No More California Dreamin’
August 24th, 2007 by 
reality
Bank of America today announced the end of stated income loans. Today is the last day. Combine this with the effects of higher rates on jumbo loans, and contemplate the results from a qualification point of view. This chart uses a fixed-interest rate of 6.50% for 30-year loans under $417,000, and 7.375% for 30-year loans over $417,000. For those down payments under 20%, PMI was added, and the equations also considered $1,000 per month for consumer debts - meaning car payments, student loans, credit cards, and any other debts on the buyers’ credit reports.
| Annual Income | SP with 5% dp | SP with 10% dp | SP with 20% dp |
Bear in mind that the California median family income is about $62,000 while you are contemplating. This now has to be real, documented income - yes, it is “only” B of A but if they’re doing it the industry is doing it, for all practical purposes. According to DQNews, the median price paid for a single-family residence in California in July 2007 was $478,000.
Posted in Fixed Income, Real Estate, The Economy | 
August 24th, 2007 at 5:59 am
The median income includes retirees, young single people, all kinds of households. The typical homebuying (i.e. mortgage holder) household will have an above median income. For Australia I recently saw figures that put their income at almost double the median. That would suggest $120k in CA. From the table above the price cut would be about 15-20% on current medians. If it spins out over several years the real reduction can be greater than the nominal. I think a 20% cut and then no appreciation for several years as markets undershoot makes sense.