“I am 34….” Option C – Partner Up (Part 1)
The number of first-time homebuyers who can afford to purchase a median-priced (about $660,000) home in the Bay Area has steadily declined for years. The percentage is now in the teens. Given the high cost of a median-priced home, most first-time homebuyers are forced to look at condos.
Let’s run some numbers. For this example, let’s say condos can be purchase for about $450,000.
A 20% down payment on a $450,000 home is $90,000. That would equate to a mortgage of $360,000. Assuming a 30-year 5.50% fixed mortgage, the monthly payment would be $2,044. And, assuming a 28% maximum of gross income for housing, it would take an income of $87,600 to qualify for this mortgage.
A double-whammy here. Most people do not make $87,600 a year. (The 2004 HUD area median income for San Francisco is $66,500.) And even fewer people have $90,000 sitting in the bank. So, the situation seems hopeless? Not quite.
What if there were TWO people involved in the purchase?
Two people making the area median income would easily be able to cover the monthly payment. And there will be some money left over to cover the HOA fees and other housing-related costs.
And, what if the two combine do not have $90,000 sitting in the bank? Then, just borrow the whole $450,000! Assuming the same facts as above, the monthly payment would be $2,555. It would take an income of $109,500 to qualify for this mortgage. Again, two people making the area median income would be able to cover the monthly payment.
So, the solution would appear to be to just get hitched. Then, the nagging question is, “What if I never get married?” While it is almost a given for just about every relative, I do not see it that way. I do not plan on ... Read
As I have written in part 1, a modest income homebuyer can get into a very expensive home by teaming-up with someone. This is certainly nothing new. But, it is certainly being used a lot more often these days, particularly, in places like the Bay ... Read
While it would be nice to live in a $600000 home for the cost of a $300000 home, not everyone is going to get the opportunity to live in one of those BMR housing units. For the rest of us, there are other housing programs ... Read
As you already know, home prices in the Bay Area are literally through the roof. It is beyond the reach for most of the local citizens. So, what is the city's solution? BMR Housing. BMR stands for "Below Market Rate". Every new building complex that ... Read
The biggest problem here would come when one of the two people decides they want to sell and move on. The remaining occupant wouldn't be able to buy the other one out, and I could imagine that the ensuing transaction could get messy. Or what if one wants to move out and rent their portion to someone? Not insurmountable obstacles, but certainly something to think about before doing this.
--
http://www.fivecentnickel.com/
