Can I afford a Bay Area home?

Workday
peppyjack

Go to company page Workday

peppyjack
Dec 2, 2020 16 Comments

I’d like to preface by saying I am a total noob at anything finance related. I am interested in buying a home in the Bay Area as I’ve been here my whole life and my family is here.

Age: 29
TC: 175
Net Worth: 400

Of my net worth, I am comfortable using about $200k for the down payment. I have a partner who has the same TC but I’d prefer to buy the house on my own. How much mortgage do you think I can afford? Any advice?

I’ve tried to use mortgage calculators but I feel that Bay Area housing is quite different from the general housing market if that makes sense (aka we’re kind of screwed).

One thing I fear is that I’m not technical so I honestly think I’m very very well paid for my role. If something happens to my current job, I’m not sure if I can earn the same TC thereafter.

#mortgage #housing

comments

Want to comment? LOG IN or SIGN UP
TOP 16 Comments
  • Amazon
    JR87

    Go to company page Amazon

    BIO
    Yo-yo Chen
    JR87
    175 “k” (I assume) is low in Bay Area regardless of whether you are technical or not. Net worth of 400”k” (I assume) will help but in the long run you need to make upwards of 350k to sustain in the Bay Area.
    Dec 2, 2020 3
    • Amazon
      JR87

      Go to company page Amazon

      BIO
      Yo-yo Chen
      JR87
      As a rule of thumb you need less than 25% earnings in mortgage. Assuming you won’t do all 400k net worth for down payment, you will be drawing a jumbo loan with mortgage payments reaching atleast 30%. This is not a wise decision financially as you are burning 🔥 monthly mortgage payments on interest and not principal thereby building minimal equity on your property.
      Dec 2, 2020
    • Workday
      peppyjack

      Go to company page Workday

      peppyjack
      OP
      I see. I was thinking of doing 200k for the down payment which is about 20% down or more for a house under 1mil.

      Do you think it is financially smarter to continue renting?
      Dec 2, 2020
  • SAP
    informer

    Go to company page SAP

    informer
    I should also add that most lenders will approve you for a loan as long as your DTI is no greater than 43%. In your case, that works out to a max mortgage payment of $6270/month. So from the lender’s perspective, you have quite a bit of room. They will also want to see around 3-6 months worth of liquid assets (not including the down payment). If you are uncertain about your job/income security then it’s advisable to have a much larger emergency fund (ie- 1 yr or more) which it sounds like you plan to do. Just run the math - you know how much you spend per month and your savings goal.

    If you have strong reasons to stay here, then I would go for it rather than waiting and risk getting priced out. Real estate in the Bay Area will remain strong as long as salaries are high.
    Dec 6, 2020 2
    • Workday
      peppyjack

      Go to company page Workday

      peppyjack
      OP
      Thanks so much for your insight, this is really helpful. Do you know if lenders just look at base salary, or do they look at TC?
      Dec 6, 2020
    • SAP
      informer

      Go to company page SAP

      informer
      Yes, most lenders will also look at your bonus and RSU grants, but they will ask to see 2 years worth and may apply a discount factor to your RSUs.
      Dec 6, 2020
  • Uber
    lallyy

    Go to company page Uber

    lallyy
    Yes, buy what you can afford eg: under 800k if that doesn't fit for your family consider an investment property. If you are here for the long haul it makes sense to buy early as possible.
    Dec 2, 2020 3
    • Workday
      peppyjack

      Go to company page Workday

      peppyjack
      OP
      However, I am hearing other commenters say with my salary, I cannot sustain living here... but I’ve never lived anywhere else in my life so not sure if it’s the right decision to stay.
      Dec 2, 2020
    • Uber
      lallyy

      Go to company page Uber

      lallyy
      That's what I meant by buy what you can afford, if you calculate expenses over the years, owning becomes much more favorable because after the 4th year owning becomes cheaper than renting.
      Dec 2, 2020
  • SAP
    informer

    Go to company page SAP

    informer
    I think it is doable, especially since you have no kids right now and also assuming that your partner will help out with some of the other living expenses.
    Dec 5, 2020 1
  • Google / Eng
    ABC-CEO

    Go to company page Google Eng

    ABC-CEO
    4x TC is affordable. So looks like you can't afford a SFH anywhere in the Bay area yet.
    Dec 2, 2020 0