I am about to put an offer for a house for about 940K in bay area and my TC is 200K. I am not sure if it is a right thing to do . Experts please advice if it is a right thing to do or should i look for lesser houses ? TC: 200K yoe:5 Dependent: 1, Recently married an no kids Downpayment : 20% House type: Single Family, no hoa Balance after putting down: Around 30k in stocks
Usually 5x if income is the max loan u can get anyway so you are stretching to the max in the current scenario. If you think your salary will continue to increase well, then I would say it is doable.
Thank you . Yes my 2019 TC is 200k. Next year it will be around 225k based on unvested RSUs .
Consider how long u want to stay in this house too. If it is 5-7 years then get a 5/1 or 7/1 ARM which is good right now and don’t worry about re-financing. In the meantime switch jobs for better TC and bigger house. Good luck
Will wife have any contribution?
Too much house!! My TC is $200k, and I would not buy it. Always have a plan for the worst case scenario -- imagine the stock market crashes, you get laid off, and companies go on a hiring freeze -- but you will still need to pay the mortgage...
Thanks for your response. We started at 700k and are here now :( Considering different factors like neighborhood, school this is the least we could find in Bay Area . Rest all houses were around 800k townhome with 300 hoa. :(
If you dont plan on having kids soon or even if you do, shcool district is irrelevant if you plan on moving 5-7 years. If you dont then you will grow into the house and it's meaningless to ask if its good. And for gods sake dont take arm if you plan to stay long term.
should be okay. Your debt ratio is 20%, far less than the standard 45%. Your cash reserve is a little low though. I still had 700K reserve after putting down 20% for 2.5M home
Thank you . Yes it’s a little low. I am selling most of my stocks to put 20% down . I do have around 190k unvested stocks which will be vesting over 3 years .
700k reserve? Do you mean cash and not invested anywhere? Or you put it in a high yield saving account?
If you are confident about your job that's a fine ratio for first time home buyers in Bay Area. Especially given all the interest is deductible at that range. Just do it
Deductible only if they itemize and give up the $24k standard deduction. With SALT capped at $10k for a household, I would consider the first $14k of interest to be a wash, and anything after that but before the mortgage cap deductible.
First two or three years will be difficult after buying a house but with Increase in salary and TC jump after moving out of Cisco would help later on.
30k afterwards. Does that include an emergency fund?
No . I have around 15k cash as emergency fund
Cool. Then agreee with the guy below. Get your own house inspector. I hope hoa isn’t too high.
I’d say go for it. I was in a very similar situation 4 years ago where combined TC was ~190k and the house was 850k. We knew what we were getting into and it was a now or never situation because the prices kept on going up. We put 10% down and the first year was a bit of a struggle because wife’s credit score wasn’t too great and we had to opt in for a high rate. But with the increase in our TCs and wife’s credit score, we refinanced the home and we’re in good shape now. The house is worth 1.2m now and mortgage is $3k. If I had waited too long back then I wouldn’t be able to afford the same house as of today. It was a risk but it paid off. Just make sure to do the math.
Where are you finding houses for this price in SF? I make 200k single and I feel like I can never buy a home :( I don’t care about schools. I want to rent it out.
It’s too much house, you could probably grow into it, but this is generally not a good thing to hedge your bets on.