Most banks will only loan about 3.5x your salary (minus other loans), if you're willing to accept slightly higher interest then you will find plenty that will offer 4x, and possibly 4.5x. Higher than that is unlikely unless there are special circumstances (e.g. your contract stipulates a 50% pay rise after 1 year, or something).
So, if you earn 40k, and pay $200 a month on your bike loan - many banks would use a figure of about 37k for income. You may find the bank may accept your word on your additional income - but you will probably have to prove it (either with pay slips, or certified accounts if it's 'self-employed' work). A number of banks are very reluctant to count 'additional' income if it is irregular.
So, an income of 37k would probably get you a $150k loan.
The value of the property you could buy would be determined by how much downpayment you can make. In general you should make about 5-10% to be guaranteed the best mortgage rates.
So, if you earn 40k, and pay $200 a month on your bike loan - many banks would use a figure of about 37k for income. You may find the bank may accept your word on your additional income - but you will probably have to prove it (either with pay slips, or certified accounts if it's 'self-employed' work). A number of banks are very reluctant to count 'additional' income if it is irregular.
So, an income of 37k would probably get you a $150k loan.
The value of the property you could buy would be determined by how much downpayment you can make. In general you should make about 5-10% to be guaranteed the best mortgage rates.
cKGunslinger
Lifer
- Nov 29, 1999
- 16,408
- 57
- 91
Well, yeah. Now that we are talking about $130K, that's ok - but the OP was asking about a $210K max. I may be focusing on the max price, but your number wasn't even included in the price-range given by OP ($160-210K).
Assuming his homes never lose value, which is never a guarantee. Assuming the value stays the same, after 5 years, he'll have $7000 in principle equity, on top of his initial $10K down-payment, but he will have spent almost $50k in interest, on top of insurance and taxes.
I'm not saying buying a house is a bad idea, I'm just saying that it's not automatically a good idea.
Yes, so WTF are we arguing about?
WTF
You make 40K and take home 2600/month.
I make 60K and take home 3400 every month.
Are my taxes messed up?
You make 40K and take home 2600/month.
I make 60K and take home 3400 every month.
Are my taxes messed up?
I think its doable but I suggest get a roommate to help out with the utilities, HOA, and other expenses. My brother moved in with me to help me out. I'm making 65-70K, but only bringing home little over 3K/month (investing in 401, tax, benefits taken out). And I purchased a condo for 446K with 20% down. My mortage payment is $2000/month. I just got it a month ago, and seems doable as of now.
Way too much. An little story here. My wife got pregnant so we decided to buy a home.. I was making 47k/year, my wife is a substitute teach, so we dont plan on any money there (plus she would soon be a stay at home mom). We asked to be approved for 120k, the mortage company and real estate agent said "thats all"?
They are not on your side.
We eventually bought a 113k home and had a kid. on 47k, we were barely scraping by between child expenses and home expenses (it's hard to curtail your spending). Not only that but homes need constant maintenance. You may think that 700/mo for an apartment is a black hole, but consider this. I spend ~4 hours a week on the house, and my wife spends much more in general housework. Having a landlord who mows, shovels, fixes broken appliances etc. yields lots of free time and unbudgeted funds. It sounds like your young, start saving (both for a down payment and and emergency fund - save 10-20% of every paycheck, compounding is your friend), live it up and enjoy that disposable income (and free time).
They are not on your side.
We eventually bought a 113k home and had a kid. on 47k, we were barely scraping by between child expenses and home expenses (it's hard to curtail your spending). Not only that but homes need constant maintenance. You may think that 700/mo for an apartment is a black hole, but consider this. I spend ~4 hours a week on the house, and my wife spends much more in general housework. Having a landlord who mows, shovels, fixes broken appliances etc. yields lots of free time and unbudgeted funds. It sounds like your young, start saving (both for a down payment and and emergency fund - save 10-20% of every paycheck, compounding is your friend), live it up and enjoy that disposable income (and free time).
cKGunslinger
Lifer
- Nov 29, 1999
- 16,408
- 57
- 91
Zebano, just gave you a little heads up, I suggest you take his advise. I couldn't imagine buying a $160,000 house with a 40K income. You will have ZERO savings, no money to buy anything to go INTO the house, and when an emergency comes up (and they always do), you are going to be heading in a downward spiral REALLY fast.
rule of thumb is around 4x your gross annual salary, in your case 5x is pushing it but if you get a roommate to help pay down the mortgage, i'd say go for it!
