Buying a home is one of the most exciting times for individuals, couples and families. If you’ve asked yourself, “How much do I need to make to buy a house,” you’re not the only one! Many Americans ask themselves the same question when the time comes to become a homeowner.
At times, there can be a level of incongruence when looking at what you want versus what you can afford. Luckily many variables come into finding the perfect blend, and a simple evaluation of your finances and home preferences will often produce the end result you want… a home you love!
Step 1: Derive a Formula
The first step you will want to take is to evaluate your gross monthly income. A mortgage company and a home loan take your gross monthly income and give a loan based on your ability to repay. Although a mortgage payment is an amount based on your home value, your income comes into play here, too.
A simple formula using your target mortgage payment plus any debt divided by your debt-to-income ratio (between 36%-45%) will give you a rough estimate of the gross monthly income you will need in order to buy a house.
Step 2: Consider a Downpayment
Next, you will want to consider a downpayment. This can be done by evaluating the debt you have, organizing how much money you can put down for overhead costs, evaluating the current interest rate on a loan and integrating all of those variables into the price of the home you wish to purchase.
In the scenario for a home valued at around $300,000 with no pending debt(s) the following is to be considered:
For a conventional loan:
- You’ll need a down payment. On average for a home valued at $300,000 a considerable downpayment is between 5-10% ($15,000-$30,000). For the purposes of this example, we will use 5% down.
- Evaluate the allotted interest rate: 3.26 percent. Interest rates will vary, however 3.26 is used as an average.
- Your average mortgage payment with 5% down from a home valued at $300,000 averages out to be around: $1,770
- Your gross monthly income needed is approximate: $4,916
This year is turning out to be a great time to buy a home in Phoenix, and your income doesn’t have to limit you. Finding the perfect blend of what you want and what you can afford is a great first step to buying or listing a home through Housso. Our real estate professionals are ready to give you expert advice on how to make your homeownership dreams come true!