You may be surprised to learn that owning a home could be more affordable than you think on your annual income. Though you will need to be careful and do your homework, there are a variety of ways to make homeownership possible. However, for expert advice, you should check with a professional. Each person’s situation is unique. Professional Mortgage Solutions in Rego Park, NY supports a variety of home buyers. This week, we help answer the question: how much home can I afford making $75,000 per year?
Determining How Much Home You Can Afford with Your Annual Income
Many opinions exist on how to calculate what home price you can afford on your income. Some suggest multiplying your annual income by 2.5 or 3 to see. There are multiple factors that go into determining the right price. However, there is no set ideal amount. You must also calculate all the costs associated with homeownership. 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 use five times.
Understanding the True Cost of Purchasing a Home
While learning how much home you can afford on your income, be sure to factor in the up-front costs with purchasing a home. These are also called the housing-to-expense ratio or the “front-end” ratio. This may be found by subtracting the monthly mortgage, insurance, taxes, application fees, and any home cost from your monthly income. Some suggest that this should be less than 28%.
Looking into how Much Debt Do You Already Have
When you are calculating how much home you can afford, do not just use income alone. Be sure to also include how much debt you already have owed. Weigh this against your worth. Many suggest that your debt-to-income ratio should be less than 36% and others say no more than 43%. Remember that once you take on a mortgage, each month you will need to pay that on top of outstanding debt owed to credit cards, student loans, auto loans, etc.
Finding the Right Level of Financing for the Home
Many say that it is best to pay as much cash as you can when purchasing a home. This may be unattainable for some. When looking at how much home you can afford, you should determine what type of mortgage you’ll be able to secure. Think about how much the interest rate, closing costs, insurance, and other fees will be in the end. These charges can add up quickly, so it is helpful to pay cash and earn equity in the home up-front, assuming you can afford to. However, there are some zero down payment programs you can research.
Professional Mortgage Solutions is excited to work with you to find a new home in Rego Park, NY. Feel free to reach out with any additional questions.