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Dear San Francisco Renters

Dear San Francisco Renters,

You may be closer to affording a home than you think.

Are you fed up with handing over a third (if you’re lucky) of your salary to someone else every month? What about having to do that for the next 5, 10, or 15 years? So why not buy a home instead, after all property prices in the Bay are just so cheap… OK that’s probably stretching the truth a lot but you might be surprised at how close you are to affording your own home in the city.

Paying rent is wasted money

What are you currently paying for rent? $1500, $2000, over $3500 per month? Think about how long you’re planning on living in the city, it’s not a stretch to calculate that you could easily waste $240,000 on rent in the next ten years. You may think that’s just the price you have to pay to live in a city as amazing as San Francisco and maybe that’s one way to stay in the city, but it isn’t the only way.

What’s the alternative?

Buying a home—before you laugh, choke on your drink, or just stop reading, give me a second to explain. I know property prices in San Francisco and the rest of the Bay are kind of crazy but there are ways to make home ownership affordable. Let’s do a little math, I promise you won’t need a math degree to understand where I’m going with this! Say you’re currently living in a two-bed apartment with a friend; between you it’s not unlikely that you’re paying $4700. Now what if you were to purchase a two-bedroom property, it’s going to be way more expensive than renting, right? Actually no, between you and your friend you could purchase a property for around $900,000 and still be spending a very similar amount every month and that includes the mortgage payments, property tax, and home insurance. It’s crazy to think that what you’re paying on rent could actually pay for you to live in your own home with a friend and start to build equity in a property.

Beat the biggest barrier to buying a home by quitting your avocado toast habit…

…if you want to wait hundreds of years to buy your own home.

For many people living in San Francisco the biggest barrier to buying a home isn’t affording the mortgage, after all you’re probably already paying that much per month in rent. It’s actually affording the down payment on a property. As we’ve already mentioned property prices in pretty much all of the Bay are high but let’s look at what down payment you would need to buy a $900,000 home. A lot of people still think that you need 20% of the property value to secure a mortgage, so $180,000 on a $900k home. That’s a lot of avocado toast you’d have to give up. In fact we just ran the numbers and you could probably save that down payment in around 173 (yes we did the math) years if you start today. You might want to get started ASAP.

While a 20% deposit might open some additional mortgage doors it’s actually not a requirement anymore. In fact, many mortgage companies will let you put down as little a 5% on a property. So your down payment needs have already dropped from $180,000 to $45,000. This is where buying with a friend can make a huge difference.

A quicker method than just quitting that expensive toast and latte habit

Forty-five thousand can still feel like an overwhelming amount of money to save , but you’re forgetting about one of the main points of this article—buying a house with a friend, family member, or partner. That $45,000 can now be split between the number of co-buyers, which means for the case of our example you’d only need $22,500 each to pay the 5% down payment on a San Francisco home. If you moved in with 2 friends that drops to $15,000. Seems much more achievable than the traditional $180k figure, right?

Finding an affordable mortgage while protecting your finances

To buy a house with friends and not need a hefty down payment you’ll need to look for mortgages that offer a 5% down payment and don’t require you to take out private mortgage insurance. You’ll also need to have a legal framework in place that protects the rights and the finances all of the co-buyers.

You can have you toast and eat it

With some smart mortgage shopping and professional help to get your co-buying agreement set up you’ll be buying a house much sooner than you expected. Not one slice of avocado toast need be sacrificed to buy your first home!

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