The nightly news may talk about the cooling housing market, but if you’re shopping in any of the top public school districts in Marin or the surrounding area, you are likely still facing low inventory and competitive bids.   

Purchasing a home, especially in the Bay Area, is a significant financial event. Whether it is your first home or you are trading up to accommodate your growing family, a number of financial and lifestyle factors play into any home buying decision.  This list that follows may be overwhelming, but for the amount of money and energy you will end up putting into your move, your time is well spent thinking through each of these areas before you make a rash or emotional purchase because you “love the kitchen”  or “it has a yard!”        

 

Before you even think about what to spend on your next home, I recommend that you first ask yourself, “How much value do we place on where we live?”  Are you and your spouse the types who can tolerate almost any situation or are you severely impacted by your living surroundings?  Is home just a roof over your head, or do you view it as a family sanctuary?  

The finances follow: 

• How much money will you put as a down payment and what will your monthly payment be?  Can you afford this number over the period of time you intend to live in the home?  This is where it is helpful to understand your entire financial picture.  You’ll be able to see how housing costs fit in the grand scheme of your financial plan and have the right context to make this decision.
• What kind of loan can you get? Talk with any mortgage broker and the current state of lending is all over the map.  Rates keep moving and lending requirements keep changing.  As always, though, higher credit scores (680-800+) and a reasonable (20%) down payment will be extremely helpful is securing a more manageable rate.  Keep in mind that too much debt in a ratio to income can negatively affect the rate or your ability to secure the best loan.
• Are you going to have to remodel before you can move in?  How much will that cost?  Do you have the tolerance for a remodel?    
• What is your potential for income over the next few years?  Do you want to continue to stay home with your children, or do you have a career outside the home and you want to keep working? 
• Do you have any major shifts that you want to make that could affect your ability to continue to pay the mortgage you can currently afford? 

 

Location can be critical to the well being of your family both in financial terms and general fulfillment of every day living.

• Neighborhood choice significantly impacts the property tax number since they are set locally.  This choice would possibly affect your cost of living---which affects your larger expense and income picture.

• Can you buy an affordable property that is still enjoyable to live in and is in a neighborhood that has good public schools?  Does this matter to you?  Are you walking distance to shops and restaurants or will you have to drive more often?  Is this okay or a conflict of values?  What is the lifestyle you want to have? 

• Will you fit in with the community where you can afford a home?

 

Finally, when you are ready to make that next move, make sure you have the resources available you need to feel comfortable that you are making the best decision for your family. 

1. Ask your friends for referrals for Mortgage Brokers and be sure to interview a few.  You want someone who will answer your questions and take the time to fully understand your financial situation and priorities so your loan will match your income and expense plan.   
2. Set up a GO TO person to bounce off the rationality of your home choice.  Make sure you inform this person ahead of time of what your most important criteria are and give them full permission to call you on it if you are rationalizing a choice versus making reasonable compromises.  For my clients, I often serve as this neutral third party who is not afraid to speak up. 
3. Sleep on any decision before making or accepting an offer.

 

We can easily get caught up in details of the buying and selling process at a time when keeping a wide angle view is imperative.  When people ask me “How much can we afford to spend on a house?” I do not immediately break out my calculator.  My next question is, “Well, what do you WANT?”