How does income relate to how expensive a home you can afford?
what I mean is I was wondering what kind of yearly salary equates to a certain house range price. Like for example what is reasonable price range you could afford with a $50k salary? I am curious because I am a college student and want to know what kind of salary I would have to be earning for it to be realistic to buy a house in the 1-1.4 million range within the next 20 years. Which will buy me a shack in my dream location of on the beach in Newport beach lol.
So for example my parents dual income is about $120k a year and they bought their house for $675,000. Is that about average or are they stretching themselves thin or could they likely afford more? There is obviously a lot of other factors such as how many kids and other expenses but I was wondering if there is a good average for a household income relating to house price range. So how much do you think I would have to be pulling in a year with little other expenses other than standard living costs, to buy my house within the next 20 years? Obviously assuming I would get raises along the way but the average salary I mean..
And sooner would be good to know too, I just put 20 years cause I was trying to be as realistic as possible. Of course Id love to be able to afford it in 5-10 years
And I should add without being in ridiculous debt or taking out extreme loans. I dont want to be stressed out or in a mess, my question was catered to being able to afford a certain price range relatively comfortably
- MadManLv 71 decade agoFavorite Answer
Assuming no increase in house prices, you will need 20% down payment, or $280K, for your $1.40 million house. How quickly can you save that up? Then, you will need to borrow $1,120,000.
Now, assume a 30 year fixed rate mortgage. A 6% interest rate translates into $6,715 per month, 7% is $7,451 and 8% is $8,218 per month. Given that you will have to pay taxed, insurance etc., and that you have to pay other expenses, you will need to be earning between $330K and $400K per annum.
- 1 decade ago
Seems like your parents might be stretching themselves a bit, but its hard to say because there are so many factors that could be specific to their situation.
One rule of thumb i have heard (and seams pretty reasonable) is that you should be earning about 1/4 to 1/3 the price of the home as a yearly salary. So for a $1-1.4 million home, you would have to be earning between $250,000 and $450,000. I know this is a big range, but there are a lot of factors to consider.
Hopefully this doesn't discourage you!Source(s): My head.
- T.J.Lv 41 decade ago
MadMan did a good job of outlining the basic gist of it.
There is no defined average. Most people forget to include taxes, up keep, insurance, home owner assoc. dues, utilities. Then include on top of that... car and insurance, personal care costs, vacations, and hopefully a retirement savings plan.
And owning a house like that puts you in ridiculously HUGE debt and taking out an extreme loan.
- julzLv 51 decade ago
Heres a nice calculator for you.