How Much House Can I Afford [Mortgage Payment vs Income]

How Much House Can I Afford [Mortgage Payment vs Income]
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–How to Get Rid Of PMI [Private Mortgage Insurance]
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–Mortgage Calculator

Rule of Thumb The basic rule of thumb is that mortgage payments, including principal, interest, insurance and taxes, must not exceed 30% of your gross income. The rule is that you may not spend more than 28% of your gross monthly income on housing (including principal, interest, taxes and insurance). But watch the full video to see what I recommend.

Therefore, your total loan payments (housing plus all other debts) must not exceed 36% of your gross income. It states that the total monthly payments on your debt must not exceed 36% of your pre-tax amount (i.e. the rule also takes into account the interest of the down payment and does not allow for over-stretching even with a large down payment). .

So if you put down a $40,000 down payment, you can use your income to buy a $240,000 house. As a result, you might be tempted to buy a $1 million house because you can invest $500,000 less. The danger arises when this percentage of the home buying rule is violated to buy a more expensive home. The people most likely to violate the first rule of home buying are people with low or moderate incomes.

The lender will also ask you to provide proof of your payment history for your last regular monthly expense. If you can provide the required evidence within the allotted time, your chances of getting a mortgage will increase significantly. Just remember that when you get pre-approved for a mortgage, lenders will likely approve the loan amount for you, with payments up to 30% or 35% of your pre-tax income. You will most likely qualify for a mortgage loan that eats up to 43% of your gross income.

If you want an income-to-mortgage ratio of 28%, your monthly housing contribution must not exceed $2,800. Financial advisors generally recommend no more than 28% of monthly income when paying for housing. More conservative advisers such as Dave Ramsey recommend that household payments “including property taxes and insurance” should not exceed 25% of gross monthly income. Other financial experts say predictable total housing costs, including property taxes and homeowners insurance premiums, should not exceed 30 percent of wages.

You can use variables to approximate your monthly home payments. A mortgage calculator can help you get a rough idea of ​​what to expect from your monthly rent. Knowing the exact costs associated with a mortgage will help you determine how much you can save each year and how long it will take to save on a down payment.

You can use your budget along with your mortgage calculations to find out exactly how much you need to save. It’s important to know that if you take out a mortgage, you’ll still need to save, as described above.

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DISCLAIMER: Content is for informational purposes only and should not be considered personal financial advice. This video and description may contain affiliate links. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available.

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