How much home can I afford in San Francisco?, by Norman Green.

How much home can I afford in San Francisco?

By Norman Green

San Fransisco is the most expensive city in America. Research shows that the average home in San Fransisco is about a million dollars. The cost of housing worsened during the Covid 19 outbreak and increased renting by 12 % only in that year. Most people that live in San Fransisco are the younger generation. The generation can afford housing in the country because of several salaries streaming into one account and also support from parents.

One reason that triggers the high cost of living in San Fransisco is that people are paid highly for their work. People working with Facebook and other tech companies, uber, banking law, and consulting make an average of about $150,000 annually after joining the school. By turning 30, they make an average of about 300,000 dollars in one year. People earning such an amount of money are hence able to get a mortgage that is worth around 1.5 million dollars.

IS THERE ANY HOPE LEFT FOR THE AVERAGE BUYER?

San Fransisco is known to have major challenges in housing, such that even the tech worker cannot afford housing. Buying a house in San Fransisco requires a deposit of about $265,000.Many average people have to save for some years to have the amount, which could result in a ten-year plan of saving. Saving helps the average buyer of a point to accumulate the deposit needed. In a survey, 9 out of 10 people were said to have significantly less money, while 14% had no savings.

On average, workers earn more than 100,000 dollars and are advised to save 20% of their earnings for about seven years to have a deposit required to buy a mortgage.

WHAT ARE THE GENERAL MARKET CONDITIONS?

For people with an average income and generally all people, it is advisable to research whether it is beneficial to own a home or buy one. The study is done by checking the price to rent ratio. Low ratios mean it is advisable to buy a house, while high ratio favors renting a mortgage. Ratios of about 1-15 indicate that it is better to buy a mortgage, between 16-20 ratios show that it is better to rent, and more than 21 shows that it is way better to buy a mortgage. The national price to rent ratio is 18, indicating that renting is better than buying a house.

Before buying a house in SanFransisco, one is advised first to determine how much one can afford and set a budget of costs. One can use the 28/36 rule used in the mortgage qualification process. When buying a house, one should know that housing costs should not exceed 28% of gross income, and consequently, total debt payment should not exceed 36% of total gross income.

After setting a budget of the amount of money one is willing to part with for a house, you can now start the house-hunting process. As stated earlier, homes for sale in the country go for more than 1.5 million dollars. one also checks for the median sale prices and their behavior for the last two years to know how the prices behave. With that in mind, one is then advised to get a favorable loan program and get pre-approved for a mortgage reducing the time one spends searching for houses as pre-approval makes the seller confident in a person and also knows that the buyer is more likely to get a house. One also needs time to search for a lender one will work with and one that fits a person’s need. Most probably, one needs a jumbo loan, but at times one may need a lender that is accustomed to a person’s specific needs. It is also advisable for a potential buyer to look for a lender good at underwriting, which is key during the preapproval process.

With that in place, one then searches for types of home ownership available in the market, which gives an individual an opportunity to choose what one is interested in. Ownership involves one owning a unit and having to share a common area and can finance a condo with a traditional mortgage. Tenancy –in-common is like the condo, but in this case, one cannot finance with traditional mortgages and thus drives people t look for finances in banks. San Fransisco also has an ownership model involving a co-op between owners and buyers. In this type of ownership buyer is interviewed by the owners of the property, and they also normally require a financial document a person and if the buyer is successful, they can buy a share from the property

After studying the ownership models, the buyer chooses the best buyer’s agent in San Fransisco and then does house hunting, making offers on diffrenent houses to get a house that is best and eventually buy the house.