I might be buying a townhome in San Diego County - am I insane???

[Stogey23]

My girlfriend's father owns a townhome in Rancho Bernardo, and has recently shown an interest in us buying it from him. Like everything in San Diego County, it's ridiculously expensive. From our first "pre qualification" (SD County Credit Union), the loan officer said our mortage+homeowner's fees+property tax will be about 39% of our combined gross income. She said this is a good range to be in, and we have no other debt.

Is there any reason I should be talked out of doing this? Her father seems very willing to help, and I trust the Credit Union. Their closing fees should be very low, because they are a non=profit organization. Where else should I shop for loans?

I understand we may be in for a market correction, but it's not like people are going to stop wanting to come to California...right?

It's important to know this would be the first purchase for both of us.

[erikl2]

What type of loan are you looking at?

[Stogey23]

What type of loan are you looking at?
We were pre-qualified for a 30yr Fixed. One with PIM, and one with a 2nd mortgage to avoid it.

Is the answer you were looking for?

[Footer Phooter]

I'm in the same boat. We want to buy, but I'm worried the real estate correction around here is going to be fairly sizable.

[Stogey23]

I'm in the same boat. We want to buy, but I'm worried the real estate correction around here is going to be fairly sizable.
At the same time it wouldn't suprise me to see this place gain 50% in value over the next 3-4 years. :confused:

[dj43]

As long as people keep flooding into California, the market isn't going to change much. The one thing we can't make more of is land and the location you are considering is a good place to land. There may be some "market adjustments" in some places but I don't see it happening where you are.

I think the 39% number is at the top of the range I would recommend. I still believe one is wise to stay down around 33% but many experts say 39% in your situation is OK.

Now if Arnold decides not to run, and Phil Angelides becomes our next governor with his pledge to raise taxes, all bets are off. We may see a lot of people with money, and the ability to live elsewhere, go someplace else. THAT is the only thing I see that would cause an "adjustment" in California real estate.

[Sachin]

1. You do realize that 39% of your gross income is 50% of your net income, maybe more.
b. You're not married or even engaged. Make sure you both have clear title to the home. that way, if she dumps your sorry ass for DC United, she can't make you move out.
iii. If you are buying for the long term, then any correction shouldn't be too bad. If you are buying for the next 3-4 years, hey, at least it's San Diego and people always want to move there.

Sachin

[Stogey23]

Thanks to everyone! We're going to check out the place today at 11, and after that we'll tell her dad how serious we are.

[M]

I'm in the same boat. We want to buy, but I'm worried the real estate correction around here is going to be fairly sizable.

I'm worried too. I want to buy a property in San Francisco, but latest figures show 66% of buyers in the Bay Area in the last year have financed their purchases with variable-rate interest-only loans. One can only imagine what is going to happen when (i) interest rates rise, and (ii) principal starts having to be repaid - on average after 4 to 5 years, apparently. Even if prices don't drop significantly, I can see a decade of stagnant to slowly declining prices relative to inflation. Quite honestly, my inclination is to bide my time for a while before investing in more real estate.

[M]

My girlfriend's father owns a townhome in Rancho Bernardo, and has recently shown an interest in us buying it from him. Like everything in San Diego County, it's ridiculously expensive. From our first "pre qualification" (SD County Credit Union), the loan officer said our mortage+homeowner's fees+property tax will be about 39% of our combined gross income. She said this is a good range to be in, and we have no other debt.

Remember that the Credit Union's interests aren't the same as yours. As long as you are putting down a 'reasonable' amount of money, they don't really care if you have no free cash at the end of the month once you've paid your overheads. All they're bothered about is whether you'll pay the loan and in the worst case scenario whether they can get their money back if you default. In other words, I really think you have to do your own after-tax budgeting to decide whether your housing costs will leave you with enough money to actually live on in a fashion you'd be comfortable with.

[M]

1. You do realize that 39% of your gross income is 50% of your net income, maybe more.
b. You're not married or even engaged. Make sure you both have clear title to the home. that way, if she dumps your sorry ass for DC United, she can't make you move out.


