How much can you purchase with 0K income using a FHA Loan

If you make $50K year, how much home can you purchase using an FHA loan? Are you a first time home buyer wondering how much $50K year salary will get you with a home purchase? How does a lender determine how much you can afford to buy?

How much home can you afford to purchase with a 50 000 per year salary with the least amount of down payment out of your pocket that’s what we’re going to dive into in today’s video now i know a lot of you are watching this from high cost states like california where i’m located going jeb at 50 000 per year i can’t afford to purchase anything because house prices

Have gone bananas i get it but understand you can use the same calculations in this video with your income to determine exactly how much you can afford to purchase in your market but hang tight because i’m going to do a series of these videos with higher salaries and higher loan amounts so that you know exactly what you can afford to purchase in your market but

The first thing i want to tell you is this video is for educational purposes if you’re looking to purchase a home you need to get pre-qualified with a lender do not use this video as the end-all don’t use your own calculations and then start to search for properties it won’t end well make sure you talk to a lender have them analyze your income your tax returns

Your w-2s along with the debts on your credit report to determine exactly how much you can afford to purchase once you have that amount then go looking for homes now if you don’t have a lender do me a favor click the link in the description below i’ll set you up with a lender who does business the same way i do somebody i know like and trust and can guide you

In the right direction so the first thing that’s going to happen when you start talking to a lender is they’re going to ask you for a copy of your tax returns your w-2s they want to see and analyze how much income you make and for this video we set a 50 000 per year salary so what they’re going to do is they’re going to take that and they’re going to divide it

By 12. why are they doing that they’re trying to figure out your gross monthly income now i said gross that is without taxes so they’re going to use your income without taxes in order to determine how much home you can afford so that 50 000 per year breaks down to 4 166 per month now that they have your income they want to see your debt so what they’re going

To do is they’re going to pull the debts that report on your credit report these are things like your car payments your credit cards maybe your student loans maybe you have an installment loan or some other type of loan with furniture maybe you pay child support or alimony in those cases they’re going to calculate those as well that’s why you need a lender to

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Analyze this information but for purposes of this video we’re just going to assume that you have three monthly debts we’re going to assume that you have a car payment at 300 per month we’re going to assume that you have a credit card where you pay 50 dollars per month not a 50 balance but that you pay 50 per month on that balance and we’re also going to assume

That you have student loans and the student loans we’re going to assume that you have a hundred dollar ibr payment so that all you’re paying per month is 100 on those student loans so 450 dollars a month now for purposes of this video we did an fha loan one because it allows a minimal down payment and two it allows the highest debt to income ratio with regards

To qualifying they allow you to use more of your monthly income to to qualify for a loan when using an fha loan and we’re going to max it out and say 57 so we take that 3 716 dollars we multiply it by 57 and we get a max qualified payment of 1924.62 now here’s where it gets a little bit tricky because you have to work backwards to figure out what your payment

Would be at per month now you might be watching this video and go jeb i make 50 000 per year but i can’t afford a 2 118 payment per month completely understand that and that’s why it’s important for you to set a budget prior to ever talking to a lender make sure you go through that process because a lender is going to qualify you for the max amount that you can

Afford to purchase unless you tell them otherwise now if you go in and you tell them hey the max i want to pay per month is 17.50 they can work backwards and tell you how much home you can purchase from there but if you go in without telling them a max they’re going to say hey this is how much home you can purchase based off your income and your debt and in this

Case it would be 1 924 and now let’s figure out how much home you can actually afford to purchase based off that max qualifying payment of 1924 because i have experience in lending i’m no longer a lender i’m a real estate professional now i was over i was a lender for over 10 years understand the business very very well but you know i i’m working backwards in

Computing these numbers so what i did was i did a couple of calculations and i started with a purchase price of 350 000. so 350 000 the first thing we have to do is determine how much you’re actually financing so at 350 000 using an fha loan which requires a three and a half percent down payment you’re actually going to have an initial loan amount before the

Upfront mortgage insurance premium of 337 thousand seven hundred and fifty dollars now once we have that amount we multiply it times 1.75 percent which is the upfront mortgage insurance premium amount for an fha loan and that comes to 5910. we take that and we add it to that 337 750 base loan amount to get us an actual financed amount of 343 660 now you’re

