I'm also a little worried about putting a lot down because prices might go down when interest rates go up.
I realize this isn't normal. Most people are somewhere cheaper, lots are married, and most have nowhere near as much cash.
Are you sure this is true? In my (admittedly limited) experience, the way it works is that the bank asks for your annual income and you have to provide proof of that, which you can do by providing a statement from the brokerage account your company vests your RSUs to. RSUs issued from your (presumably publicly traded) company are liquid, so you can pretty easily claim them as part of your annual income and get a mortgage against that income.
You just need a document from your employer demonstrating to the bank what they are intending to pay you per year in total compensation, including both salary and RSU stock. Also get some documents from your stock broker showing how many RSU's you have vested so far versus ones that are scheduled to vest over the next X years.
For a bonus: rather than liquidating all your vested RSU's for the downpayment, hold onto a good number of RSU's in your brokerage account as these can be used to show you are holding assets, which can help you get a lower mortgage rate as well. Banks love to see that you have assets you are holding onto and can liquidate just in case you do need cash. Their ideal customer is someone who can technically buy a house in cash, but is only applying for the mortgage because the mortgage rates are currently lower than the stock return rates.
Chances are if you work at FAANG and have RSU's that's actually considered a very safe loan that you are basically guaranteed to be approved for at a very nice low mortgage rate. You'll be able to get approved by multiple banks, and then get them to compete with each other to lower their rates by fractions of a percent to try to win your mortgage agreement. Mortgage brokers are your friends here, pay one to do the hard work of contacting the banks on your behalf and make sure your documents look good and then the banks will be falling over themselves to give you a loan.
Would they really care if the asset is cash or stocks?
> very nice low mortgage rate
True, and my credit score is higher than 760, so banks love me.
You would think not, but I suspect that the process, or the people involved in the process, see a good amount of assets in stocks as an indicator of a more financially savvy applicant, which theoretically translates to a safer mortgage. Having a large amount of cash is ironically a bit suspicious looking as well. It is normal for banks to ask for many months of bank statements to verify that the cash is actually yours, and you aren't just temporarily holding onto it for someone else, or got a big transfer from parents / friends that you need to pay back. With stocks it is easy to see that you have had this asset for a while, so they can trust that it is actually yours.
Makes me nervous that I won't qualify for a low mortgage rate right as the Fed is likely to start raising interest rates again (further chilling my enthusiasm to buy).
Now the thing to consider, is how much to put down vs how much of your down payment you should invest. With rates so low, it seems better to invest the down payment in the stock market and putting the minimum in the house.
> With rates so low, it seems better to invest the down payment in the stock market and putting the minimum in the house.
I'd agree that it'd be better to put the minimum possible down, but remember that I'm limited by my salary, not my down payment, so I'm expecting 40% down so I can afford something nicer. I also think that stocks have done will because there's no alternative, and people buy the most expensive home they can afford the mortgage for, so if interest rates go up, both stocks and real estate will go down (or up less quickly).
Get married, move to a cheaper place - remote work is all the rage now after all - and use that cash to buy some real estate without the need for any mortgage (in this order or the other way around, your choice). You'll gain the financial security of having your own home, the social security of having a family and the freedom to explore whatever befits you. Who cares what interest rates or housing prices do, you're not affected by either.
Source: I more or less did this and have never looked back with regret.
It's also totally freakin' nuts.
By which you actually mean "prices come down to earth," which is a good thing, just one that many powerful interests don't want to happen because they have bet against it.
The solution, as with the original problem is to build more housing.
What you need to do is remove the dead weight from the market: i.e. do things to reduce investors and mortgage writers siphoning money out of the economy. What this means is smaller, shorter term loans and taxes on commercial real estate lending and leased land and housing.
This is absolutely false. Many people have sold at a lost over the years for many reason including job relocation, family issues, bankruptcy, etc et etc
That said Pricing going down != loss, for example I bought my current home 5 years ago, I bought it below market value, and after 5 years of value increases prices would have to drop more than 20% for me to sell it for less than I paid for it, and much more to "take a loss" if you calculate profit / loss properly factoring the value of shelter provided (which no one does)
>>People treat their house as a retirement fund, or just an investment.
