How much can you really get away with?

Question

So, I know the general rule is - spend no more than 3 times your annual income on a home. So, $100k/year would buy you a $300k house. Say you have a decent downpayment of around $70k to put down and get a monthly mortgage of $1.7k then wouldn't you be able to afford that even if you only brought in around $4k/month?

Just wondering.

Thanks.

I realize that buying a $300k house on a $48k salary does not go along with the rule I had mentioned, which was part of my question. It doesn't follow the rule, but at the same time it doesn't seem too out of reach as that rule would make it seem.

I have no kids, no student loans, my total car costs (including payment, gas, insurance, etc.) is around $600.

Answer 1

Pretty much, lenders try to make sensible loans to people who appear to be living within their means and whose credit profiles indicate they will make the payments. The last thing a lender wants to do is set you up for failure because that would mean he is setting the groundwork for a foreclosure.
So, the answer to your question is yes, there is a point where loans seem more likely to pass underwriting and those are the loans where the payment would represent about 33% to 40% of the loan applicant's take home pay. Lenders also look at other outstanding debts.
i am not an expert on this however I would advise you to look at your debt to income ratios. Call on your favorite lender and ask if the loan is do-able. Good luck!

Answer 2

Forget all those rules. Do an actual budget for your specific situation. If person A has two big car payments credit card debt, a risky job then they may not be able to borrow as much as someone who makes the same income, has zero debt and has a govt job.
You have to add in taxes, utilities, insurance and expected maintenance. If the house is older has a 15 year old roof and furnace you could be facing $12,000 of repairs the first year you own the home. So in that case you can afford to borrow less.
You are right the more you put down the lower your payment.

Answer 3

The three times your actual income is a guideline, not a hard and fast number. If you feel you can afford more then you'll want to be able to prove to the lender that you can in order to qualify.
One of the easiest ways to do this is to take the amount of your desired house payment and deposit it in a savings account for a period of a year or so before the purchase. Showing significant savings will help you get approved for a higher payment as well. If you do this it shows you can make the higher payments and also gives you a reserve account to help qualify.

Answer 4

$4K a month would be $48L a year, so using your rule of thumb, that would be a $144,000 house. If you have a $70K down payment a $214K house would have a mortgage of $144K.

It would be pretty unlikely that you could have a mortgage for $230K, the $300K house minus your $70K down payment, and only pay $1700 a month by the time you figured in real estate taxes and insurance.

Answer 5

Is tha 4k gross or net? Add car payment, credit cards, utilities, and if children invovled..all sorts of expenses. You could afford 1700 a month but it is pushing it. Being able to afford it, doesnt mean you need to max out.