how much "house" can i afford with what i make/have?

Question

i'm a 1st time home buyer in my 30s and will be buying this on my own.I make about 60k a yr with 40k saved for a downpayment.I also have about 30k saved for "emergancies".I don't want to be "house poor" but would like a nice house.My question is what price range for houses should i be looking at?

Answer 1

You probably would have no problem with a mortgage payment on an average-sized single family home. Here in Denver, the going rate for such a house is about $250K, so with your down payment, I bet you could get a house like that for about $1100 a month, which is not bad at all. Assuming you have good credit (which I'm sure you do), you can get a nice low interest rate. If you want more house than a regular 3-bedroom, 2-bath single family home, you might have to pay more like $300-400K, but if it's just you and a spouse or partner, or just you by yourself, you should try and go with a smaller home for your first house purchase, in case you run into any unforseen costs.

Answer 2

When my wife and I bought our home 2 years ago, our income was roughly 60,000 combined. They stated we could afford $260.000 which was too high. I would go no more than $225,000 which I know is low considering what homes are going for. But no matter what the price, make sure you get a fixed rate open end, which means you can pay down the mortgage at anytime. Also get an amortization so you'll exactly how much you're paying. I would take 30,000 from the savings and 10,000 from emergency to cover your closing cost.

Answer 3

Rough estimate is you can afford a house worth three times your annual salary. Please keep in mind this is a rough estimate, it depends on your down payment, real estate taxes, other expenses (do you have three children in college at $30,000 per year?) and many more things.

Figure your monthly payment for principal, interest, real estate taxes and home owner's insurance. You can find websites which include calculation software or you can use Excel or you can use a financial calculator. Keep your mortgage payment (including real estate taxes and insurance) to a maximum of 28% of your gross income. Keep all debt payments (house, car, credit cards, student loans, everything) to a maximum of 36% of your gross income.

The above is some very conservative advice, many people will tell you to borrow more money and I am sure you will receive loan offers of four and five times your annual income. Just because someone lends you the money does not mean you can really afford it.

If you can come up with a 20% downpayment, you can avoid private mortgage insurance (PMI). PMI is an insurance policy the borrower has to buy to protect the lender in case of foreclosure. My advice is to avoid PMI if possible.

Answer 4

In general you should never have a mortgage or rent payment that is more than 1/3rd of your net income. After that it would be hard for me to say because I don't know what other payments or debts you have that would impact your ability to pay. How secure is your job? Any foreseeable problems there in the near future. I made my mistakes here in Florida buying a house or two they were really too much for me. I came out OK, but just remember, when it's time to make that payment, it shouldn't be a struggle. If it will be a struggle to make that payment and have nothing left over to live on or for emergencies, then it's too much.