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Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 decade ago

How expensive of a house can I afford on 30K?

I make about $32,000 gross a year and want to buy a townhouse,but don't have a down payment. How much house can I afford for what I make?

Update:

I live in Minnesota

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  • 1 decade ago
    Favorite Answer

    General rule of thumb is 2x to 3x your annual salary for a mortgage. For you that's between $64,000 and $96,000. In the past few years

    Peel the onion back one layer and there is a more detailed formula. The 28/36 rule. Spend no more than 28% of your gross income on a mortgage payment and no more than 36% of your income on your total debt service. These used to be the ratios that banks would use, but in the real estate run up the rules became looser and I would suspect they are tightening back up again.

    The 28% of your income comes out to be ~$750. The 36% ratio for you is $960 and every debt payment has to fit in under that, mortgage, car payments, student loans, credit card minimums, everything. When figuring your prospective mortgage payment don't forget homeowners insurance and property taxes. Both of those can vary wildly by area. Live near a coast and the insurance can be very expensive. Live in a rust belt state and your taxes could be brutal. Personally I paid anywhere from $500 per year to $2000 per year on insurance and anywhere from 0.6% of the homes value to 4.0% (you aren't reading that wrong, a FULL 4%) of the home's value on real estate taxes.

    Using a $85,000 mortgage and assuming awesome credit (giving you a 6% fixed rate for 30 years), the principal and interest are $510 per month. Add in $75 per month for insurance and $100 per month in taxes (guessed at 1.5% per year) and you are up to $685 per month. If you put down less than 20% you are going to pay PMI also which can also vary wildly. That fits in pretty well with your salary, so you might be able to go a touch higher, depending.

    You could pretend you had that as a mortgage payment and start saving the difference between your rent and this payment to see how easily you can afford it.

    good luck!

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  • gtatix
    Lv 5
    1 decade ago

    If you live in Tokyo, you could possibly afford a cubicle to sleep in. If you live in Addis Ababa Ethiopa you could likely own a whole whack of land and several goats as well as all the food and water you can consume and a lovely tent. It would help to know where the hell you are looking.

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  • Anonymous
    1 decade ago

    base on the financial article i read. It said

    Car price = total 3 yr annual income

    House price = total 5 yr annual income

    if you are 32k per , then total 5 yrs annual income is 160k.

    Then u shld get a house around 160k.

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  • 1 decade ago

    Ball park figure about $70-$80,000.

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  • 1 decade ago

    You could afford about $70,000.

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  • bijjee
    Lv 6
    1 decade ago

    in complete Q. where--which city--country

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