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Homes for sale in the Bay Area, but with 40% wealth loss is now a good time to buy?

  
  
  

Homes for sale in the Bay Area, but with Americans losing 40% of their wealth, is now a good time to buy?

 

A few weeks ago, the LA Times as well as every other news outlet reported that the typical American familiy lost an average of 40% of their wealth from 2007 to 2010, according to a Federal Reserve report.  Were you hit by this fiscal loss?  I know I was, and that average percentage just about hit it on target.  I have a few friends who also have lost just as much, some more, some less.  Never the less, it put us all in the same boat, we all have lost wealth in these last few years. But who hasn't?  The better question may be, what should we do from here?

 

40 percent wealth lost

*Source: Federal Reserve:Changes in U.S. Family Finances from 2007 to 2010

 

If we have hit rock bottom, than there's no where else but up, right?  But hold on, there is still speculation that the U.S. may go into a double dip recession, even as the UK has already hit their double dip recession.  So with the economy stagnating, and jobs outlook bleak and uncertainty all around us, is now still a good time to buy a home?

 

Let's take for example that I have lost a good amount of equity in my home from 2007 to now, took a 5% pay cut at work, and my 401k stocks dropped tremendously during the 2007 crash and still haven't gained back the value they had before.  This is probably typical of what has happened to many of us in the Bay Area.  With a situation like this, am I able to take advantage of rock bottom home mortgage interest rate loans and home property values also at near all time lows, and buy a home for sale in the Bay Area?

 

Well this depends. With the Recession and Housing market still unstable, the landscape has changed for potential buyers.  As with any potential home purchase, it comes down to buying power, which is your credit rating and down payment amount, this determines the loan amount you will qualify for.  With this knowledge, at least you can start to determine if now is a good time to purchase. Here is a list of items to check off that may affect your buying power:

 

- Unsecured debt: Credit card balances should be low or close to zero.  If your credit balances are paid off, keep the credit line open.  This will give you good debt to available credit ratio.

- Secured debt: Are your auto or boat loans paid off and/or paid on time?  Have your current mortgage payments been paid on their due dates? Good secured debt history will also boost your credit rating.

- Down payment: Do you have enough for a down payment? The average down payment seems to be 10 percent.  However, depending on your credit rating, the lender may ask for more or less.  With the typical American losing 40% of their wealth, this loss may be a reality for some of you, which means you may have lost some or most of your downpayment source.

- Debt to incomre ratio: Will all your housing costs, principal/interest/insurance/property tax, be 33 percent of your gross income?  Add credit card and all other debt on top of that, and total debt to income ratio should be 38 percent.  Lenders may use this ratio for maximum loan amount they will qualify you for.

- Employment stability: Is your company or your job stable enough to take on the mortgage payments?  Even though you may meet or exceed all of the above and the lender will approve your loan, do you know something enough at your work situation that you may not be employed or a decrease in pay in the near future? 

- Credit rating: You can get your credit rating for free from this Government website; however that will only give your credit rating once every 12 months.  There are many websites that offer you to track your daily updated credit rating at a low cost, but be aware of scams.

 

 

As you can see from this list, this may seem to be your typical home loan checklist.  However, if you were not among the many who have lost 40% of their wealth, coupled with an uneasy employment environment that may affect a down payment, less monthly budget power and tighter lending restrictions, you are either a step away from buying a home for sale, or a few steps away that will give you time for your credit rating to recover and ascend back up to the top.  The choice is yours! 

 

                        Have a great real estate day!

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