Home

If the average worker in California wanted acquire a home it would be difficult to come up with a down payment which for a conventional loan is 3% and even more difficult to meet the requirements to qualify for the loan. Banks normally require that your monthly principal and interest payment plus taxes, insurance and mortgage protection insurance not exceed 28% of your monthly income. The median price of a single family home in California is $900,000 which means a $27,000 down payment. At 7% for a 30 year loan the payment would be $5,800 per month plus $500 for taxes and $200 for insurance plus $800 for private mortgage insurance (required when down payment is less than 20%) for a total monthly payment of $7,300 which when divided by 28% means a monthly income of $26,000. If you have an excellent credit score the ration can be raised to 36% which means a monthly income of $20,000. Using the same criteria a person working at a fast food restaurant earning $20 per hour or $40,000 per year would qualify for a home loan of $150,000 if you could come up with the $4,500 down payment. In other words it is very difficult for a person to purchase a home in California and many are leaving the state.