Profile picture for user8326576

Is it worth buying in the Bay Area?

Hello Friends,
    I have been looking at buying a 3 bedroom house in San Jose with a budget of $500k. Even after looking for 2 months I haven't been able to make a single offer. Either homes that I like are in a shabby neighborhood or they are in a good neighborhood but the interiors are crappy. It is getting pretty disheartening and I am wondering if I should increase my budget to maybe $600k.
    I earn close to $138k in salary and probably another 15k in bonus + maybe 15k in stock bringing my income to about 170k. Can I afford a house of $600k considering I will have to spend around $20k for furnishing and another $15k for closing costs etc. I have been to several websites and entered this info but they give me weird results probably because of what I say as credit card payments. I pay off my credit card immediately every month( about $3k) so should I enter that as my monthly payment or should I enter $0 since it's not as if I have debt on my credit card it's just that I pay it off immediately every month. 
     I believe that housing market hit rock bottom in Oct 2011 and most home prices are rising. I rent right now and pay $1700 in rent so does it make sense to keep renting and wait for prices to fall again?
    
   
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June 04 2012 - San Jose
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Answers (6)

Unfortunately no one can time exactly when prices and interest rates will bottom out and when they will rise...but if you keep waiting you may find the market will have moved against you...now is the best time to buy, work with a buyer's Broker (represents your interests only in a "single agency) and a mortgage broker to guide you.

Good luck!

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June 10 2012
Profile picture for SteadyState
Use the following calculator to perform a buy vs. rent calculation.
In general in the SF bay area renting is much cheaper than buying. But check the rental costs for your area of interest and make a balanced evaluation.
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June 05 2012
So much of this really depends on you.

Lets assume you do boost your price range and end up buying something in the $560,000 range. Given what you have said, by coming up to that level, you are going to start finding homes in areas you are going to like. For instance in the south san jose area for instance. There are areas with good schools and decent homes at that range.

If you buy a house in that ballpark, lets assume you put down 20% which would come to about $112,000. Your monthly mortgage payment would be $2,237. This does not include taxes and insurance. So consider that when looking at your monthly budget.

As for what you will qualify for, as mentioned before, you should talk to some lenders and see what they can do for you. I suggest talking to your current bank, a credit union if you have access to one, a small local bank, a loan broker and a direct lender. With those in your pocket you should be able to pick and choose from several loan "products" that fit your needs. I have a really good person I could suggest who as done some great things for my clients in the past.

Good Luck,
Robert
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June 05 2012
You need the help of a qualified mortgage specialist.  I know of several if you would like to email or call me.  They will be able to answer the questions concerning what is the Maximum you can afford.   In terms of whether to buy or rent -- many renters that can afford to buy -- find that they can have a lower total payment (please look at PITI --- Principal intererst taxes and insurance)  versus rental expenses.

As far as the market conditions,  I think the bay area bottomed a little earlier than 0ct 2011,  by maybe 6 months.  It usually takes 6 months for the public to catch on.. But that does not really matter -- I cannot predict the future -- and it is possible the Bay area market could fall further.  However, there are some longer term trends you should look at.  For example the Median price peaked somewhere around then of 2006 to 2007, and has fallen to 430k for the bottom in San Jose (from over 800k at the peak) it is now at 500k .. which is "higher" but relative to 830k it is still very cheap.  Due to mortgage rates, it is often cheaper to buy with 20 percent down than it is to rent at this time.  Finally,  if for the moment, you disregard the last 5 years,  Bay Area Real Estate has appreciated an average of 7 percent for the previous 40 years or so...

It really is up to you to decide --- do you believe the next 10 years or so will be more like the past 40 years ?  or the past 4 ?

donw
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June 05 2012
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I can put upto $120k as downpayment.
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June 05 2012
Profile picture for hpvanc
Generally you do not include credit card balances if you pay them off every month so your credit card debt would be $0.  The other big limiting factor I don't see mentioned is how much you have as a downpayment. 

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June 04 2012
 
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