KentState
Diamond Member
- Oct 19, 2001
- 8,397
- 393
- 126
When I purchased my home last year, the loan was for 178k@5.5% apr for 30 years fixed and I pay a total of $1300 each month which includes PMI, principal, and the escrow account with covers taxes and insurance. This was in a fairly low tax area of Ohio which leads me to believe a similiar loan in your area would be at least $1500/month. My typical utility bill for gas/electric/water/sewer/phone/cable/internet is around $350/month. I would expect you to be closer to $2000/month in house and utilities. That would not leave you with anything a month for food, savings, car, bike, car insurance, and just general going to the store and getting a pair of pants. Now that my wife is divorcing me, I'm not longer able to afford this burden on my own and I make rougly $55k a year. I would hate to try to maintain this on $40k a year without sacrificing a comfortable living.
Thats the first thing I was going to post.
NO fricking way bring home pay on $40K is $2600.
Gross income is $767/wk so you're lucky if you even take home $600.
And Georgia had state income tax.
I don't see how your take home is $2600 on a $40K salary.
4x?!
I've always heard 2 to 2X from real estate agents. Even 3X seems pushing it to me.
Figure, with interest rates around 5 to 6%, you can estimate a principle and interest payment of about $6 per $1,000 borrowed. So, a loan of $160,000 (assuming 100% borrowed), would have a principle and interest of about $960. Add to that your taxes, insurance, and home owners association and you have a monthly payment in the $1100 to $1200 range.
I agree with most of the points above, particularly 1) Since you will likely move soon, you will not recover your investment. 2) It's too damn much.
A lot of people are throwing around what they think your payments will be, but they can't possibly know without knowing exactly where you're looking. In my area (Omaha, NE), property taxes range from 2 to over 3% of the property value per year. So taxes on a 160k house will range from $267 to $400 per month. In other parts of the country, those taxes would pay for a $5 million home. Add to that homeowner's insurance which (in my area) could range from $400 to $4000 annually for that value of house (depending on where it is located and your coverage options). Then you have PMI which could range from $170-400 monthly, depending on the lender and insurance provider. Assuming a 6% interest rate (may not be possible when you buy, depending on your credit and what kind of loan you get), and closing costs of $4k, you'll be financing $154k at $923/month. So this total mortgage payment could run from $1393 monthly (not likely) to $2056 monthly (also not likely), with a likely payment of, say, $1583 / month.
In my area, garbage collection is included in my taxes, but I still have about $250 monthly for 1600 sq ft for Electric/Gas/Water/Sewage. So the actual cost to own that house would be $1833. Add on your vehicle costs (nearly $400), and you have about $400 left over for food, gasoline, entertainment, telephone, internet, cable, saving for retirement, saving in general, saving for home repairs (your appliances will go out, you need to figure out how much life they realistically have, how much they'll cost to replace at that time, and save accordingly. This adds up). Not to mention lawnmower, snow shovels, weed whacker, sprinklers, hoses, furnace filters, possibly a refrigerator, paint, rekeyed locks, home inspection, decorating, the list goes on and on.
The real cost of buying and owning a house goes WAY beyond the monthly payment...
A lot of people are throwing around what they think your payments will be, but they can't possibly know without knowing exactly where you're looking. In my area (Omaha, NE), property taxes range from 2 to over 3% of the property value per year. So taxes on a 160k house will range from $267 to $400 per month. In other parts of the country, those taxes would pay for a $5 million home. Add to that homeowner's insurance which (in my area) could range from $400 to $4000 annually for that value of house (depending on where it is located and your coverage options). Then you have PMI which could range from $170-400 monthly, depending on the lender and insurance provider. Assuming a 6% interest rate (may not be possible when you buy, depending on your credit and what kind of loan you get), and closing costs of $4k, you'll be financing $154k at $923/month. So this total mortgage payment could run from $1393 monthly (not likely) to $2056 monthly (also not likely), with a likely payment of, say, $1583 / month.
In my area, garbage collection is included in my taxes, but I still have about $250 monthly for 1600 sq ft for Electric/Gas/Water/Sewage. So the actual cost to own that house would be $1833. Add on your vehicle costs (nearly $400), and you have about $400 left over for food, gasoline, entertainment, telephone, internet, cable, saving for retirement, saving in general, saving for home repairs (your appliances will go out, you need to figure out how much life they realistically have, how much they'll cost to replace at that time, and save accordingly. This adds up). Not to mention lawnmower, snow shovels, weed whacker, sprinklers, hoses, furnace filters, possibly a refrigerator, paint, rekeyed locks, home inspection, decorating, the list goes on and on.
The real cost of buying and owning a house goes WAY beyond the monthly payment...
I disagree anyways, you can go for a house worth more than $100k, but not a house worth $200k anyways.
codeyf
Lifer
- Sep 6, 2000
- 11,854
- 3
- 81
Actually, we left ourselves with just shy of $10k in our savings. But good guess none the less
The rate we got to start was ok, but not great. 6.75% iirc. Our refi was at less than a point less, I want to say 6.175%. Within a few months of our refi, it went below 6%, but at that point the difference between the rates wasn't enough to justify yet another refi.
if you can get a single family house in the area you live in for 160K there is no bubble to burst in that area
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