41K salary, how much house can I afford?

[BayRaider510]

There is a house on the market that I absolutely love for 202,000. Would I be crazy to try to get this house with my salary? I would put 5% down conventional loan and get one roomate, perhaps two. I would like to get a house before the houses go up more and in my area 190 is probably the cheapest you're gonna get. My take home pay is probably about 2200-2300 a month. I have no debt and only cell phone, car insurance, gas, and internet to worry about. And of course the utilities if I buy it. Right now I pay 775 for an apartment and always seem to have around 1100-1200 left over after all expenses. 

Let me know your opinions. I would love to buy a house for less but anything within 30 minutes of me is quite expensive.

[sports1965]

It's doable but you are pushing your limits.

I wouldn't do it.Not worth sleepless nights.

The loan is based on YOUR income not your possible future roommates

.

[skigirl916]

I've done a TON of calculating, and have found this calculator to be the best predictor of mortgage affordability: https://www.chase.com/mortgage/mortgage-resources/affordability-calculator  This is a good starting point for determining what you can reasonably afford.

Affordability is different from what you can get approved for though.

As for approvals, unfortunately, you can't include roommates as income in your application unless they're on the loan/mortgage, which I'm assuming they won't be.  So, you're limited to your $41K salary.  Lenders will look at your front and back end debt to income ratio to determine what you can afford.  Typically, lenders use a 39-43% as a total debt-to-income limit. Under this rule, your combined monthly debts would not be allowed to exceed 39-43%. (Your combined debts include your mortgage payment and all other recurring debts (credit cards, car payment, student loans, etc.)  Here's a debt-to-income calculator: http://www.bankrate.com/calculators/mortgages/ratio-debt-calculator.aspx (You need to put in the expected mortgage payment given the interest rates applicable to your credit score, along with all other payments you pay monthly).

Using the Chase affordability calculator, at your salary, I don't think it's wise to get a mortgage for more than $155K.  With your income, probably closer to $130K or lower.  

But, it looks like if you have NO DEBT beyond your mortgage, you'll just squeak by under 43%.

But again, what you can get approved for, and what's affordable, are often two different things.

YMMV, of course.

[BayRaider510]

Ok thanks guys, think ill pass. Instead ima wait for a different house to hit the market, probably 175-180k. This house will be USDA eligible though so the 0.4% MI will be quite affordable.

[justrock]

I'm in just about the same place as you financially and I got approved for a mortgage of $144000 with yearly property tax of $4300.  The tax cap put many homes out of reach for me, the monthly payments would be too high. I do have a 20,000 down payment though so I am purchasing a home for 159,900 wih taxes of $3300 a year.  The

moral is, save your down payment so u can get a better house.  If you have $1100 left over every month you will be there in 18 months if you put that money away.

also check on first time home buyers assistance in your area  you are probably within the income guidelines and it's free money you just have to be able to save some on your own. My area matched me 4 to 1 and I had to save $2000 over a period of 10 to 24 months (my choice how long I needed, I picked 12 months). That gave me 10 grand right off the bat, plus I got another 10 grand grant from my county and a $6000 gift from a family member for closing costs.  

[ShanetheMortgageMan]

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@BayRaider510 wrote:

Ok thanks guys, think ill pass. Instead ima wait for a different house to hit the market, probably 175-180k. This house will be USDA eligible though so the 0.4% MI will be quite affordable.

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It'll be .5% come Oct. 1st.

[BayRaider510]

Are you positive of this? That's disappointing.

[ShanetheMortgageMan]

100%.  USDA is already telling us to submit loans to them with the .5% amount being calculated.

[Pharoe33]

Would debts like auto and rental insurance be calculated into the monthly debts or are they strictly using debts that are found on your credit reports? If the lender is considering only debts on the credit report are they considering old debts that maybe charge offs and still reflect a balance or even inaccurate information? I apologize if I'm asking a repeated question, I just want to be clear as I'm trying to understand the process. Thanks.

[ShanetheMortgageMan]

Only insurance that is calculated into the debt to income ratio is the homeowners insurance on the property you'd be buying, so auto & rental insurance wouldn't impact anything.

Debts that appear on your credit report will be included.  Payments on charge-offs or collections wouldn't count though if you are using conventional financing.  USDA usually requires those to be paid in full.  FHA you can read the link in my signature on how collections & charge-offs are treated.