"I'll be eating Top Ramen for awhile...."

Looks like ramen eating is becoming a way of life for new home buyers in Manteca. This article from the Manteca Bulletin examines the implications of the Bay Area middle class exodus to the Central Valley. Banking on continuing price appreciation, many of these buyers are relying on interest only loans. The piece follows one Bay Area mid-management professional who is not fazed by a $4000 monthly mortgage payment but admits that he will be eating ramen for awhile. Thanks to a reader for this gem.

...First-time buyers now in Manteca are almost exclusively Bay Area middle class who are feeling the squeeze in the Bay Area housing market. The days of 10 percent down financing went the way of the AMC Pacer. Today, more and more first-time buyers are 100 percent financing their homes and take loans that give them four different monthly payment options including interest only. And the mortgage payments - including taxes and insurance - typically push $4,000 a month for a median-price home costing $450,000. The difference between renting and buying is staggering. Such homes - three bedrooms and two baths with just under 1,900 square feet - can be rented in Manteca for under $1,400 a month.

William Sharp, 33, is part of the new trend of first-time buyers in Manteca. A mid-management professional, Sharp didn't like the idea of renting any longer since he wanted a home to call his own that he could improve as he wished without worrying about being given notice to move. "I don't like to move," said Sharp who has lived in only two different homes in the past 11 plus years. He's been renting a 1920's home for around $2,000 a month overlooking the bay. Sharp now has a home in Manteca's Mission Ridge neighborhood in escrow. Friends put him in contact with Re/Max Executive Realtor Heather Pereza. After looking at homes in his price range in Tracy, he started looking in Manteca. "I didn't like the homes I could afford there," Sharp said of Tracy. "I had wanted a swimming pool but the floor plan of this home is what I want and it's a nice neighborhood."

The $4,000 monthly mortgage payment - which includes taxes - doesn't faze Sharp who has a strong employment history with good pay. But even he admits "I'll be eating Top Ramen for awhile but having (my own) home is worth it."

Realtors have indicated the debt ratio qualifications "seem to have gone out the window" as many lenders are qualifying first-time buyers on the strength of their income and credit history. And, as Pereza and other Manteca-based Realtors point out, more and more first-time buyers are going 100 percent financing often with interest only loans. “It scares the heck pout of me," Pereza said. "There are a lot of people who are doing firsts and seconds that way."

And the loan option that's gaining favor as housing prices escalate has four monthly payment options - ranging from interest only, partial deferred interest, to full payment. Buyers can chose among the four options each month. The loans have early prepayment penalties, usually three years or less. And it is quite possible in 10 years that they will have paid nothing but interest.

Pereza said buyers are banking on the historic Northern California trend of rising market prices. When they go to sell, they will have equity built-up that will put them ahead of the game. But if for some unforeseen reason such as a job loss they are forced to sell early, they could be upside down in the home.

Still, buyers like Sharp gauge the risks and consider them minor compared to the positive lifestyle advantage of owning a home. He already has been making plans to put his own imprint on his hew home's interior as well as the yard. Sharp intends to become involved in the Manteca community and hopes to help coach competitive cheerleading teams. He was a cheerleader in both high school and college. "I don't look at buying a home right now as an investment," Sharp said. "Maybe I will in a few years." Even so, if he goes with interest only options, it will have a positive impact on his income taxes. "Single (taxpayers) get hit hard," he said.

Sharp had nothing but praise for Pereza, noting he'd never buy a home without a Realtor. "It's easier to leave it to the professionals," Sharp said.