Have you been moving in and out a lot from different units because you are just renting spaces? Now, are you looking to buy a house for yourself or your family where you can finally settle down and call it “home”?
Many people dream of having a space where they and their families can finally relax without thinking about where to move next month.
If you ask yourself, “What mortgage can I afford on 70k annual salary?” Read on to learn more!
Buying a House with a $70k Salary
How much house can you afford on 70k? It is the million-dollar question of many people wishing to acquire a home as a place to live or an investment. With that salary, the straightforward answer is a house worth $267,000 and $345,000.
This value is based on an assumption of choosing the option of a 4% interest rate for 30 years in Florida with an annual homeowners insurance premium of $600 and an annual property tax rate of 0.97%.
However, you should note that you may be able to afford a much more expensive house or a higher loan than regular borrowers depending on your credit score and down payment.
Maximum House Payment with $70k
Indeed, we have our budgeting techniques and style to fit our needs and wants.
Some have multiple bank accounts to effectively segregate expenses, while others separate an exact percentage of income every month to avoid having problems with payment.
Many finance experts recommend an allotment of 25 to 33 percent of your gross monthly income on your housing. If you are wondering why this is, let’s break down an assumption for you.
Workers with 70k salary mortgage payment monthly will be around $5,800, including taxes. Following the ¼ rule, you should spend 25% of your monthly income on housing which will result in $1,450.
The ⅓ rule, on the other hand, will give you a monthly expense of less than $2,000 per month, while those who may want to spend 40% of their income can pay for a $2,300 mortgage payment monthly.
This one varies from one person to another and his situation. A range from 25 to 33 percent only means having at least enough budget to pay for other expenses like food and groceries, utility bills, recreation, and other commodities.
Of course, this monthly payment is also part of the giant puzzle as other factors also come into play when choosing an option and purchasing a house.
Determining How Much House You Can Afford
How much house can you afford on 70k? If you are looking for an excellent tool to help you with getting a ballpark estimate of your possible housing expenses, it is good to use free mortgage calculators online. Most of them are very realistic and reliable.
But should you wish for a more realistic estimate, it is best to consult a mortgage lender. This way, you will also be able to check your purchasing power.
Checking your credit score will also help you assess your situation and give you a good head start before applying for any loan. Researching the average mortgage rates based on your credit scores makes you more prepared.
If you are also keen on preparing for a possible mortgage loan, visit here to check houses you can afford if you make $70,000 a year.
Considering your Monthly Mortgage Payment
So, can I buy a house making 70k a year? Yes! As future homeowners, checking all future costs is crucial even at the planning stage.
Mortgage payment has four (4) different components: interest, taxes, principal, and insurance.
The principal is the amount of money itself, while interest is the cost added when borrowing funds. Every month when we pay, a certain percentage of our payment goes to paying the interest while another portion goes to the interest.
Taxes, on the other hand, are what you pay annually based on your home value. Mortgage lenders add these taxes in small amounts on your monthly payment.
Insurance, as the third one, protects your property from any acknowledged damage like fire, theft, and natural disasters. Having insurance not just helps you, as the property owner, but also lenders, should you default on your loan.
The last on this list is the Homeowner’s Association dues, also known as HOA, which covers maintenance, landscaping, trash removal, initiatives within your community, centers, etc., centered around improving your experiences.
Factors Affecting Home Affordability
Aside from your salary, your price range may also change depending on other things like loan terms and down payment. So for the question, can I afford a house making 70000 a year? The answer is that it is possible.
Giving a more significant down payment helps you in the long run as it reduces the amount you have to pay every month.
If you give an upfront payment over half of your yearly income, your home buying budget will be increased, or your monthly mortgage payment will be more affordable.
Take note here that when budgeting for a possible down payment, do not forget to include closing costs typically ranging between 2 to 5 percent of the loan amount.
Credit Score and Interest Rate
Having a higher credit score means a lower mortgage rate. It means that you are more likely to repay what you borrowed. Lenders favor this and may make the whole process a lot easier.
Interest rates, on the other hand, affect your total loan cost. It also dictates how much you will pay monthly as part of your mortgage payment.
A higher interest rate is unfavorable for homeowners, so pick the lowest possible deal!
Your current debt load helps lenders evaluate your application since they consider how much of your monthly income will be spent on other expenses.
For example, even if you earn $70k a year with a high credit score but have a car payment, student loans, and other bank loans, you might only qualify for a smaller loan compared to someone with no consumer debt but the same salary.
To give you an idea, having a total debt that does not exceed 36 to 43 percent of your gross annual income is ideal.
If you are still wondering, “can I buy a house making 70k a year?” It is suggested that you start improving your portfolio before applying to receive approval from lenders immediately.
Aside from knowing how much you earn, mortgage lenders also check where you make this income, including how stable it is. Ideally, a two-year job history can help prove your regular and suitable employment, but this is not always the case.
Many mortgage lenders do not require a two-year job history, which benefits first-time home buyers who just graduated or are only starting their careers.
It is also helpful to self-employed ones who do not have official pay stubs and W2 forms.
Income predictability helps your application as it aids lenders in checking your income stability. You should also note that commissions are rarely approved as the monthly income is not guaranteed.
Choosing loan terms depends on the buyer; if you want to buy a more expensive house, the longer loan term is recommended. This way, you are still paying an affordable monthly payment for a longer time.
Location for your Property
Like a business, we want our property to be situated where value is expected to rise in the coming years. It should also be where you can afford the current value and near schools, hospitals, parks, malls, etc.
It is good to remember that every neighborhood offers different values and deals. The price range is apparent when you have already done ocular visits and consultations with mortgage lenders and agents.
Every state and city has different property taxes, too! So it is essential to research and consult professionals as much as possible. Aside from these, the location also dictates whether you will need any additional home insurance.
So, can I buy a house making 70k a year? Definitely! Your income is not the only factor when purchasing a home, although it plays a massive role in your application.
You should also consider your credit score, employment situation, debt-to-income ratio, savings, and possible down payment.
Your price range is also different from others, so never compare your expenses and possible monthly payment to them even if you have the same annual salary and credit score.
Before meeting your realtors or agents, be sure that you have already done your research and that you have already exhausted all possible and available resources to buy a house is not a minor financial decision; it comes with risks.
Maximize your buying power on whatever salary you have, and if you are inclined to know more about this, visit us at Homes By Ardor or call us now!