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Figure out on your own how much of a payment you can afford, based upon your own actual and expected expenses. If you borrow the maximum amount the bank is willing to lend you, you are surely borrowing too much.
What I've seen is banks will generally loan you around 5x your income if you have no other debt and a good credit score like 720+. Meaning, if you have 20% down, no debt, and 44k a year income, you "can" probably purchase up to a 240-250k house.
Most of you who say the bank will only loan him 2.5x or 3x his income clearly have never talked to a lender in recent history. LOL.
He asked how much the bank would let him borrow, not for 15 different versions of the Dave Ramsey sales pitch, though.
Yes, that's what he asked, but I also thought he was looking for advice on how much he should borrow. It would be very foolish to borrow 5x your income, especially in an uncertain economy.
Yes, that's what he asked, but I also thought he was looking for advice on how much he should borrow. It would be very foolish to borrow 5x your income, especially in an uncertain economy.
Oh absolutely. Although I know of some people who are in situations where it's ok, such as under the table income, or perhaps they are buying a house with a husband/wife who lacks the credit to qualify for a mortgage (but has income), or someone who will almost certainly receive a spike in income yet wants to purchase now...maybe someone who wants to buy a property and rent out rooms and would want to max out their borrowing capacity, etc.
Recommend that you speak with a loan officer and getting pre-approved before you start looking for houses. Otherwise, you are wasting your time looking at places you potentially cannot afford. Key is to deduct 15-20% from the amount you are pre-approved for- otherwise you will be house poor!
Oh absolutely. Although I know of some people who are in situations where it's ok, such as under the table income, or perhaps they are buying a house with a husband/wife who lacks the credit to qualify for a mortgage (but has income), or someone who will almost certainly receive a spike in income yet wants to purchase now...maybe someone who wants to buy a property and rent out rooms and would want to max out their borrowing capacity, etc.
A lot depends on the phase of your life. A lot of younger people have bought more expensive houses than they could really afford at the time based on the expectation that their income would rise, and it often did. But it's a risk to do that. I did that in a way with my first house. I could afford it, but my budget would have been very tight if my income hadn't risen. Buying decisions will necessarily be a lot different when you're at or past the point in life where your income has peaked.
The problem today is that many people have suffered from reduced incomes due to unemployment, job loss and taking a job with a lower income than the one they lost. Many young people aren't seeing their incomes rise as in the past. It pays to be more careful than before, though I don't necessarily believe in being overly conservative. As I said, a lot depends on age.
Things might have changed though I've always found that lenders were willing to lend me much more than I thought I could afford. I encourage you not to do this....find a house you can live with that you can keep long term as nobody has any assurance they can sell quickly now. Remember if you take on a morgage you are signing up to make that payment for a long time, not just in the good times but years and years out. Many people are thinking they can afford something now because their income is going good but they don't expect some years down the road job loss or illness, or divorce.
What I've seen is banks will generally loan you around 5x your income if you have no other debt and a good credit score like 720+. Meaning, if you have 20% down, no debt, and 44k a year income, you "can" probably purchase up to a 240-250k house.
Most of you who say the bank will only loan him 2.5x or 3x his income clearly have never talked to a lender in recent history. LOL.
also i don't know how realistic it is to suggest a first time buyer put 20% down on a house. if everyone did that, it would drastically change the demand for housing. i read the other day that it would take the average american 14 years to save a 20% downpayment for the average house.
a friend of mine makes about $50k/year, and just bought a $180,000 house with a 100%-LTV USDA loan, got the seller to pay closing costs. He had about 5% that he could have put down, but chose not to. He has 2 roomates, and i so far he has been able to save more money on a monthly basis than when he was renting.
Last edited by le roi; 06-18-2011 at 07:59 AM..
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