An Introduction While it is such a joy and considered one of the biggest achievements in life to own a property, it is important that one should know his/her limits–the amount that one is willing to invest in buying the house. Of course, all these prices would heavily depend on your annual income which is estimated to be $60, 000. However, there are a few conditions that one should remember while deciding on a home that can be bought with a $60000 per year salary.
The 28/36 Rule The most common guideline used by most mortgage lenders and instead of using the ratio of the loan value to the home value, they use the 28/36 rule to recognize mortgage loans that one can afford. This guideline only means that on average, your whole monthly debt should never go past 36 percent of your gross monthly earnings. Of that, up to 28 percent may go towards paying for the mortgage, property taxes, homeowners insurance, and HOA fees. The formula of determining the total monthly payment which should not exceed $1,800 before taxes, is based on the $5, 000 salary for every month, and the maximum house payment should never be more than $1,400.
Down Payment The amount of the down payment you can afford likewise determines what you can buy based on this income level. Typically, traditional fixed-rate mortgages demand a down payment of at least five percent to obtain the lowest rates and the best terms. On the median house price of $281000 for the nation, a 5 percent down payment would be $14050. First-time home buyers often settle for FHA loans that can be secured with only a 3½ % down payment or $9,835 on the median-priced home. If you pay less down payment, you will be expected to pay a higher monthly installment.
Other Debts and Expenses If you want to know what max home price is acceptable for you with the $60,000 salary, do not forget to calculate other monthly obligations such as car loans, student loans, and credit card balances. Maintenance costs such as food expenses, power, transport, and social activities should also be estimated. As it is with everyone, the spending is unique and if these recurring debts and basic expenses were to be kept below $1,400, then the full 28 percent housing ratio as per the common standard would be justified. Otherwise, you may have substantial other debts or expenses, which will necessitate a reduction in the maximum home price and payment as a result.
The variety of available affordable homes Given all these factors—a $60,000 annual income, estimated five percent down payment, and $1,400 target monthly housing payment—here is a range of home prices and mortgage loan amounts you may be able to afford: Given all these factors—a $60,000 annual income, estimated five percent down payment, and $1,400 target monthly housing payment—here is a range of home prices and mortgage loan amounts you may be able to afford:
- $180,000 Home Price Thus, with the 20 percent down payment of 36000 for a $180000 home, at a three percent interest rate, a monthly mortgage payment would be around $1,400. This entails a down payment which many buyers may not afford to save or accumulate at the initial stage.
- $250,000 Home Price With a 10 percent down payment of $25,000 and a three percent interest rate, the monthly mortgage payment for a $250,000 home remains at around $1,400 per month. This means that little cash is paid upfront but it is still a considerable amount of money.
- $280,000 Home Price Placing down a mere five percent ($14,000) on this affordably priced home for three percent interest monthly house payments approximate $1,400. This is in line with other average down payments that first-time buyers make on their properties.
- $320,000 Home Price Paying three and a half percent down for an FHA loan of $11,200 on a $320,000 home yields estimated housing costs of approximately $1,400 per month. This down payment amount is the lowest in terms of cash but the interest rate increases the payment.
As you can observe, available down payment, interest rates, home prices, and monthly payments are all connected in a cycle. Obtaining pre-approval for a loan will narrow down the options of the maximum affordable price depending on the individual’s circumstances. It also makes your offer more appealing to sellers since they know they have already qualified for the loan due to the pre-approval.
Other Cost Considerations Though the 28/36 rule is based on the monthly house payments about one’s income, do not ignore the other expenses associated with home ownership. Other expenses that are incurred at closing such as title fees, inspection reports, and others may range between 3% and 5% of the total home price. Other costs that first-time movers encounter during their first move include paint, furniture, and appliances also affect the first-time movers. And of course, maintenance and repairs are always a constant in any home and may pop up from time to time. Therefore, before looking for homes, be very strategic with the estimated amount of mortgage and other responsibilities of owning a home.
Weigh Your Options The final affordable price is therefore determined by how comfortable you are to spend a certain proportion of your $60,000 annual income on housing. By staying close to the lender's requirements, the payment has to be kept near $1,400 every month. But that still only identifies older homes or limited inventory in expensive markets. In the course of the buying process, some buyers feel that they can afford to ‘stretch’ and spend as much as 5 percent/10 percent to 35 percent or even more to get what they desire in terms of features location, or amenities. However, it is also important to remember that going beyond what lenders recommend will limit the amount of money you can spend on other things and achieve other financial objectives. In this case, consider both the short and long-term consequences of the decision to arrive at the most suitable decision for the given context.
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