Can I buy a house? $42K salary?

Question

I make $42,000 a year and would like to purchase a home. I have a good credit background, am paying off my credit cards and student loans. I just finished up paying off my car. I'm trying really hard to budget even more. i'm living in my parents house, no rent. Can I buy a home? How much would a mortgage be including all the taxes and other fees? I live in Chicago and would like to live in the city.

Answer 1

Ask a loan officer, they can tell you and how much, etc...

Answer 2

The general rule of thumb is, you can afford 2.5 times your salary in a mortgage. However, if you have debt like credit-cards and student loans that figure may change. The way I understand it, Chicago is a VERY expensive area to live in so I doubt you can buy a home or even a condo for 100K which is what you would qualify for. I would save some money for a large down-payment, wait until you get married or increase your income, or consider moving into a less expensive real estate market.

Answer 3

Let me suggest that you DO NOT buy a house until you pay off your credit card debt and student loan.

If your salary is 42K and your expense is moderate, yes, you CAN buy a house. (probably not in the city, and it won't be large or in expensive area) However, it won't leave any extra money for anything else. When you buy a house, you need a whole host of other "stuff" you will need to buy to make the empty house livable HOME. In addition, if you are buying a used house, you will be wise to budget for unexpected repairs and other necessities. Let me tell you my 10,000 dollar "buffer" for unexpected expenses went rather quickly!

My gueestion is this.... before you make the leap, have most, if not all of your debt clear. Have a buffer money of about 10,000 dollars or so, and have enough for down payment of 10%.

You will be saving yourself from a lot of headache. With less debt, you are also likely to qualify for much better rates, too.

Answer 4

Yes, you can buy a house. However, based on your salary and credit, it may not be from a traditional standpoint. There are TONS of ways to purchase homes that do not require loan companies, credit checks, etc. Most people will provide you with "traditional" alternatives, but use your mind for your leverage. Sure, maybe you want to use the traditional ways to purchase a home, but if that doesn't work, use "investor" methods (those with integrity, of course). While there is no way for someone to give you the cost of mortgage without ALL of the necessary information, you can use various stragegies that will allow you to purchase NICE homes without the need of banks or mortgage companies.

Some of the options are lease/purchases, rent-to-owns, subject-to deals, etc. Do the research and find out what will work best for you.

To your success!

Answer 5

1. Order copies of all three credit reports and figure out your "middle score".

2. Figure out how much you can afford to pay a month. Be sure to include current debt payments (credit cards, student loans, car, etc). This number shouldn' t exceed 50% of your gross monthly income.

3. Contact a local broker or bank and figure out what kind of interest rate you can obtain. Do NOT ask them what you qualify for otherwise they'll stretch you beyond a reasonable comfort level. Forget interest only or negative amortization loans.

4. Once you figure out an approximate interest rate, find a website like bankrate.com or similar with a mortgage calculator. Play with interest rates and loan amounts until you figure out how much you can borrow. Add the payment + all your other debts and divide by your monthly income. If it's close to 50% you'd better look for less home since you haven't included taxes and insurance. Also, contact a tax professional who can figure out what you'll save monthly in taxes based on your income. This will boost the affordability.

5. Go to realtor.com or similar and punch in price range for your desired neighborhood or zipcode.

6. Call a local realtor and shop within your price range no matter what they pitch or how emotional you become.

7. If you find you can't afford the homes in your desired neighborhood don't feel bad. Most likely those people can't afford it either and can't sleep at night due to financial stress.

Answer 6

The banks usually think of giving a mortgage for about three times your salary. With a down payment, that would get you about a $140,000 house. In big cities that would not be much of a house. You would do better to either look for a two family house where you can cover some of the costs as a business expense or look for a house in the suburbs that would let you commute by rail to the city.

Answer 7

At 42,000 a year you can afford about 150,000 dollar home as long as you are in an area that property taxes aren’t over 350.00 per month and a down payment of at least 30,000. I would suggest that you buy a fixer upper and put your own money in it over time so as to keep your payment down and property taxes down. I would also call your local Primerica office for financing they have a much better deal than any bank can offer. They will also free of charge show you how to best invest your money to make the max, all I can say is that if it wasn't for them I would have been through Bankruptcy. They are a great company.
Good luck.

Answer 8

Yo can qualify for a house now, you might consider buying a Condo for starts. I would suggest pretending you have a $1300 a month mortgage now and placing that money in an E-trade 3 month CD each month. This will give u a real look at how your budget is impacted and at the same time your money will be gaining great interest. You can contact me at www.lendersgreen.com

Answer 9

I'm not a mortgage expert but from experiance I've learned even with bad credit you can get a loan. You need to go talk to a mortgage company and get preapproved for a loan and then start looking. It's easier to get into a house if your pre-approved for an amount first. Then you know your housing options.

Answer 10

Research it, but don't make any moves for at least 6 months. The impact of the subprime lender implosion is not clear yet. They all have failed since the beginning of March.

It will start impacting the market immediately, but prices won't be affected for a few months. At least sellers will not begin to understand that 20% of the market place has simply evaporated because they can't get financing. In 6 months time, we will have a clearer picture and some data reflecting where the market is going to head.

Be happy you didn't buy recently. Sit back, save your money and monitor your credit. You should be in a very strong negotiating position at that point.

Answer 11

To get a more realistic answer to your question, you need to consult a loan officer from where you do your banking or a credit union where you are a member. If possible avoid mortgage brokers where they will tack a lot of junk fees. But first your really need to talk to a loan or mortgage officer.