How Much House Can I REALLY Afford?

Over 50% of Americans are stuck in the paycheck to paycheck lifestyle and many have no idea they are even in it. If you ask them what is the biggest contributor to this lifestyle, barely any of them will ever think that their home is the culprit.

The median wage per hour in the us as of 2019 was 19.33 that’s roughly 3 300 a month which comes out to about 40 000 a year let’s assume that over the last couple years it’s increased by eight percent so we’re looking at thirty six hundred dollars a month and forty three thousand two hundred dollars per year the median home price in the us right now is three

Hundred and seventy five thousand dollars if you were to get a thirty year loan at three point five percent interest with twenty percent down your payment would be one thousand eight hundred and fifty dollars per month that’s after taxes and insurance can you guys spot the problem here after taxes and all the other deductions are taken out of your paycheck you’re

Taking home maybe twenty nine hundred dollars that leaves you with only a thousand fifty dollars to spend after your mortgage is paid a thousand fifty that’s it let’s factor in a 400 payment for a used car and you’re left with only 650 dollars take away 250 from sewer and utility and you’re left with only 400 bucks oh yeah and let’s not forget car insurance health

Insurance cell phone oh yeah and food we all gotta eat if you want me to keep going it looks to me like we’re in a bit of a tight spot can you see the problem now what’s going on guys my name is mark benecke and today we’re going to be discussing how much home you can really afford like really afford america is being kept in this endless loop of biting off way more

Than we can chew we have so much that’s pushed at us that just keeps us in this perpetual cycle i’m sure you’ve all heard of living paycheck to paycheck well many of us that are actually in this situation aren’t even fully aware of it i own a subprime car dealership and i have seen this firsthand and i can tell you it’s disheartening the absolute worst part about

It is that most people have no idea how to even start to pull themselves out of it since this is all about real estate i’m sure you could figure out what i’m going to say that’s right you’re housing there’s tons of different options that you could take if you’re already in a tough spot with your housing however that’s a topic for a completely different video make

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Sure to keep an eye out for it for the sake of this video we’re going to be figuring out how much you should be paying per month in order to keep yourself in a good financial position and in order to do so we first have to figure out how lenders actually determine how much you can afford so you’ve decided that you’re gonna purchase a home great the first thing

That you do is you go out and you find yourself a realtor what do they tell you go get pre-approved go on now get out of here it’s a good call on their part because at the end of the day you want to make sure that if you’re going to be putting in an offer it’s not just going to be falling on deaf ears you want to make sure that your offer is strong so they make a

Suggestion of a few different lenders and you submit your paperwork with one fast forward and they’re both calling you up telling you congratulations you got approved for 375 000 and don’t you come back without a pre-approval so at this moment you figure hell yeah i’m a high roller now let’s go find this mansion stop i can promise you that if you do this you’re

Gonna be stuck in this paycheck to paycheck lifestyle until you either get rid of this thing or completely pay it off 30 years is a very long time it’s been 84 years see what happens here is that a lender is actually putting you at the highest possible threshold that they feel you’d be able to pay back it’s sad to say but not everybody out there is actually out

For your best interest they’re there to make the most possible money that they can they do not give a damn about your lifestyle or your future plans you want to know who does you you’re the only one who truly cares about that in other words you’re the only person that can determine your own future so if you let them do it you’re living for their future typically

Lenders will look at your dti and determine that your home payment should be no more than 50 of that debt to income ratio how much your total income is minus all of your expenses this might not be a problem if they didn’t base it all on your gross income the total income without deductions or taxes this means that they’re basing your entire approval on a number

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That you don’t ever see ever so in reality you’re actually looking at about 60 of your true dti ever they do a really great job of verifying all of your information to make sure that you fit in this 50 range however they don’t do such a great job of finding out whether you actually have dreams past a home this whole idea that the american dream ends with a family

And a nice car inside the nice neighborhood with a beautiful home and the picket fence is complete maybe for some it might start there but i can promise you it doesn’t end there the american dream is different for everybody but in my eyes there’s one common factor that doesn’t change for anyone it revolves around us having the ability to strive towards a better

Future it’s in our nature to reach for the stars once you understand this you can push back against their wants and focus on what really matters to you you base back up bolster we’re not going to be letting them determine how much you can afford you’re going to be the one that determines how much home you can really afford but how well we’re going to start with

Your net income this is the amount that you bring home after you’ve paid taxes in all other deductions this is the money that you really see every month now once you have that number you’re going to multiply it by 0.35 why because we’re trying to keep your true debt to income at 35 max this is a number that you can really afford to pay comfortably for your housing

Each month doesn’t seem like much does it i know but i can also promise you that this will flip in your favor as time goes on other people are going to be stuck to that property for 30 years while you’re over here working towards a debt-free future of your own making keep in mind when i say 35 max i mean max that means that your taxes and insurance should be included

In this as well i know i probably just shatter your illusions even more and that’s a good thing because now that the illusion is gone you can focus on what really matters to you so let’s just pretend that you make thirty six hundred dollars a month after taxes and deductions you’re looking at about twenty nine hundred dollars so multiply that by point three five

And you’re looking at one thousand fifteen so let’s say that you qualify for three point five percent interest and you’re putting twenty percent down that means you’d be looking at a home of two hundred and five thousand dollars as you increase the down payment so does the amount of home that you can actually look at one last note here this is based strictly off of

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Just your own income so let’s say that you have a partner that’s gonna be cosigning with you and they make the exact same amount that you do that means that your home just doubled if you wanted to if there’s anything that you took from this video make sure that it’s this don’t buy more than what you need this is your life and you should be living it the way that

You want if you leave yourself at the mercy of your lenders then that just means that you’re living for their wants now there are plenty of different viewpoints on how much you should actually allocate towards your housing payment some suggest a lot higher others quite a bit lower at the end of the day i suggest that you find a number that’s going to be not only

Comfortable for you but it’s going to leave you with plenty to be able to save and invest and also allow you to live in the area of town that you want to live in i really hope this helps you determine how much home you can really afford but in order to make it a little bit easier for you i’ll leave a mortgage calculator in the description below just to help make

Crunching numbers a little bit easier now as always make sure to find a realtor that really understands this and also follows the same vision that you do now if you’re in the fresno area and need help finding a home my contact information is in the description below and if you’re wondering if 2022 is going to be a good year to purchase a home make sure to check

Out my video on it if i’ve left you with any questions at all please make sure to drop them in the comment section below so that we can get the conversation started and so it gives me a good idea of the types of videos that you’d like for me to put out well that’s all i got for you on this one so thanks for watching and we will see you in our next one okay bye

Transcribed from video
How Much House Can I REALLY Afford? By Mark Beneke