Mortgage

How A lot Home Can I Afford If I Make $ 70,000 a 12 months?

What is your budget for buying a home?

If you're making $ 70,000 a year, or a salary in this field, you may be wondering how much home you can afford for your income.

This is important information as an understanding of your budget will point you in the right direction to find a home and get a loan.

However, figuring out affordability is not as simple as providing a number.

Salary plays a big role in purchasing power. But it's only part of the equation.

You can maximize your home buying power by knowing the various factors lenders consider when making your mortgage application and what they want to see.

Check your budget for home buying. Start Here (November 10, 2020)

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How much house can I afford for $ 70,000 a year?

The house you can afford for $ 70,000 a year – or any salary – depends on a few factors.

Aside from your salary, lenders check your creditworthiness, down payment, debt to income ratio, and likely mortgage rate, among other things.

Depending on how all these numbers play out, your budget for home buying with a salary of $ 70,000 can look very different.

Check out some examples to see what we mean. *

Your down payment and home purchase budget

salary
$ 70,000 / year
$ 70,000 / year
deposit
$ 15,000
$ 40,000
Current monthly debt
$ 250
$ 250
Mortgage rates
3.0%
3.0%
Home purchase budget
$ 349,200
$ 409,200

Your current debt and home purchase budget

salary
$ 70,000 / year
$ 70,000 / year
deposit
$ 40,000
$ 40,000
Current monthly debt
$ 150
$ 500
Mortgage rates
3.0%
3.0%
Home purchase budget
$ 432,000
$ 352,400

Your mortgage rate and your budget for home buying

salary
$ 70,000 / year
$ 70,000 / year
deposit
$ 40,000
$ 40,000
Current monthly debt
$ 250
$ 250
Mortgage rates
2.75%
4.0%
Home purchase budget
$ 420,800
$ 367,200

* All examples assume a creditworthiness of 720, an annual property tax rate of 0.1%, and an insurance premium of $ 600 per year for a homeowner. All calculations were done using The Mortgage Reports Affordability Calculator

Check your budget for home buying at today's prices (Nov 10, 2020).

This is how you determine how much house you can afford

Your mortgage lender ultimately determines your purchasing power.

However, free online mortgage calculators are a great tool for getting an affordable estimate.

Before using a mortgage calculator, make sure you research current mortgage rates for a more accurate estimate.

You can go a step further by checking your balance and then using your credit score to find average mortgage rates.

Once you've entered your annual income and estimated mortgage rate, the calculator determines the maximum you can spend on a house and the expected monthly payment.

Look at your total monthly payment

There are several different costs involved in a mortgage payment.

It's important to plan for these expenses too so that you can get a more accurate estimate of what you can afford based on your monthly budget.

The four main components of a mortgage payment are principal, interest, taxes, and insurance.

Principal and Interest – Principal refers to the loan amount. Interest is the cost of raising funds. Each month a certain percentage of your payment goes towards repaying the principal and another part towards interest.
Property taxes – you pay Property taxes also on the house. Lenders add this amount to your mortgage payment and it is paid into an escrow account. Property taxes are based on the value of your home
Insurance – Homeowner insurance is required when purchasing a home. This protects property from damage such as theft, fire or natural disaster. You may also have to pay private mortgage insurance (PMI) when you buy a home with less than 20 percent less. This insurance will protect the lender if you default on the loan
HOA (Homeowner & # 39; s Association) Fees – If you're in a community with a Homeowners AssociationYou also pay monthly HOA fees. These fees can cover the cost of landscaping, community centers, maintenance, garbage collection, etc.

Some mortgage calculators do not take into account all of the costs included in your monthly payment. This can give you an unrealistic estimate of how much house you can afford based on your salary.

The reason? You have a set monthly budget – and when your "other" homeownership costs are higher, less of that budget will be left for your core mortgage payment. This in turn reduces how much house you can afford.

Use a mortgage calculator with taxes, insurance, and PMI to get a more accurate estimate of your home buying budget.

Or talk to a lender. They can give you a free mortgage loan estimate with the most accurate number based on your finances and current mortgage rates.

Check your budget with a lender today (November 10, 2020).

In addition to salary, what determines your budget for buying a home?

While salary is a key factor in affordability, other factors also affect your budget.

The reality is that two applicants who are earning $ 70,000 a year may qualify for two different mortgage amounts based on factors such as:

Down paymentCredit score Interest rate Debt-to-Income-Ratio (DTI) Employment history

We showed you the numbers above. However, here is some more information about what each factor means and why it is important to a mortgage lender.

deposit

Most home loan programs require a minimum deposit between 3% and 5%.

