How Much House Should You Buy Based On Your Income

It’s always a question asked by first time home buyers (and some second time too): how much home can I afford? A huge part of the answer to that question is your income.

A better question might be, “How much house you SHOULD buy should be based on your income?” Not only because you need to make payments, but also because you need to save a down payment. Zero down payment mortgages are few and far between.

Experts recommend 20%

How Much House Should You Buy Based On Your Income... It's always a question asked by first time home buyers (and some second time too): how much home can I afford?Most experts recommend that home buyers put down no less than 20%.

This will give you the best chance to get the contract, get the mortgage and avoid mortgage insurance. This is problematic for many home buyers under the age of 35. They average about 8%, according to the National Association of Realtors.

Keep in mind that if you put a 10% down payment you’ll need a higher income level. This is because you’ll have to pay mortgage insurance with your mortgage payment. Higher income means no mortgage insurance, and it also means better means to save. But what if you don’t have a higher income?

It may mean moving to an area where you can afford it.

Denver area median salary may do it

If you crunch the numbers for the Denver area, your median salary may just be enough. If you’re wondering what median income means, it’s the middle of a set of numbers.

So, if a job has a salary range of $50,000 to $75,000, the median salary is $62,500. Back to the Denver numbers. Here’s how it works out. The median salary in Denver is $69,754. The median home price is $318,164. That means if you have the 20% down payment your income should be $44,071, and if you have only a 10% down payment you’ll need an income of $52,766.

Those numbers were found on Huffington Post

(https://www.huffingtonpost.com/entry/how-much-you-need-to-afford-a-home_us_591c84d1e4b094cdba507c94?utm_hp_ref=real-estate)

and it has other cities listed as well. Do your homework!

5 Tips For First Time Homebuyers

5 Tips For First Time HomebuyersYou’ve decided that it’s time to stop renting and jump into home ownership but there are a few things that you should do before making that leap. Some of these things need to be done well before you start traipsing through house after house.

The very first thing you should do is check your credit

Not just your credit score, but your credit reports. The “big 3”: Experian, TransUnion and Equifax, will give you a complete overview of your credit situation. If there are discrepancies, get them cleared up. This can take weeks or months. If your credit score is low, you may need months or even a year to raise it. Having a good credit score can make a huge difference in how much interest you pay on your mortgage, so it will be worth putting off looking at homes until you are ready and able to buy.

Next, save, save, save

Having a decent or better down payment can mean the difference between getting the house you want or not. 20% is a good figure to shoot for, if you can save more, it will give you a cushion in case you need to fix things in the home or pay any extra fees. Plus it helps raise that credit score too!

Get preapproved for your mortgage

Getting preapproved can and will give you a leg up over other people making offers on the same home as you are. A seller who knows that you can get financing and settle more quickly will favor you over another buyer who doesn’t. It will also mean that you stick to your budget. If you are preapproved for a mortgage that will be comfortable for you to pay each month you will be less likely to be talked into a home that is above your price range.

No large purchases until after settlement

Don’t shop for furniture, cars or make other big purchases until after you have settled on your home and the money has been paid out to all parties. If you make any large, expensive purchases, especially on credit, prior to settlement you may end up without a mortgage when you are ready to settle.

Lastly, find a reputable Realtor to help you find that new home!

Definitely pick one that loves working with first time homebuyers and who will answer all your questions! A great Realtor will help you to get through the whole process safely and find a great fir home!

It’s Harder For First Time Homebuyers If Using FHA or VA Financing

First time home buyers are often among those who use the services of FHA or VA to purchase their home. The Federal Housing Administration (FHA) provides low interest mortgage assistance to homebuyers. The Veterans Administration
provides low interest mortgage assistance to military veterans. Unfortunately, these finance options can rule out many homes that these buyers can afford to purchase.

Can be harder to purchase

It’s Harder For First Time Homebuyers If Using FHA or VA FinancingIt can be much harder to purchase your home if you use FHA or VA financing. Each program has certain conditions and requirements that can make getting an affordable home difficult.

For instance, in many states condos are not VA/FHA approved and only fee simple townhomes with a homeowners association or single family homes are. That means a higher cost from the start. Let’s look at each.

FHA home loans

FHA home loans have rather low limits as to what may be borrowed. That means that if the home you are looking at is more expensive, you need to come up with either more down payment money or find another way to finance it. This can be difficult if you don’t’ have much saved or have credit problems.

This leads to another issue: credit. You have to have some credit established to qualify for an FHA loan. It doesn’t have to be perfect, but there has to be some credit history. Another issue can be your monthly payment budget. Many first time home buyers don’t realize that their monthly mortgage payment will include things like homeowners insurance and real estate taxes. An FHA mortgage also includes a monthly fee for private mortgage insurance. You will be responsible to pay an upfront fee at closing, plus 0.45% to 1.55% annually depending on the terms of your loan.

VA loans

VA loans also require an upfront fee which can vary from 0.5% to 2.8% of the loan amount, depending on factors like your service background, down payment or whether it’s your first VA loan or not. VA loans also require private mortgage insurance if you are putting less than 20% down. Quite honestly, if you have 20% or more to put down a conventional mortgage may just be a better deal.

The VA places a cap on the amount of closing costs you may pay as a buyer. This means that any closing costs over that cap will most likely be rolled into the price of the home. How is this a problem? Well, it raises your monthly payment, and if the appraisal comes in below the sales price, you’ll have to come up with the difference between appraised value and sale price to complete the sale. VA loans take longer to close due to requirements for paperwork and inspection approvals.

Is It Better To Rent Or Buy in a Hot Real Estate Market Like Denver

The real estate market in Denver is hot and the question can come up, is it better to rent or buy in a hot real estate market? The answer depends on a lot of things and only you can answer it.

First time home buyers

Is It Better To Rent Or Buy in a Hot Real Estate Market Like DenverThe market in Denver can be really difficult right now for both buyers and renters. First time buyers have it tough because the homes normally available to first time home buyers are now higher priced and out of reach or are very hard to find, but they are also getting priced out of the rental market as well. So what can you do?

Weigh your options

In order to make a decision, weigh your options. Would it be better for you to continue to rent for awhile? If not, are you willing to find a property below your expectations that may need work? Sometimes that is a good idea if the ready to move in homes are out of your price range. Also look in up and coming neighborhoods. They may not be ideal… yet. Those that appear to be getting popular will mean your investment will give you the equity you need to move up later.

Be sure to save your pennies

Having a substantial down payment can help you get a home when people with smaller amounts saved find it harder to buy. Having more to put down can help you get that house too. You look like a better potential buyer to a seller entertaining multiple offers and it could give you an edge.

Rental potential properties

Look for a property that could have rental potential. Either through an income suite or later when you decide to move up. An income suite could provide you with the ability to purchase a higher priced home because the income will help with the mortgage.

Your best bet is to talk with a Realtor to help you figure out when the best time to buy for YOU might be.