# How much house can I afford?

After my condo sells I would have \$80,000 to put down. I earn \$48,000 per year . Many years on job. Credit score of 780. No car loans out .I pay off my credit card monthly. How much home would I qualify for? Also tell me would I quailify for more if I purchase a home with a rental apartment attached? If so how much more.

I live in NY !

Update:

WOW ! Thank you ALL!!! These are some best answers I have ever seen to a question. I will have hard time choosing best. I have learned a great deal with your answers. Thank you all for your time and thoughtful answers.

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• Anonymous

Your debt to income ratio is a simple way of showing what percentage of your income is available for a mortgage payment after all other continuing obligations are met. The ratio is one of the many things a lender considers before approving your home loan.

You may see conventional loan debt limits referred to as the 28/36 qualifying ratio. Those numbers refer to two percentages that are used to examine two aspects of your debt load.

The First Number, 28%

This number indicates the maximum percentage of your monthly gross income that the lender allows for housing expenses. The total includes payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner's association dues. (Often referred to by the acronym PITI.)

The Second Number, 36%

This number refers to the maximum percentage of your monthly gross income that the lender allows for housing expenses plus recurring debt.

Recurring debt includes credit card payments, child support, car loans, and other obligations that will not be paid off within a relatively short period of time (6-10 months).

Debt to Income Example

Yearly Gross Income = \$45,000 / Divided by 12 = \$3,750 per month income

\$3,750 Monthly Income x .28 = \$1,050 allowed for housing expense

\$3,750 Monthly Income x .36 = \$1,350 allowed for housing expense plus recurring debt.

Not All Loans Are the Same

FHA loan ratios are typically 29/41, allowing a higher debt load for both housing expenses and recurring debt.

For the above example, FHA would allow \$1087 for housing and \$1538 for housing plus recurring debt.

For a VA loan, the debt to income ratio should not exceed 41% of your monthly gross income.

Good for you! Sounds like you have continued to make some great financial decisions. No debt, plenty of money to put down, solid job. Not sure where in NY you live, but you will know the cost of houses where you want to live. The "government recommended daily allowance" for a mortgage is 36% - total debt at or below 40%. So, you would have ~\$1720/month to put you at or around what you should do.

Because of your credit you can get a lot more than you can afford. If you can find a place that has a consistent rental then you can include that income (or potential) into your calculation for the mortgage.

If you buy a \$300,000 house and put 20% down, you would have a \$240,000 mortgage. Figure 6% (max, w/ your credit), your payment would be \$1438/month (NOT INCLUDING TAXES OR INSURANCE).

Now, you haven't considered the possibility of other mortgage types (interest only, 40 year amortization, etc.). Because of your previous fiscal responsibility, I wouldn't recommend anything to crazy... Also, if you have an apartment you know you can rent out, the equations can be easily adjusted to tell you what you can and should afford. Keep in mind if you think you can buy something that would be significantly more expensive b/c someone said "no problem, just rent it out for \$1500 a month" - if it is not rented out - YOU are the only person left to pay for that "guaranteed \$1500 a month" - not the person who told you "no problem..."

Stay responsible. If you can find a place you like w/ an apartment and can still comfortably afford it, do it. Also, with a rental, make SURE you have some cash for things that will happen (new fridge, plumber, dishwasher, carpet, paint, etc.)

Good luck!

Joe...

I'm not actually going to answer your question, but I'd like to make a suggestion.

I took a class called Financial Freedom. One thing we learned in there is that you never spend monthly on purchasing a home more then 1/3 your income. Not your income plus your spouses if you are married, but 1/3 the income of the person with the most stable income. Meaning they have job security and have potential for growth.

I do know this from having relatives who lived just outside New York City, don't buy in new York City or other major Cities, you'll get half or less then what you'd get by purchasing a home in an area ten or more miles outside a major city.

One other thing they said in this financial freedom class, is that if you are the sole income provider and buying a home in your name, get disability insurance. WHY? Becuase if you became disabled you are likely to lose everything. You get a policy that will pay you three times greater per month, then what you are currently living on, that way as you age and things become more expensive you can keep up with economic increases and are able to maintain your standard of living that you've grown accustom to.

I hope you find yourself a nice home.

• Tweet
Lv 5

Sounds as though you're a smart cookie when it comes to finances. Good credit score! With \$80,000 to put down and earning \$4000 a month, you should be qualified for at least \$300,000 mortgage. Having a "rental apartment" attached doesn't really make you qualify for more, but could be considered as a "income property", also could or would most likely increase your insurance rates for the structure (I say structure because you don't get house insurance based on the land it sits on). A realtor can really give you a good start as far as what to do first,ie, get pre-approved for a mortgage before starting to look for a house. Good luck!

• Joanne
Lv 4
4 years ago

OK, normally that high of income and low debt would be a credit score in the high 700s . . . what is the problem ? We can't tell because we don't know what rate you'll get with that bad FICO or if you have child support or other judgments ? (The cause of the low FICO ?) Just ask your bank for a prequal letter. They are free and only they know what % rate will be charged (and therefore affect how much house you can afford) And get the prequal for a 30 or 20 yr fixed . . . the ARM will get you in at a low rate for 6 months then spike and send you to bankruptcy court (unless that is the reason for your low FICO).

• Anonymous

Your credit score is fine. Lenders will prefer to see a payment to income ratio of 3:1 or so, so you can make payments of about 1250 a month, which would buy a mortgage of somewhere around 240,000, so you could maybe spend a bit over \$300,000. Prepare a balance sheet (what you own and what you owe) and an income statement (where it comes from, and where it goes), and take these to a loan officer at your favorite bank, and you will learn much more than I can tell you here.

• Anonymous

Credit score 780. 80 Down. You are looking at half a million and up.

my guess is that with your terrific credit score, you'll qualify for a lot more than you should feel comfortable borrowing.

so, you should think very carefully about how much of your income you want to commit to housing payments, keeping in mind that you'll probably want to fix up your new place.

i would recommend going to one of the online mortgage calculators, and figure out how much home you can afford given your the amount you want to pay each month

• Shayna
Lv 6

Not more than one years income loaned out for 60 months, generally. Be careful of the scam loan places these days.