How to determine your budget for a Bay Area property?

The starting place in narrowing down your home search should be understanding your budget.  There are two components to assessing your budget: the down payment amount and the mortgage amount (and corresponding monthly payment amount).

In general, you should expect to put down at least 20% of the home’s purchase price as a downpayment.  This means you’ll need minimum 20% of your target’s property in savings. Or said another way, your budget is capped at five times your savings (e.g., if you have $300,000 in savings available for your downpayment, your budget is $1,500,000).

The maximum mortgage amount is largely dependent on the maximum monthly payment that you can comfortably afford.  You can use Unlocked’s monthly budgeting template to help determine approximately what you can afford, or you can talk to a mortgage broker to get a more detailed estimate.  Keep in mind that a mortgage is usually 15 or 30 years in duration, so you should also factor in future expenses that may be part of your monthly budget.

Combining your down payment and mortgage amounts gives you your maximum purchase budget.  In the Bay Area, the vast majority of homes sell above the listing price, oftentimes 10-20%, although as high as 50%+.  When looking at listings of homes within your budget, we recommend keeping this fact in mind, as some listings that are just within your budget may end up selling for well above your budget.

In order to better understand what a home is likely to actually sell for, Unlocked can prepare a Custom Valuation Report for a given property to give you a better sense of whether it (likely) falls within your budget.

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Buyers' Guide