A larger down payment will reduce the amount you need to borrow to buy a home. That way, you can either afford more home – by keeping your down payment percentage low – or reduce your monthly housing costs by taking out a smaller loan.

Lowering at least 20 percent can help you avoid PMI, which will make your monthly payments more affordable and increase your purchasing power.

When budgeting a down payment, remember to include closing costs in your calculation.

Closing costs are typically between 2 and 5 percent of the loan amount, which can add a few thousand dollars to your expenses.

Credit score and interest rate

Your credit score also plays a role in affordability. The higher your credit score, the lower your mortgage rates.

Interest not only determines your total borrowing costs, but also how much you pay each month.

Mortgage rates can fluctuate from week to week or even day to day depending on market conditions. Interest rates also vary depending on the lender. Because of this, it is important to search for your mortgage loan and find the best deal.

Debt to income ratio

When calculating affordability, your lender also takes your current debt load into account.

Your debt-to-income ratio is the percentage of your monthly income that you spend on monthly debt payments.

A borrower making $ 70,000 a year on student loan payments, a high auto payment, and high credit card payments can qualify for a much smaller loan than a borrower with the same salary and zero consumer debt.

Ideally, your total debt shouldn't exceed 36% to 43% of your gross monthly income (including future mortgage payments). However, the maximum threshold varies depending on the loan program. Some lenders allow a DTI of up to 50% in certain circumstances.

Unfortunately, high debt payments can reduce your purchasing power.

Therefore, a borrower who makes $ 70,000 a year from student loan payments, a large auto loan, and high credit card payments can get less money than a borrower with the same salary and zero consumer debt.

Employment history

Mortgage lenders aren't just interested in income. They also evaluate the stability of your income.

In most cases, you must have two consecutive years of service to qualify for a mortgage.

However, two years of professional experience is not always required. This can help first time home buyers who may be just starting their careers.

The most important thing in a lender's eyes is income stability. The more predictable your income, the better.

So if most of your income comes from commissions – which are not guaranteed – the lender will review your commission income over the past two years.

You use your average income over this two-year period for qualification purposes. If any of these years your income is significantly less, you may only be able to qualify for a small mortgage.

Tips to Afford More Home for $ 70,000 Salary

The ability to get more home for your buck while making $ 70,000 a year at the same time is possible, but you need to plan ahead. Here's what you can do:

1. Save a larger deposit

Remember, a bigger deposit means you can borrow more. Instead of slashing the typical 3% to 5%, you might save at least 10% to 15%.

A higher down payment will also help you negotiate a lower interest rate.

2. Try to increase your credit score

You don't need great credit to get a mortgage, but a high score will save you money in the long run as you will qualify for a better interest rate.

Always check your credit rating and score before applying for a mortgage. If necessary, take steps to increase your score. Pay your bills on time and pay your consumer debt.

3. Reduce debt payments

Reducing your debt not only increases your credit score, it also improves your purchasing power. This is because your DTI ratio is lower.

Come up with a plan for paying off student loans, credit cards, and other debts you have.

If you are looking to buy a home in the near future, avoid making a new car payment whenever possible. This additional debt can significantly reduce your purchasing power.

4. Don't be afraid of PMI

While a 20 percent down payment can help you get a lower mortgage rate and increase affordability, it is not the right move for everyone.

As a general rule of thumb, you should never charge your personal savings account to buy a house.

When a 20 percent down payment means you've run out of cash, it is wiser to invest less. This way you keep cash for emergencies.

Understandably, some homebuyers aim for a 20 percent decline to avoid PMI.

Yes, PMI is an additional expense. However, this isn't always a permanent issue.

If you pay off your mortgage balance and your home increases in value, you end up with 20 percent equity. At this point, your mortgage lender can lower the PMI or you can refinance the mortgage and remove those costs.

If you pay PMI, you can buy a home sooner too.

Remember, the mortgage and housing market is unpredictable. If you delay buying until you receive a 20 percent down payment, you could potentially miss out on low prices and affordable home prices.

Review your eligibility to buy a home (November 10, 2020).

Find out what you can afford

How Much House Can You Afford While Earning $ 70,000 a Year?

The bottom line is that factors other than salary determine purchasing power.

Yes, income is an important part of the equation. However, you need to take into account other monthly costs, your down payment and of course your interest rate.

By getting your finances in order and shopping at the lowest possible price, you can maximize your purchasing power for any salary.

Check your new plan (November 10, 2020)

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