Wednesday, November 02, 2005

Halloween is over, wanna buy a house?

Two days after Halloween and, I’m sick to my stomach. Too much candy! Anybody want to stop by the office and pick up some leftover candy, be my guest.

And now for the Realty Report:

According to data just released, most Californian’s are falling short on income required to qualify for a loan on a median priced home. The shortfall, $73,810 is based on qualifying income of $127,950 required to purchase a $545,910 home.

The Long Beach median price is at $457,000, about 100,000 less than the statewide median price.

Here’s a fun trick, I call math.

Lets figure out if you can buy a home. Let’s assume you have 45,700 saved in your piggy bank. (that’s 10% of the median, which is what we’re going for)

Your banker gives you a loan at 5.75% amortized over 30 years. Your payment is $2400, less tax, insurance, and lawn service.

Now lets assume you are just like everybody else and you fall short by 73,810 on qualifying income; you earn approximately $54,140 annually or $4511.67 per month. Already you know you don’t qualify because you’re now over 50% of our income to debt ratio.

So now, in order to afford this price, we need to lower the payment or increase the down payment. We can lower the payment by choosing an interest only loan which puts our mortgage payment at $1257.00.

If we find out that Aunt Edith has an extra $10,000 burning a hole in her mattress, she might lend it to you cheap. Our down payment now is, $55,700 which will save a whopping $100 on either payment choice. Not much help there.

What!? You didn’t tell me you had a wife, sugar daddy, or a brother who wants to buy a house too! Good. With a co-applicant on the loan you now double qualifying income and can buy this house! Congratulations you’re a homeowner. Now its time to figure out who gets to live there. We’ll talk about that some other time.

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