Visit this unique 6 bedroom, 4 bath home on Sunday, Oct. 19 from 2 to 5 pm!

Stop by and tour this home at 749 Live Oak Way, San Jose in the Moreland School District!

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749 Live Oak Way
San Jose 95129

Almost 3200 square feet, this 6 Bedroom, 4 Bath home has a new, oversized kitchen with spacious eating area next to a step-down den with fireplace. With two master suites, there's plenty of room for an in-law setup, especially with the kitchenette upstairs off the game room.

See the virtual tour at: http://www.tourfactory.com/455355

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Sellers are motivated! We've just reduced this beautiful 3/2 Cupertino home to an unbelievable $819,830, almost $200K under original list price.

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Despite the gloom and doom of the financial market, buying a home that you plan to live in for 5 to 10 years is not a bad idea if you meet the financial requirements.

Let's run some rough numbers: First-time buyers purchase a home for $400,000 with 20 percent down ($80,000). The loan amount is $320,000 (let's assume the buyer paid all the fees, costs, etc.). At a 6% interest rate your interest payment is around $1920 per month for a 30-year loan. Incorporating the cost of property tax ($400) and insurance ($70) your mortgage payment is $2390. If you are also paying principal on the loan, let's guestimate another $300. So your monthly mortgage is between $2390 and $2690.

While that's some serious change, and I'm not recommending anyone purchase a home they can't afford, let's look at the comparison. Say you rent the same home for $1700/month. Using the interest-only figure for the comparison ($2390), after 5 years:

Renting: $102,000 spent over 5 years
Owning: $143,400 spent over 5 years

So how likely is it that in those five years your home will go up in value $41,400? Yep, it's quite possible. Even probable. If you're handy around the house, you certainly can do a number of improvements yourself and gain sweat equity that benefits you even in a difficult market.

Yes, you put down $80,000. I'm not forgetting that. But it's unlikely you stuck that saved $41K in the bank while you were renting and "saving all that money." If you paid principal in addition to the interest, then you gain equity by paying against the balance of the loan. So at $300/month you've paid off $18,000 of your $320,000 loan.

Sure, you may own a home and drive an older car. But economically, borrowing to buy a house is money far better spent than borrowing to buy a new car. Fat chance that car will go up in value in five years.

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Lenders are looking at communities and geographic areas to determine "depreciating markets." If you are buing in a depreciating market, the lender may be extremely cautious or refuse to loan on the property based on the loan-to-value ratio. Here's the catch-22: If it takes 30 to 45 days to get approval for a loan, your escrow period will be approx. 15 to 30 days more. Over a 60-day period it is possible your purchase in a depreciating market may depreciate below the contract sales price. Your lender may want to renegotiate the terms–the loan amount or sales price–before funding.

Having flexibility in your cash down is wise…and one way to offset this type of situation. More cash down drops the loan-to-value ratio. Alternately, proceed as far toward the approval process and get a fixed figure not to exceed in mind. If you can get approved for a $600K purchase, find a home under $600K to allow some wiggle-room.

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