Planning to buy a house in the next few months. My wife and I have been working here in the Bay Area for about 2 years and are first time buyers. We have accumulated about 200k (all in) and targeting a house around 1.1m. Seeking some guidance around this - 1) How much down payment is generally advisable for 1m house? 2) When do people go for buying a house? Is 200k enough? Or should we wait till we’ve accumulated 300k? 3) Given our savings, should we even go for 1m house? Should we be aiming lower or higher?
I dont think banks will let you go all in. If you have 200k, then max they will let you do a downpayment is 160k I think. Also think about closing costs, moving costs, costs for setting up the house etc before going all in. It is always better to have a good cash buffer when you plan to buy any big ticket item like a house.
They will let you go all in plus or minus 10k or so. However, they usually want to see about 6 mo of mortgage payment in savings. This can be 401k and ira.
I would say put down at least 20% so you don’t get to pay PMI. Also keep in mind that you will need additional closing cost funds in addition to the down payment.
Are you OK with paying PMI?
20% down. Avoid PMI entirely. If you buy an older resale, expect to be hit by many $1k+ fixes and expenses. The older the home, the bigger contingency budget you need. New construction further out alleviates this headache, but you pay for it with the commute. First rule of real estate is location location location. Spend time in the neighborhoods you’re targeting. Make sure you understand the area and are happy with it. Otherwise it’s a very expensive mistake. Another thing to remember about purchasing a home, particularly new construction, is the supplemental tax bill. This is essentially a tax on the change in price of the property from the last sale. For new construction, it’s a steep bill. You typically pay this in the second year in Santa Clara county. Not sure how it is in other counties.
This guy has good advice. I own a 100 year old Home and have dumped $12k into it in 5 months to fix shit. I knew what I was getting into when I bought it, so it’s been fine for me, but that’s because I budgeted for it. Next year I will be dumping $30k into electrical, windows and AC. Weee
Can you explain about this supplemental property tax? I am looking into a new construction and they say that there would be no special assessment. Should I trust them?
My recommendation goes against the grain: put no less than 20% down, keep cash in 3-6mo of expenses, and try to get a 15 year loan instead of 30 because you'll save a ton of money that way and pay the house off sooner. Just because you have a tech job, doesn't mean you can't still do better than others with tech jobs by being smart. I think that means you probably won't be able to afford quite as much house as you think you can, but you'll set yourself up to do better financially in the long run!
Those are lovely ideals, but ultimately unrealistic for a lot of people in a lot of markets and situations who would still be a lot happier with a suboptimal setup. If you can get a 30yr mortgage with no prepayment penalty (should be easy) that's well within your means, you can still hasten the payment as much as you want, all the way to 15 years or less if you really want. All you lose is a slightly lower interest rate, and you gain a whole lot in terms of flexibility and appreciation potential, particularly if it'd take years (assuming no appreciation...) to attain a 15% mortgage off the bat.
Never buy with less than 20%. Pmi or short term loans are a huge hit. 20 to 30% is ideal and many lenders will require 1 years worth of payments in cash as well.
200k is not enough downpay for 1.1 house. I south bay you need 25% downpay to win the bidding war
You can shop around lenders for 20% down with good credit. You might start with townhouse. North Sunnyvale has great potentials.
I'd definitely go lower than $1.1m. I'd either keep saving or focus closer to $700k. Use $140k for your down payment to avoid PMI and set aside around $30k so you're not immediately house poor the day you move in. That leaves $30k for any closing expenses, small renovations and furniture/decor expenses.
👍
Even East Palo Alto doesn't have anything for 700k. This is currently the cheapest house in that area: https://www.redfin.com/CA/East-Palo-Alto/2163-Ralmar-Ave-94303/home/1850949
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I bought my first home with just 10% down few weeks back. I would say go for it. What are you waiting for ? A dip. No one knows when it's going to happen. Even if it did, If you think twice now, during dip you will always develop cold feet and you will never buy.
Second this. Dips will always happen. If you're not a flipper, it's not really a concern. Just pick a good area, a house you want to live in, and do it.
Do you mind if ask where you bought your home ?