Purchasing a home is one of the biggest steps a person can take in a lifetime, financially, it is essential to evaluate what you can afford before searching for a new home If a person earns 50,000 a year, they can afford to pay 200,000 for a house The answer is yes but, it will take a lot of planning, prioritization, and perhaps, some sacrifice.
First, determine what lenders will allow you to take First, most recommend that house payments should not exceed 30% of gross monthly income So on 50000 per year, $1250 per month, today’s rates that’s enough to get a mortgage of $180-$190,000; not 200,000 You’d have to pay about 10-20, 000 for a down payment.
Then build the budget and find out what numbers are suitable for you The fixed costs which include the mortgage payment, property taxes, homeowners insurance, utilities, maintenance, and repairs should not exceed 40 percent of your take-home pay Other variable costs such as the food, entertainment, transportation, and savings should be included Contributions to the retirement account are also essential to decide what you can let go and fit a mortgage payment in your lifestyle.
There might be a few compromises and changes to one’s schedule or habits to help tip the balance in the favor of the more expensive house Here are a few suggestions.
Make more money – can you find a part-time or a temporary job Work extra hours in the existing job request a pay raise Bargain for a sign-on bonus or stock options apply for a higher position
Pay off credit cards auto loans other debts Try to save more money for the down payment and spend less on the mortgage Reduce personal expenses such as club membership eating out traveling shopping entertainment Have someone to share bills with
Less living standards - Select townhomes, condos, and fixeruppers with less price than the market average but more expensive in terms of possible repair and remodeling expenses
If all the ratios do not work out consider waiting for a few years until you can afford more house more comfortably or go for cheaper houses that better fit your income and standard Despite being a house it kills the whole essence of owning a house.
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