It's just plain and simple - 50% is just too risky - and such a decision would be reckless at best for your family. It is rather tempting to jump in, but you don't want to become the hostage of a huge liability. Though there are many school of thoughts, my view is that the San Ramon market, particularly windemere and gale ranch are over-priced and prices are likely to decline after the summer frenzy. Prices in these are not even at 2003 level, which tells me that there is some way to go before we find bottom. Even if there is an economic recovery, it is goind to be jobless recovery and wouldn't someone needs a job to afford a house? Unless the broader economy improves, the prices will keep declining...I know there may be disagreements, but this is my view of the market right now...I would say, stay safe, finacially, all it takes is one bad move...

Sr_desi,

Is it a 'good idea.'? No. It's risky. Can it work? Yes, but it is a roll of the dice. Ultimately, however, the decision is all yours. Whatever you decide, I can help you. Check out my website, http://www.SidewalkHomes.com, and see if you like what I offer.

Good luck,

Will Bateson, Broker
Sidewalk Homes
925-455-0845

very smart choice. Good luck to you. Please feel free to call or email me anytime with any further questions.
Thank you

Kamal Randhawa
Broker
510-932-1066

Thanks to all of you. I have decided not to go with this idea. I will look something else to fit in my pocket. I know it is very risky and just wanted to see what others are thinking.

Hello Sr Desi,

50% of net income (take home) might make more sense, but 50% of gross (before any income taxes) sounds high and risky.

It all depends on your monthly income and what your expenditures are (aside from your house payments). Maybe you are frugal person and can make it work, but at 50% of gross, you would be cutting into your savings rate and also your retirement funds.

Hope this helps!

I believe with most of the other agents here. 50% is very risky. Maybe you want to look in other areas where the homes are a little bit less expensive. Mountain House, Tracy, Brentwood, Oakley...very nice areas and the homes are 1/2 the price. But if you have your heart set on San Ramon, I would consider it 100 times over before making the plunge.

Kamal Randhawa
Broker
510-932-1066

I do not have any other debt.

Hi Sr_desi,
I can have you talk to one of my client who went with FHA loan. He closed escrow 2 weeks back. He is exactly in the same situation as you. You might be able to make a better decision after talking to him.

Feel free to call or e-mail me.

Harpal Harika
Realtor

Hi Sr_desi:

I agree with what Doug & Scott has offered below. I notice that you take into consideration all the costs [P&I, PMI, Property Taxes and Home insurance]; however, have you considered the benefit of the deductible mortgage interest?

One of the first things you can do to soften the "wallet shock" as a FTHB is to adjust your withholding based on the scheduled interest deduction (getting money back from the government is poor financial management - would you give anyone else a no-interest loan?)

See: http://www.irs.gov/individuals/article/0,,id=96196,00.html

The first page is an intro to the calculator; the link to the detailed 5-page withholding calculator is at the bottom.

Best, Steve

50% is very risky. What other debt do you have? Is it included in your 50% figure?

45% (which includes mortgages, taxes, insurance, PMI, HOA, plus all other personal debt) is what I would consider the max amount.....in my opinion.

That is a great question, but one best answered by you. 50% is a kind of a scary number in a recession. However, it depends on these factors:

Job stability - How stable is your job?
Income growth - Are you in line for pay raises or bonuses in the near future?
Longevity - How long do you plan on staying in the house?
Type of Mortgage - I am assuming it is fixed. If it is variable, that might be a time bomb

It is not unusual to stretch to get into your first house. We have all done it. A lot will depend on how much you can control your budget. If you are not very good managing your money, it could pose problems. But if you can spend wisely, you can no doubt make it work. It might be a sacrifice for a year or two (until you start to see your income go up), but if it is truly your dream house it might be worth it.

Doug Buenz
http://www.680Homes.com/san_ramon/

Hi. One question would be, do you expect your income to go up in the next few years? If yes, then it might make sense to stretch a bit for now. I would recommend taking a real hard look at your monthly budget to decide if you can handle it. For what it's worth, I can say, that when I bought 10 years ago, I wish I would have bought just a bit more house than I did. The wife would be happier.

Scott

The 50% includes P&I, PMI, Property Taxes and Home insurance.