Mike Mueller, Social Media.ist

As I was talking to a Realtor the other day on Broker Tour,
They had happened to see me on the News where the host had asked me the question,

"If you make $90,000 a year and have $25,000 in the bank can you afford to buy in the Bay Area?"

The Realtor and I were having a lively discussion about what the right answer would or should be.
I was contending there is actually two correct answers, the TV version and the Reality answer.

The TV answer is short. It's a broad based statement. It's a generalization. It comes with obligatory YMMV stipulations (Your Mileage May Vary).

The Reality answer is long. It's well thought out and takes into account the many variables that play into this scenario.

In answer to the original question - the answer was "Yes! They could absolutely buy a home in the bay area."

That's the TV answer and that's what I said.
But then the "Mike" in me came out and I qualified it with a small portion of the Reality answer.

The Reality answer would be, "Maybe! Maybe they could and maybe they couldn't."
I have a couple of questions to ask them first...

• How's your credit score?
• Do you have all three scores?
  
• Credit quality?
• Tradelines?
• Collections?
• Derogatories and the time since the last one?
• Past BK? How long ago?
  
• Are you full time permanently employed?
• How much of that $90,k is due to overtime?
• How much to Bonuses?
• Is that regular or scheduled?
• How long have you been on the job?
• How long in the line of business?
  
• How's your debt?
• How many accounts do you have open?
• How about remaining balances, are you maxed out?
• New accounts, how many of those do you have?
• Inquiries, how many recent inquiries show in the last 12 months?
• When we do this loan what will your back end debt ratio look like?
  
• What kind of property are you looking for?
• Single family, Condo, PUD, Manufactured Home, or Doublewide?
• Is the purchase going to be "as is" or fully disclosed?
• Seller concessions? If so how much and what?
• How much are you looking to put down?
• Seller Carry back?
• How does the Property appraise?
  
• What comps and where are those comps?
• Additions to the property?
• Were they done with a permit?
  
• Got assets? "No, sit back down and get dressed. I'm not talking about that!"
  
• How much do you have in reserves?
• Is that all in your name and for how long?
• How much is liquid?
• 401,k or IRA?
  
• Gift Money? How much and from who?
• Have enough cash to close?
• How much left over after that?
• How long do you plan to live there?
• And then what do you want to do?
  

That'll get us started.
No really! That's just a start to the considerations that go into a loan.
This is why people like me exist and cannot be replaced by mindless Borg Units or computer programs like online lenders.

So the easy answer is that, "YES! You could absolutely buy in the bay area."
But is that a tumble down shack in a shady hood, or a beautiful new home on top of a hill?

Even if there was an easy answer (there isn't), or a way to compute the answer it still would be wrong to give that away on TV.
The reason?

If I had that answer, and hypothetically said, "Sure! They could buy a $550,000 home anywhere they want."
Then they talk to a less than ethical loan officer who tells them, "I can get you into a $1.4 million dollar home for the same payment!"
"Wow! That's more than double the home that lousy guy Mike said we could buy! - Let's go with Lester Sleazeball, He's the Man!"

You know the answer right?
That's a Neg Am Loan.
That's not the right loan for everyone.
They'll be in foreclosure in just a couple of years when their payments triple.
Lester and the Real Estate Agent, Suzie Sliime, will have already spent their huge commissions and moved on to the next victims, I mean "Valued Clients".

In the end, I guess the right answer isn't what you see on TV.
The right answer only comes after you have spent the time and energy searching for it.
And channel surfing doesn't count!