And while your at it, make sure you have a binding agreement as to what will happen if one owner wants to sell. It's very difficult to force a sale if one owner obstructs it and there's no such agreement as a friend of mine in New York recently found out. He was in a long term relationship with another guy (and thus marriage wasn't a legal option for them). When the relationship went sour, he had a nightmare of a time dealing with the jointly owned house. Eventually, the other guy bought him out, but not before a lot of aggravation and legal expense.

[Footer Phooter]

Went condo shopping today. Still worried about the correction happening, but I think we're going to buy. We're not going to use any of the more "creative" loan products, however.

[bigredfutbol]

Went condo shopping today. Still worried about the correction happening, but I think we're going to buy. We're not going to use any of the more "creative" loan products, however.

The correction worries me, too--we're roughly in the same area. We already own our townhouse, but we've only had it for two years--I'm sure you know what the market was doing then, as well as now.

[Stogey23]

What kind of closing costs should I expect? Does the price of the home affect this?

[Sachin]

Somewhere around 3-5% of the total purchase price. You will have to pay various taxes, fees for apprasials, home inspection (typically separate), perhaps points on your mortgage (tax deductable), and much much more!

Here's a sample HUD-1, the document that all title companies use for closing costs. Your costs and your seller's costs are outlined:

http://www.hudclips.org/sub_nonhud/html/pdfforms/1.pdf

When we bought our house for $355,000, our closing costs were roughly $10,000. You need to have that cash in hand at closing.

[BrianJames]

Somewhere around 3-5% of the total purchase price. You will have to pay various taxes, fees for apprasials, home inspection (typically separate), perhaps points on your mortgage (tax deductable), and much much more!

Ugh..and "transfer stamps"..aka "transfer your money to the local city stamps". Last time I moved the seller in the burb i was moving from at to pay transfer stamps and bought in chicago, where the buyer had to pay them..that did suck.


When we bought our house for $355,000, our closing costs were roughly $10,000. You need to have that cash in hand at closing.

IIRC, you can also roll that into your loan if its an absolute necessity, but not advised.

[Own Goal Hat-Trick]

Somewhere around 3-5% of the total purchase price.

When we bought our house for $355,000, our closing costs were roughly $10,000.

i thought between 7-10%.

does it vary much at all?

[Sachin]

Did you pay points? They can vary, but most things I've seen are between 3-5%

Sachin

[yimmy]

Your lender should provide you with a Good Faith Estimate that tells you what kind of costs they have.

We bought a house in Northern California last year. We didn't pay any points so our closing costs were about 1 percent of the loan.

If I were you, when you close escrow and go to the title company to sign off on everything, check all the numbers. This friggen title company made a mistake in their math and overcharged me by about $600. To be fair, it probably would have been caught by them after my lenders funded the seller but I was still miffed.

Oh yeah, and make sure that the appraisal of your townhome is worth what you're paying for it, but since it's your g/f's dad, i'm sure he won't try and screw you and he'll (hopefully) give you a fair price.

[christopher d]

My girlfriend's father owns a townhome in Rancho Bernardo, and has recently shown an interest in us buying it from him. Like everything in San Diego County, it's ridiculously expensive. From our first "pre qualification" (SD County Credit Union), the loan officer said our mortage+homeowner's fees+property tax will be about 39% of our combined gross income. She said this is a good range to be in, and we have no other debt.

Is there any reason I should be talked out of doing this? Her father seems very willing to help, and I trust the Credit Union. Their closing fees should be very low, because they are a non=profit organization. Where else should I shop for loans?

I understand we may be in for a market correction, but it's not like people are going to stop wanting to come to California...right?

It's important to know this would be the first purchase for both of us.SDCCU is a good outfit. I've never had problems with them. San Diego Metropolitan CU on the other hand...

But as to the "real-estate bubble", that's what folks told me in 2000, when I bought a 2BR condo four blocks from Balboa Park (Morley Field) for ~150k. What I told them then holds true now: Market-timing is for day-traders and gamblers, and at the end of the day, you are still holding Southern California real estate. People will not just stop coming here, the sun won't stop shining, and the women won't all of a sudden get homely. If it squares with your household budget, by all means go for it. Enjoy homeownership :)