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Probably a little confused with that why are you putting three and a half percent down and then adding 1.75 to it it’s because fha requires an upfront mortgage insurance premium and so you have to add that back onto the the the loan amount after you do your down payment to figure out exactly how much loan you’re going to be financing per month so now that we

Have that 343 660 amount we have to figure out where the interest rates are today now i spoke to my lender here locally he gave me the interest rates today based on an fha loan at two and a quarter percent so what we have to do now is we have to determine how much your monthly payment is and we have to take that monthly payment we have to factor in your property

Taxes we have to factor in your homeowners insurance we also have to factor in your monthly mortgage insurance because you’re using fha there’s also a monthly mortgage insurance in addition to that upfront mortgage insurance that you paid so we have to use all of that and calculate our payment to figure out exactly how much monthly payment that is to see if it

Fits within our budget that we allotted at the beginning so we have a financed amount of forty 343 thousand six hundred sixty dollars we multiply that times two and a quarter percent we amortize it over thirty years and that gives us a payment of one thousand three hundred and nineteen dollars per month now for property taxes what i did was i used our local

Property taxes at somewhere around 1.1 percent now understand depending on where you are in the country if you’re in a state like texas being two percent your property taxes are going to be significantly higher than the amount that i’m that i’m using here and that’s why you can’t use these calculations exactly to determine your situation but for this situation

At 1.1 percent we multiply that times the 350 000 purchase price that gives us a tax amount of 320 and 83 cents per month then we have to factor in our mortgage insurance now mortgage insurance is .85 of the amount finance so we take that thousand six 343 sixty dollars we multiply it times point eight five percent and divide that by twelve and that gives us a

Monthly mortgage insurance of two hundred and forty three dollars and forty two cents now we still haven’t taken into account our insurance how much insurance do we need on a property like this now depending on where you’re located if you’re in an area that has hurricanes if you’re in an area that has a lot of natural disasters this amount might be considerably

More than the amount that i’m going to use here but i’m going to say that you your your insurance is going to be around 600 per year which is going to be 50 per month so all of that added in together your mortgage at 1 319 plus your property taxes at three hundred and twenty dollars and eighty three cents pmi two forty three forty two and your insurance at fifty

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Dollars per month gives you a total monthly payment of 1930 so that fits within that budget of 1924.62 that means at a 50 000 salary based on the debts that i had there you know using the taxes use the estimates that i had that you could actually qualify to purchase a 350 000 home using an fha loan but at the beginning of the video i mentioned why it may not

Be smart to purchase a home using an fha loan if you can actually qualify based on the information that i just provided and that’s because we did it at a 57 percent debt to income ratio based off your gross monthly income so that was your gross monthly income without any taxes taken into consideration without any of your other expenses taken into consideration

We didn’t factor in how much you spend on gas how much you spend at the grocery store how much you spend on babysitting on going out to dinner with your friends any of that information and so 57 of your gross monthly income is a lot of money to spend on a mortgage payment without factoring in anything else so make sure if you’re looking to purchase a home you’re

Going through the process setting that budget to determine exactly how much home you can afford before you start that process but if you want to know exactly how much you can afford talk to a lender have them analyze the numbers have them run the numbers for you and they can you know give you you know a full pre-approval and tell you exactly how much you can

Afford based off your scenario and not using my calculation and again if you need somebody to do that hit that link in the description below and that will put you in touch with someone who can guide you in the right direction and if you’re looking to purchase a home and you’re wondering about fha qualifications how it works what else do they need for for fha

What do they need for credit score you know what do they need for for monthly income all of that information do me a favor hit this video here this is the fha guidelines for 2021 it goes over all the fha requirements that you might need to know so check out this video and that will give you a better idea of where things stand but if you have questions for me do

Me a favor comment below or reach out to me directly but for now i appreciate you taking the time to watch i appreciate the support hope to see you again soon have a great day bye

Transcribed from video
How much can you purchase with $50K income using a FHA Loan By Jeb Smith