The Sonoma County housing market has an average housing price of $648,000. Housing prices in Sonoma County are indeed expensive. Following is what you need to know if you plan to buy a house in Sonoma County in the current market…
1. You don’t have a down payment or any access to cash. In a competitive offer situation, the seller of the property is going to look at the offer that looks the strongest on paper. In such a scenario, you might be going up against a buyer or two who are putting down 20 percent or more. In order of priority the seller would probably look at the all-cash offer first (if there is one), then look at each offer with financing based on the amount of down payment. Unless you are using VA financing, going in with a mortgage loan program such as down payment assistance, Calhafa or USDA, it is going to be very difficult purchasing a property that is listed on the open market. While these programs are options you qualify for, you want to come in with cash such as a 3.5 percent down FHA loan or a 5 percent down conventional loan if possible to even the odds and increase your chances of getting into contract.
2. The disparity between what you want and what you can get for the price is too large based on your expectations. For example, let’s say you’re working with little down payment and you’re looking to purchase a piece of land to build and construct a dream home. Sounds like a great idea, however, in practicality most banks will not finance such a purchase without at least a 30 percent down.
Let’s say you’re looking to purchase a single-family home, you’re qualified up to $700,000 but “it’s not the right house.” This is representative of two things either your expectations are so high that you cannot budge, and interest rates and housing prices will move away from you or your expectations need to be adjusted in alignment with what the market supports.
3. You’re working on getting your credit score up. Let’s say that you can qualify for a house and a payment that you can afford and that you can handle however, let’s say your credit score is being pulled down due to consumer debts such as credit card balances. If you’re looking at a FHA loan and your credit score is anywhere from 666-700, getting your credit score up for example is not going to make much difference as you would still be in an FHA loan, especially if you’re working with a little down payment. Put it another way, your energy may be better focused in buying a home which would make your credit score go up. Then look to the future for prudently doing a cash out refinance to get rid of consumer debts lowering your other fixed costs in the process.
4. The payments are too high. It stands to reason that you might be able to purchase a house with mortgage payment between $3,500 to $4,000 a month for principal interest, taxes and insurance. Let’s say for example that you have enough income to support such a house payment and along with a low debt to income, such as 34 percent. If the payments at $4,000 per month for example on a $750,000 house are 34 percent of your income and you are still uncomfortable with that payment, you should re-evaluate whether you want to purchase a house at all. The reason being is because a 34 percent debt to income ratio is an extremely low conservative number and is representative of the total mortgage payment with your other monthly abilities in comparison to your pre-tax income. In other words, the 34 percent debt to income ratio means that 66 percent of your total monthly income goes towards everything for the rest of your budget.
5. You are fixated on a single-family house only. For most home buyers, the goal would be to purchase a single-family house in a perfect situation. Not every home buyer and not every financial situation however is perfect. First time home buyers in many instances would be far better suited to purchase something a bit more within their means such as a condo rather than a single-family house right out of the gate especially if the income doesn’t support purchasing a $648,000 single family house. You can still purchase a condo in Sonoma County between $350,000 to $370,000 and have a bit more discretionary control of your income as it relates to a monthly budget. A condominium unit or in some cases a smaller-sized house is a great stepping stone to getting into the market and upgrading down the line in the future as your income and finances permit.
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Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.