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Jaideep Greer
Jaideep Greer

What Value House Can I Afford To Buy



How much house you can afford is directly related to the size and type of mortgage you can qualify for. Understanding how much you can comfortably spend on a new mortgage while still meeting your existing obligations is crucial during the home-buying process.




what value house can i afford to buy


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Keep in mind, however, that there are parameters for income eligibility (borrowers must earn a maximum of 115% of the median household income) and for the price and size of the house itself. Even if you can afford a certain amount, the eligibility might be for a less expensive home.


There are several methods for figuring out your home affordability. The easiest way is to enter your information into our calculator above. Our home affordability calculator works with either your debt-to-income ratio or your proposed housing budget.


There are several options to consider if you are struggling to afford the home you have your eyes on. Some methods must be undertaken over time, whereas others will immediately impact your mortgage application.


If your current debt is around $600 a month, your housing expenses can be $1,200. Also, if you already calculated all expenses on a house and get a certain number, say, $1,450, you should try and cut down your $600 monthly payments by $250 for a better chance at a loan.


FHA loans are insured by the Federal Housing Administration. This means that banks get paid even if you default on your mortgage, and so are likely to be more flexible with their credit and down payment requirements. Note that, in order to qualify for an FHA loan, the borrower must intend to use the house as a primary residence and live in it within two months after closing.


Mortgage Type: The type of mortgage you choose can have a dramatic impact on the amount of house you can afford, especially if you have limited savings. FHA loans generally require lower down payments (as low as 3.5% of the home value), while other loan types can require up to 20% of the home value as a minimum down payment.


The table above used $600 as a benchmark for monthly debt payments, based on average $400 car payment and $200 in student loan or credit payments. The mortgage section assumes a 20% down payment on the home value. The payment reflects a 30-year fixed-rate mortgage for a home located in Kansas City, Missouri. Plug your specific numbers into the calculator above to find your results. Since interest rates vary over time, you may see different results.


In practice that means that for every pre-tax dollar you earn each month, you should dedicate no more than 36 cents to paying off your mortgage, student loans, credit card debt and so on. (Side note: Since property tax and insurance payments are required to keep your house in good standing, those are both considered debt payments in this context.) This percentage also known as your debt-to-income ratio, or DTI. You can find yours by dividing your total monthly debt by your monthly pre-tax income.


House #1 is a 1930s-era three-bedroom ranch in Ann Arbor, Michigan. This 831 square-foot home has a wonderful backyard and includes a two-car garage. The house is a deal at a listing price of just $135,000. So who can afford this house?


The bigger the down payment you can bring to the table, the smaller the loan you will have to pay interest on. In the long run, the largest portion of the price you pay for a house is typically the interest on the loan.


Income is the most obvious factor in how much house you can buy: The more you make, the more house you can afford, right? Yes, sort of; it depends on how much of your income is already spoken for through debt payments.


The higher your credit score, the more house you can afford for the same down payment. A higher credit score will get you a lower interest rate, and the lower your interest rate, the more you can afford to borrow.


These are all solid choices, except for making only the minimum payments on your bills. Having less debt can improve your credit score and increase your monthly cash flow. Both of these will increase how much home you can afford. They will also decrease how much interest you pay on those debts.


A general guideline when calculating how much home you can afford with your salary is to multiply your income by at least 2.5 or 3. This should give you an idea of the maximum housing price you can afford.


For example, with a $100,000 annual salary, you can afford a $300,000 house based on the maximum multiplier. However, you might be able to afford a more expensive home if you can secure a low interest rate or have enough money saved up for a large down payment.


I want you to feel confident about how much house you can afford before you hit the ground running and start shopping. And our How Much House Can I Afford? calculator can do just that. All you have to do is enter your monthly income into our home-buying calculator to instantly get a home price that fits your budget.


To calculate how much house you can afford, use the 25% rule: Never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments. Following this rule keeps you safe from buying too much house and ending up house poor. I want your home to be a blessing, not a curse.


Your loan to value ratio can play a big role in buying a home. If you do not have twenty percent to put down, or 80% loan to value, you may have mortgage insurance as in addition to your PITI payment.


You can visit bankrate.com to use their mortgage calculator to determine how much mortgage you can afford or for the best advice contact a local lender to discuss your mortgage options. There are many great mortgage programs available through different lenders.


If you're thinking about buying or selling, start by contacting a local agent. They can give you direction to get started, resources to find our how much mortgage you can afford, and get set up with listing alerts for the market you're interested in buying or selling.


To better understand how much mortgage you can afford it is best to contact a local lender or mortgage broker to discuss your options. The information I've provided in my blog article gives you a helpful starting point to begin your research for buying a home or condo. Your loan officer will be able to discuss your qualifications with your MTI and DTI.


Shopping for a new home? Calculate the home price you can pay and the mortgage schedule you will need based on the payment, down payment, taxes and insurance you can afford. This calculator should give you a rough idea of your house price range based on the monthly payment you can afford for a mortgage. Once you are ready, you'll need to get professional mortgage advice on your actual affordability. Other factors include your credit rating and fees that you pay up front or roll into the mortgage loan.


In this article, we breakdown all the aspects of home affordability if you have a $70,000 annual income. To talk with a financial expert about your situation, click the link below to navigate to SmartAsset's quiz and get matched with a pre-screened advisor today.


As you can see, in states with a high property tax rate, your monthly tax bill can be steep. However, property tax rates are calculated differently depending on where you live in the state and the assessed value of the property.[6]


Location plays a large role in how far your money can go. In general, you'll be able to afford a more expensive house in an area with low property taxes. In areas with steep HOA fees, your budget will be more limited.


The size of your household and your total income can also affect your budget. If you're an individual making $70,000, you can likely afford a larger home than if you're a single-income household with multiple dependents.


It can be tempting to look for a house at the very top of your qualifying threshold. But consider looking for a home in the middle of the range of what you can afford. This will give you some cushion to save for repairs, maintenance, and emergencies.


Follow the 28/36 rule. Don't spend more than 28% (or $1,633 on a $70k income) of your monthly income on a house payment. And spend less than 36% (or $2,100 on a $70k income) of your monthlyincome on your total debt.


If you are just getting started on your search to buy a house and are not ready to talk with a lender, here is some helpful information to figure out your home buying price range and how much home you can afford.


The Housing Ratio is a relationship between your gross income and total housing cost. As a rule of thumb, your housing budget should be no more than 1/3 of your income or approximately 35%. So if you are making 10K per month, 3.5K is a reasonable housing budget. If you are pushing the expense ratio to 40% plus (the highest you can possibly stretch is 50% but I do not recommend) you will start to feel very stretched because you have to pay for other things than just the house cost such as food, car(s), health insurance, children education, clothes, vacations etc.


If you go the other way (i.e., finding the house you like and then trying to qualify for the mortgage you need to buy it) you will likely overspend. We all tend to want more than we can actually afford.


Go through this exercise even if you already have a monthly budget. It never hurts to double check and, when it comes to deciding how much you can spend on a house, it is always better to be safe than sorry.


For example, if you earned $100,000 a year, it would be no more than $2,333 a month. Now keep in mind that that cost must cover everything, including maintenance, taxes, insurance, and HOA fees. The lender will use a debt-to-income ratio to see if you can afford this space, and this is called the front-end ratio.


As part of our premium membership, we have a home affordability calculator that is customized to you. Simply make sure your FitBUX profile is up-to-date, click a button and we will show you the optimal purchase price, an OK price, and a Risky purchase price. 041b061a72