The usual rule of thumb is that you can afford a mortgage two to 2.5 times your annual income. That's a $120,000 to $150,000 mortgage at $60,000. You also have to be able to afford the monthly mortgage payments, however.
How much should you be spending on a mortgage? According to Brown, you should spend between 28% to 36% of your take-home income on your housing payment. If you make $70,000 a year, your monthly take-home pay, including tax deductions, will be approximately $4,328.
3. The 36% Rule
| Gross Income | 28% of Monthly Gross Income | 36% of Monthly Gross Income |
|---|
| $40,000 | $933 | $1,200 |
| $50,000 | $1,167 | $1,500 |
| $60,000 | $1,400 | $1,800 |
| $80,000 | $1,867 | $2,400 |
To determine how much house you can afford, most financial advisers agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt — that includes housing as well as things like student loans, car expenses and credit card payments.
Some experts suggest that you can afford a mortgage payment as high as 28% of your gross income. If true, a couple who earn a combined annual salary of $100,000 can afford a monthly payment of about $2,300/month. That could translate to a $450,000 loan, assuming a 4.5% 30-year fixed rate.
This rule says that your mortgage payment (which includes property taxes and homeowners insurance) should be no more than 28% of your pre-tax income, and your total debt (including your mortgage and other debts such as car or student loan payments) should be no more than 36% of your pre-tax income.
Before completing a mortgage application or even strolling through an open house, you'll want to know these things: Your monthly income. The sum of your total monthly debt payments (auto loans, student loans and credit card minimum payments) Your credit score and any credit issues in the past few years.
Down payment chart for a 500,000 property
| Percent Down | Down Payment | Loan Amount |
|---|
| 5% down for a $500,000 home | $25,000 | $475,000 |
| 10% down for a $500,000 home | $50,000 | $450,000 |
| 15% down for a $500,000 home | $75,000 | $425,000 |
| 20% down for a $500,000 home | $100,000 | $400,000 |
You can only get a mortgage with no down payment if you take out a government-backed loan. Government-backed loans are insured by the federal government. You may want to get a government-backed FHA loan or a conventional mortgage if you find out you don't meet the qualifications for a USDA loan or a VA loan.
While a 20 percent down payment does help you avoid paying private mortgage insurance, many buyers today don't want (or can't) put down that much money. In fact, the median down payment on a home is 12 percent, according to the National Association of Realtors, and 6 percent for first-time buyers.
Down payment chart for a 300,000 property
| Percent Down | Down Payment | Loan Amount |
|---|
| 5% down for a $300,000 home | $15,000 | $285,000 |
| 10% down for a $300,000 home | $30,000 | $270,000 |
| 15% down for a $300,000 home | $45,000 | $255,000 |
| 20% down for a $300,000 home | $60,000 | $240,000 |
Typically, mortgage lenders want you to put 20 percent down on a home purchase because it lowers their lending risk. It's also a “rule” that most programs charge mortgage insurance if you put less than 20 percent down (though some loans avoid this).
“A score of 700 or higher would generally be considered a really good score and help you qualify for the most competitive offers,” explains Matt Dundas, director of finance at Carvana, an online used car retailer. It's not that you can't get approved with bad credit and a lower score.
The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments. The extra payments will allow you to pay off your remaining loan balance 3 years earlier.
Current Mortgage and Refinance Rates
| Product | Interest Rate | APR |
|---|
| 30-Year Fixed-Rate Jumbo | 3.0% | 3.034% |
| 15-Year Fixed-Rate Jumbo | 2.625% | 2.722% |
| 7/1 ARM Jumbo | 2.25% | 2.517% |
| 10/1 ARM Jumbo | 2.5% | 2.593% |
Breaking it down further by every thousand dollars of your mortgage can help you how it all adds up. On that same $250,000 loan with 5 percent interest, you would pay $5.41 in interest each month for every $1,000 of the loan. You would pay $64.91 each year for every $1,000 of the loan.
Monthly Payments by Interest Rate and Loan Payoff Length. Amortization schedule table: $ 190,000 30 Year loan at 5 percent. 1,019.96 per month.
Mortgage Comparisons for a
125,000 dollar loan.
Monthly Payments by Interest
Rate and Loan Payoff Length.
$125,000 Mortgage Loan Monthly Payments Calculator.
| Monthly Payment | $614.92 |
|---|
| Total Interest Paid | $96,372.95 |
| Total Paid | $221,372.95 |
Monthly Payments by Interest Rate and Loan Payoff Length. Amortization schedule table: $ 260,000 30 Year loan at 5 percent. 1,395.74 per month.
A $150,000 30-year mortgage with a 4% interest rate comes with about a $716 monthly payment. The exact costs will depend on your loan's term and other details.
Mortgage Comparisons for a 110,000 dollar loan. Monthly Payments by Interest Rate and Loan Payoff Length. Amortization schedule table: $ 110,000 30 Year loan at 5 percent. 590.50 per month.
The most common way to buy property is by private treaty or sale through a real estate agent or directly from the owner. If a property isn't going to auction, you are saved from the stress of auction day, but are then faced with the daunting question of how much should you offer.
