2010 School API reports

There is a definite correlation between the median home prices and the API scores of schools in that area. Many first time buyers are not aware of school's API scores especially the young couples with no school attending children. They make the home purchase decision without inquiring about schools performance. Unfortunately, they realize the importance of schools a few years later and then get forced into sending the kids to private schools.

The following links provide the API scores for different Bay area counties.

Alameda

Contra Costa

Santa Clara

San Mateo

San Joaquin

San Francisco



To find the school where your child will attend the school, one should always call the school district and confirm the attendance area and check if the student attendance is guaranteed or if there is a wait and the child will be sent to a nearby school.

How much can I borrow?

How much can I borrow and what are housing expenses?

We get frequent question from listeners asking how much can I borrow? The exact amount one can borrow depends on a number of factors , for example – annual income, down payment amount,  credit score, loan term, loan program, interest rate, property type, HOA dues, and additional liabilities  like credit card debt , car payments, child support, alimony. A simple rule of thumb is one can borrow roughly around 5 times gross annual income. 

Consider a specific example of purchase price of $700K, loan amount $560K, 20% down payment of $140K, single family owner occupied home with no HOA fees, monthly credit card and car loan of $300. Under these conditions, borrower needs an annual income of $113K for 30 yr fixed term at 5% interest rate. Ratio of loan amount/annual income is 4.9. On other hand  if the rate drops to 3.25% for a 7/1 ARM product, required annual income is $97K and so ratio of loan amount to annual income is  changed to 5.7.

The graph below shows the effect of interest rate on  the maximum loan amount one can borrow and corresponding monthly payments.  loan amount and your monthly payments.

Other question asked frequently is – I want to buy a house but do not want to spend more than my current monthly rent, say $2000. A rule of thumb is that your effective monthly payment is only 50-60% of your monthly housing expense. If one is paying $2000/month rent one should consider buying a home with monthly housing expense of roughly twice that amount  of $4000/month.

Consider again the same example discussed above at  5% rate, one  has to pay interest of about $2330, principal of $670, property taxes  $670, property insurance $80. Both Interest and property taxes of $3000 are tax deductible and can save you about $1000/month if you are in 33% incremental tax bracket.  In addition, principal payment of $670 is also forced saving. So effective monthly payment is $3750-$1000-$670 = $2050. Pie chart below shows relative distribution of different items.

The above numbers provide a rough analysis. One should always consult a qualified tax adviser for tax benefits. For a detailed analysis of your particular mortgage situation, ,rate quote, and  pre-approval letter, please contact us by filling preliminary form at our website , http://RekhaChatwani.com and select loan application from menu bar on left side, or email   Rekha Chatwani