Many people are seeing less income during the COVID-19 pandemic. However, fear not, owning a home could be more affordable, depending on where the market goes. Are you making at least $100,000 per year? We are seeing some great opportunities in the local area. If you plan your budget well, and do some research, now could be the right time to get a home. We’re here to help! Professional Mortgage Solutions in Rego Park, NY is here to help prospective home buyers during the COVID-19 Pandemic. This week we explore: How much home can I afford making $100,000 per year?
Budgeting to Own Your New Home
One of the first steps to budgeting your path to home ownership is to understand how much mortgage you can take on with your current income and assets. To calculate this, some people simply multiply annual income by 2.5 or 3. However, there could be other factors influencing how much cash you will have. You must have enough available to both pay the loan and keep up your home. Be sure you truly calculate all the costs. These include the interest rates you can finance, any repairs needed, costs to finance the home or put a down payment, and more. Some banks suggest using 1.5 times your income and others say to use five times more.
Understanding the True Cost of Home Ownership
A lot of home ownership comes with hidden up-front costs and ongoing expenses. It is especially important to understand these. The up-front costs are also called the housing-to-expense ratio or the “front-end” ratio. This is easy to calculate: subtract the monthly mortgage, insurance, taxes, application fees, and any home cost from your monthly income. To make it “affordable” some say the total front-end expenses should be less than 28%-30%.
Now in COVID-19, people with adjustable-rate mortgages could see more ongoing home expense changes. Further increases in utilities, cleaning, and security have been experienced by many. You will always want to add cushion into your budget to manage any unforeseen expenses and changes in the local economic systems.
You Financial Capacity to Manage Debt
To see how much home you can afford, you need to understand more than just income alone. Subtract how much debt you already owe for other expenses. Weigh this against your net worth. Ideally, your debt-to-income ratio should be less than 36%. Some say the ratio should be no more than 43%. As you take on a mortgage, you must pay that on top of money owed to credit cards, student loans, auto loans, etc.
To end up with less debt, use as much cash as you can when purchasing a home. If you want less debt, then pay cash, and earn equity in the home up-front. This is assuming you can afford to save these funds up effectively. Professional Mortgage Solutions is here to help you budget and take advantage of finding a new home in Rego Park, NY. Feel free to contact our local offices for help!
