. If no child care involved, for $200K - the sensible loan would be about $650, which means about $810K house with 20% downpayment (With current bidding wars in good areas, 30% and more downpayment has a better chance imo).

[JohnSoCal]

Originally Posted by ANIM

150K for 1M loan is insane (unless it is tax free..??)

For $200K - if you have kids, depends whether it is one person income or dual income. Dual income - means likely need day care or after school care. Day care for small children is expensive. One income - meaning the second parent stays at home with kids = no need to pay for that. If no child care involved, for $200K - the sensible loan would be about $650, which means about $810K house with 20% downpayment (With current bidding wars in good areas, 30% and more downpayment has a better chance imo).

I said what they would qualify for. not what they should do. That is up to them to decide, not us.