What does it take to afford a house?
December 17, 2008 · Print This Article
Natalie Mack asked:
With mortgage payments, utilities and all the other regular expenses on top of that, how much do you have to make in order to pay all those bills? Just a ballpark figure …
With mortgage payments, utilities and all the other regular expenses on top of that, how much do you have to make in order to pay all those bills? Just a ballpark figure …
Maybe a $150,000 house?
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Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
it all depends on all that other suff. car notes, credit card bills you did not mention those thing or upkeep on this home.
I would think with out knowing at least 50 k a year no less
I am a mortgage banker in TN & KY
Rule of thumb is expect to use 40% of your monthly take home pay on household expenses (mortagage, insurance, utilities). That percentage could be lower if you have substantial credit card debt or other loans (student, car). Also, the more of a down payment you put, the lower your monthly payment will be. There are calculators online you can refer to to see what amount of mortgage you can afford.
More than 90,000?
My house payment is about 610/month.(less than $100,000 home) Cost of propane has doubled since we bought house. Looks like we need a 10,000 energy upgrade to afford our heating costs this year. So whatever you think you need for something always budget for double. Because everything goes up from real estate taxes, insurance, food, and last but not least gasoline. Then there are the energy surprises like after you can afford everything you need, then you realize you really can’t afford it after all of the increases.
Don’t give up hope though - buying a house right now might be a great investment. I would go for the smallest, cheapest, structurally sound place you could find. And choose a payment $300 - 500 less than what you can afford because we can’t control the price increases. But we know they will!!!!!!!!!!!!!!!!!!!
My estimate is that you need at least $60,000 annual income to be able to afford a $150,000 house, not taking the down payment into account. Here is how to calculate:
Ideally, though you could qualify for more house than you might be able to afford, no more than 25% of your monthly take home pay for the PITI payment. PITI = principal, interest, taxes and insurance. It includes the monthly payment for the mortgage plus property tax and home insurance.
Ideally, no more than 40% of your monthly take home pay for the PITI plus all your other debts.
For a mortgage of $150,000, the monthly payment is going to be close to $1000 per month. Add another $50 for insurance and I’m totally guessing here, but let’s say $200 per month for property taxes (you’ll need to find out). That’s a PITI of $1,250. You’ll need monthly take home pay of at least $5,000 to stay within 25%. As I said, the mortgage companies will qualify you for more, but that is probably going to be hard to afford.
Now, add up all your other debts. To stay below 40% debt/income ratio, your other monthly loan and credit card payments cannot exceed $750, if you have $5,000 monthly take home pay. $1,250 + $750 = $2,000, which is 40% of $5,000.
Your mortgage payment should not exceed 25% of your TAKE HOME pay on a 15 year fixed rate loan. Assuming 6%, that is $1265.79/month on a $150,000 loan. That means you need to bing home around $5000/month. A household income in the $100,000 range is about right.