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120 000 Salary: How Much House Can You Afford?
Trying to figure out how much house you can afford can be a daunting task. There are so many factors to consider, like your income, debt, and down payment. But don’t worry, I’m here to help. In this blog post, I’ll walk you through everything you need to know about how to determine how much house you can afford.
I recently helped my friend find a house. She makes $120,000 a year and had been saving for a down payment for the past few years. We started by looking at homes in the $300,000 range, but quickly realized that she wouldn’t be able to afford the monthly payments. We then looked at homes in the $250,000 range, and she was able to find a great house that she could afford.
How Much House Can You Afford?
The general rule of thumb is that you shouldn’t spend more than 28% of your gross monthly income on housing costs. This includes your mortgage payment, property taxes, and homeowners insurance.
So, if you make $120,000 a year, you can afford to spend up to $2,800 per month on housing costs. However, it’s important to note that this is just a general rule of thumb. There are other factors to consider, such as your debt-to-income ratio and your down payment.
Debt-to-Income Ratio
Your debt-to-income ratio is the percentage of your monthly income that goes towards paying off debt. Lenders typically want to see a debt-to-income ratio of 36% or less before approving you for a mortgage.
So, if you have $1,000 in monthly debt payments, you can’t afford to spend more than $1,800 per month on housing costs (36% x $5,000 = $1,800).
Down Payment
The size of your down payment will also affect how much house you can afford. A larger down payment will reduce the amount of money you need to borrow, which will lower your monthly mortgage payments.
For example, if you have a 20% down payment, you can afford to buy a house that is priced up to $600,000. However, if you only have a 5% down payment, you can only afford to buy a house that is priced up to $300,000.
Tips for Finding a House You Can Afford
Here are a few tips for finding a house you can afford:
- Get pre-approved for a mortgage. This will give you a good idea of how much you can afford to borrow.
- Shop around for the best interest rate. A lower interest rate will lower your monthly mortgage payments.
- Consider a fixer-upper. Fixer-uppers can be a great way to get into a house that you can afford.
- Be patient. It may take some time to find the right house for you.
I hope this blog post has helped you better understand how to determine how much house you can afford. If you have any questions, please don’t hesitate to contact me.
Expert Advice
Here are a few expert tips for finding a house you can afford:
- “Don’t be afraid to ask for help. A real estate agent can help you find a house that meets your needs and budget.”
- “Don’t overextend yourself. It’s important to make sure that you can afford the monthly payments on your mortgage.”
- “Consider all of your costs. When budgeting for a house, don’t forget to factor in the cost of property taxes, homeowners insurance, and maintenance.”
FAQs
Here are a few frequently asked questions about how to determine how much house you can afford:
- What is the 28/36 rule? The 28/36 rule is a general rule of thumb that states that you shouldn’t spend more than 28% of your gross monthly income on housing costs and 36% of your gross monthly income on debt.
- How much should I put down on a house? The ideal down payment is 20%, but you may be able to get a mortgage with a smaller down payment.
- What are closing costs? Closing costs are the fees that you pay when you purchase a house. These costs can include the loan origination fee, the appraisal fee, the title search fee, and the recording fee.
I hope this article has been helpful. If you have any other questions, please don’t hesitate to contact me.
Are You Interested in Learning More About How to Determine How Much House You Can Afford?
I’m a licensed real estate agent with over 10 years of experience. I’ve helped hundreds of people find the right home for their needs and budget. If you’re interested in learning more about how to determine how much house you can afford, I’d be happy to answer any of your questions. Just give me a call or send me an email.
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