Buying a home can be a big step for a family. San Diego is known for having some high housing prices. It's important to not try and buy something out of your price range.
"You want a good mortgage debt to income ratio," said Jill Gonzalez, an analyst at Wallethub. "The California housing market is notoriously expensive and the incomes don't really keep up with how expensive homes are getting."
Very few people can afford to buy a home outright. Mortgage lenders say that's why it's important to budget and know exactly what you can afford.
"Here if you want to own a home, most households have to divert a big percentage of their household income to the cost of ownership," said Mark Goldman, a C2 financial loan officer and market analyst. "San Diego is among one of the highest cost markets in the country."
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For families looking to settle down in San Diego county, the search can be exhausting.
"It's brutal and incredibly competitive," said Jenna Nelson, a mother of two children who has been shopping for a home for the last year. "While we do want to get into a home, we are not willing to get into a bidding war."
Nelson says they are sticking to a strict budget, which has made it hard to find a home. Right now, many homes on the market are being purchased very quickly.
"We're waiting outside as the last people come out of the house and as we leave there are people waiting," said Nelson. "If we aren't willing in that moment to go look at a house, most likely it will be gone in four or five days."
Nelson and her family say they have a spreadsheet laying out exactly how much they can spend. Mortgage lenders say that's a good step to avoid being too far in debt. Unfortunately, many parts of the county have some very high debt-to-income ratios.
"You want to keep it 200% to 300% debt-to-income," said Gonzalez. "We're seeing in Fallbrook that ratio is over 800% and in Escondido, it's over 750%"
If you borrow too much on a home, that means other parts of your life might suffer. Gonzalez says paying that much on a home mortgage makes it hard to pay the other bills.
"From food, to insurance, to other healthcare needs," said Gonzalez. "It really does lead to a snowball effect."
That's not the only worry. Goldman says this pandemic showed a lot of people their jobs weren't as secure as they thought. Having too large of a mortgage could put your home in jeopardy.
"If one of the earners in a household loses their job, or wages go down, it could be their house in peril," said Goldman.
Fannie Mae recommends total debt is 36% of gross income for a household, but Goldman says his loans are usually between 40 and 45%. He thinks that will continue to grow as housing prices continue to rise.
"I'm anticipating the balance of 2021 to be a strong year for purchases and real estate values to continue going up," said Goldman. "There are more people that want to buy homes than there are homes for sale."
Gonzalez recommends using mortgage calculators to find out exactly how much you and your family can afford. Price is a major issue, so Nelson says her family is considering a move out of state.
"Prices just keep going up and up," said Nelson. "They keep selling for more than they're listed for."