How expensive of a house can an 80k salary buy?
- Wanda BagramLv 69 years agoFavorite Answer
The standard debt-to-income ratios are the housing expense, or front-end, ratio; and the total debt-to-income, or back-end, ratio. Use the link in the end after you have read everything so to know where you stand. It’s a great tool.
On a salary of $80K NET (Pre-tax).
Front-end ratio: Maximum housing expense ratio = annual salary x 0.28 / 12 (months)
(80,000.00 X 0.28 / 12 months) = $1,867.00
Back-end ratio: Maximum allowable debt-to-income ratio = annual salary x 0.36 / 12 (months)
(80,000.00 X 0.36 / 12 months) = $2,400.00
Here's a look at typical debt ratio requirements by loan type:
• Conventional loans:
Housing costs: 26 percent to 28 percent of monthly gross income.
Housing plus debt costs: 33 percent to 36 percent of monthly gross income.
• FHA loans:
Housing costs: 29 percent of monthly gross income.
Housing plus debt costs: 41 percent of monthly gross income.
Taxes and insurance
In addition, lenders include the cost of taxes and insurance when calculating how much house you can afford:
• Real estate taxes:
• Homeowners insurance:
So as in theory let’s say you make exactly $80K and no other source of income. You have a $350 car payment, $200 credit card bills a month, $100 monthly Car insurance payment and you are going to put $5K down and you are getting a loan at 5% interest and you have good credit (670 score). You are getting a 30 year loan and your annual taxes will be about $2.5K (depends where you buy it on state/county/other taxes and the more valuable the home the higher the taxes) and annual insurance costs will be about $500 (Depends on State and County minimum requirements/ mandatory coverage). And there will be NO HOA or Community fees. (All factors above can change everything)!
This results into:
Available Mortgage Limits:
Available mortgage payment ($): $ 22400.00
Affordable home amount ($): $ 4177708.22Source(s): Life.
- RossLv 69 years ago
If you make 80K you probably have a decent job and a decent head on your shoulders. You should already know what you can afford regardless of what the bank tells you.
I rule of thumb sort of is 3Xs your annual salary but in you have to figure in your debt to income ratio, you credit, how stable you are, amount of money down, and probably some other factors.
- Go with the flowLv 79 years ago
Google: How Much Home Can I Afford.
Remember: They will tell you the max. The more house you buy, the more profit for the bank.
Good rule: Never spend more than 3 times your salary.
From Consumer Reports Money Magazine
Never spend more than 2 years of salary on a mortgage.
This is if you want a good quality of life, such as saving for retirement, vacations, kids college, etc
- Put 20% down to avoid that nasty PMI
- Steve DLv 79 years ago
All else being equal (total debt, credit score, etc), someone making $80k can be approved for a mortgage of about $240,000. Add in the down payment that the buyer has and that would be the maximum price point.
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- Anonymous9 years ago
Level of income is definitely a deciding factor for the purchase. However, the most critical factor is your debt / income ratio. Rule of thumb is your PITI should be equal to or less than 28% of your income. PITI plus all other financial obligations should be around 32%. Depending on your credit report, some lenders may push the debt / income ratio up to 50%. You need to find out what your ratio is. Check with few loan officers.
Good luck !
- 9 years ago
This is a broad question and has numerous answers.
A) How much money do you owe already?
B) How much are your current monthly expenses?
C) How much interest are you going to pay.
While the "general" rule of thumb is 3X's your salary, there are many factors that go into the decision making process.
- toshaLv 44 years ago
And the same question shows up again
- Anonymous4 years ago
It might be possible definitely