How Much House Can I Afford [Mortgage Payment vs Income]
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- เผยแพร่เมื่อ 17 ก.ย. 2024
- How Much House Can I Afford [Mortgage Payment vs Income]
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MENTIONS:
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--Mortgage Calculator www.bankrate.c...
Rule of Thumb The basic rule of thumb is that mortgage payments, including principal, interest, insurance and taxes, must not exceed 30% of your gross income. The rule is that you may not spend more than 28% of your gross monthly income on housing (including principal, interest, taxes and insurance). But watch the full video to see what I recommend.
Therefore, your total loan payments (housing plus all other debts) must not exceed 36% of your gross income. It states that the total monthly payments on your debt must not exceed 36% of your pre-tax amount (i.e. the rule also takes into account the interest of the down payment and does not allow for over-stretching even with a large down payment). .
So if you put down a $40,000 down payment, you can use your income to buy a $240,000 house. As a result, you might be tempted to buy a $1 million house because you can invest $500,000 less. The danger arises when this percentage of the home buying rule is violated to buy a more expensive home. The people most likely to violate the first rule of home buying are people with low or moderate incomes.
The lender will also ask you to provide proof of your payment history for your last regular monthly expense. If you can provide the required evidence within the allotted time, your chances of getting a mortgage will increase significantly. Just remember that when you get pre-approved for a mortgage, lenders will likely approve the loan amount for you, with payments up to 30% or 35% of your pre-tax income. You will most likely qualify for a mortgage loan that eats up to 43% of your gross income.
If you want an income-to-mortgage ratio of 28%, your monthly housing contribution must not exceed $2,800. Financial advisors generally recommend no more than 28% of monthly income when paying for housing. More conservative advisers such as Dave Ramsey recommend that household payments "including property taxes and insurance" should not exceed 25% of gross monthly income. Other financial experts say predictable total housing costs, including property taxes and homeowners insurance premiums, should not exceed 30 percent of wages.
You can use variables to approximate your monthly home payments. A mortgage calculator can help you get a rough idea of what to expect from your monthly rent. Knowing the exact costs associated with a mortgage will help you determine how much you can save each year and how long it will take to save on a down payment.
You can use your budget along with your mortgage calculations to find out exactly how much you need to save. It's important to know that if you take out a mortgage, you'll still need to save, as described above.
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DISCLAIMER: Content is for informational purposes only and should not be considered personal financial advice. This video and description may contain affiliate links. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. • How Much House Can I A...
Thanks for watching! 😘 Comment below with the percentage you think is good for a mortgage payment!
Thanks for breaking this down, Tiffany. It is hard to know how much you really can afford!
Absolutely!!
Good video. One thing that I would add is the following.
With the gross income at 5000 per month and your trying to keep property cost to 28 percent of that or 1400 its important to know that that 1400 number by bank standards does not count the mortgage payment only but rather counts the mortgage paymet,property tax and insurance.
Good points.
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I think you are on to something by taking out a 30 year mortgage and just making a higher monthly payment when possible. The monthly payment on a 15 year mortgage just would have made me nervous about being too “house poor” in the event of an emergency. But paying $100 extra per month maybe 7-9 months every year made a noticeable reduction in the principal amount. I wouldn’t have paid off the house in 15 years, but this strategy (combined with putting any “unexpected” money into principal rather than too many splurges) knocked 9 or 10 years of payments off the 30 year term. I also recognized that, in general, my income tended to rise over time when my fixed rate mortgage (plus taxes + insurance) typically did not increase as much as income so it made paying “a little extra” per month easier to do as time passed.
Love this break down!
Thank you Tiffany 😊
You’re welcome 😊
I like minimalist living, and spending less than 10% of my income on housing.
Sweet!!
financial stability is important for property ownership, & that is based on social connections & personal health
So make sure you have a household team that isn't about to stab each other in the back. And don't take out a huge mortgage if your health is declining. So determining property affordability by comparing monthly payments with household income is OK. Assuming you're confident that health, social connections, and money streams are stable (or increasing).
Things to think about.
Thanks for making all those great videos. You are amazing Tiffany. Question, how about to buy a second home (rental property)? First mortgage payed off and debt free. Same math applies, in case you get bad renters? 🤔
You’re so welcome Esmeralda. Yes, I would give yourself some buffer in case it is empty for a bit and for things that would need to be fixed/replaced.
Thanks for the video, I have a question? I already have a house and I plan to buy a second house, the first one I will rent and the new house will be my main residence, my mortgage payment on house 1 should be counted as a monthly debt. Thanks
You're welcome Jesus Romero! Yes, it will be counted as a monthly debt. :)
But can't you just rent out that spare bedroom and then cut the cost that way?
If you have a spare bedroom and are willing, that’s totally what I would do! 😄
Thanks for watching! 😘 Comment below, did you figure out how much house you can afford?