That is a problem society has yes...
The more important point is that in a supply-constrained situation, there isn't really going to be a "buy the dip" moment. Most home owners that are under water are under no pressure to sell, yet buyers are on the clock.
You may not recognize it as such, but the idea that you always sell to the highest bidder is an expression of a very specific sort of "morality", one that excludes a more wholistic conception of what property ownership means for society as a whole, as well as the individuals who make it up.
I understand that "the market sets the price" is a widely accepted dogma after 30-40 years of neoliberal messaging in every part of the US, UK and significant chunks of the rest of the world, but it's not actually natural law (to the extent that more or less nothign is natural law).
The very people complaining about being locked out of the housing market, being a victim of market conditions, would instantly forget about any and all morality as soon as they do secure a house. They'd absolutely not sell their house at a discount.
When they preach "accessible housing", they mean accessible to them. When their houses appreciate in price just for the sake of owning it, I would know of nobody saying: I didn't deserve this, I'm going to wire this money to charity or back to the government.
There is no morality in markets. Whilst as owner you may benefit, in times that you do not (economic crisis, expensive repairs, personal problems like divorce or disability)...absolutely nobody comes to your rescue.
Morals and markets do not go together.
I remember in Seattle in the mid-90s just as the housing market there was starting to take off hearing a radio talk show where someone was complaining about Californians coming to WA and "ruining things" by bidding up housing costs. The host pointed out that it takes two to tango, and that the sellers were just as implicated in the process as the buyers. The caller got very flustered and then said "well, yeah, but it would be un-American to accept anything except the highest price".
Sigh.
This is not true. For example, the Romans used to use a cost-plus pricing scheme, and were apparently alarmed/surprised by the negotiations that they saw in Arab markets.
Now if they oppose broader reform that could actually have positive effects, that’s a more appropriate and nuanced question.
If you accept a low bid, you open yourself up to claims of discrimination against one or more protected classes.
I dont blame a seller for trying to sell at maximum price they can get, I am blaming the system we have created to puts monthly payments, and long term debt as the focus of purchase instead of the cost of the thing being sold.
Cars are the same way, we know how Pickup Trucks that cost $100,000 why because financing as allowed them to cost that because the banks will loan now almost 10 years to finance a new truck
College is the same way. Debt financing allows the prices to raise at rate far removed from inflation, with out that sellers would need to find way to cut costs and offer their goods are more affordable prices.
My Problem is with our current system of Life Long Debt.
That would really surprise me. Everyone I know talks about how much cheaper it would be to buy if only they could afford the deposit.
Most of the time the mortgage is lower than the rent for the obvious reason that when you rent you're both paying the landlord's mortgage, plus their profit.
True, of course. But you are also paying the landlord's property taxes and maintenance costs and (sometimes) utilities and....
A pet peeve of mine is when people compare mortgage payments to rent payments as if they are a equivalent. There is a lot of additional overhead in homeownership beyond the mortgage payment.
Though maybe it's a sore point for me because my furnace died this morning and it's -40 outside so guess who gets to drop an unplanned $6k this week?
Which you pay via your rent as well, as your landlord is also paying those overheads.
When you rent you're paying everything you pay when you own... plus profit for someone else.
Well, possible profit. There is risk involved. Underwater mortgages are totally a thing.
More recently, a fair number of landlords are in trouble right now due to the COVID eviction pause. Their tenants stopped paying, but their own principal, interest, and insurance payments kept going clickety-clickety-click. Some of them are even walking away from the properties.
It's also important for everyone to keep in mind that not everywhere is the Bay Area, or even California. Judging nationwide housing conditions by the conditions in those regions is likely a mistake.
The problem is that there is a tendency for people to compare the rent payment directly to only the mortgage payment.
Whether or not the fully burdened mortgage is less than the rent depends on the region but it is not uncommon for the costs of owning to be higher than the costs of renting, and this still makes sense for the landlord because of differences in cost basis.
Rent is just a little bit of gravy to partly offset the cost of owning those appreciating assets. It's not the point.