FINANCE- HOME BUYING SERIES PART 4- What can you afford?

Are you thinking a buying a house and don’t know where to start? Not sure what price you can afford?

Hey guys it’s hannah and i’m back with your next house scientic so we have talked about figuring out whether you want to make the decision to start looking at buying a house or not whether your decision to buy a house is based off of more of a need or more of a want and why you’re really looking to buy a house and if it’s actually the smartest move to do that so

Let’s assume that you’ve gone through all those steps and you have determined that you definitely are ready to start the home buying process and that your reason is a legitimate reason and that is definitely a good financial move for you so with that assumption we are going to start talking about things that you can do to help prepare yourself for this process and

The very first thing i would say that you should do is start to figure out what your budget needs to be because that’s going to determine the size of house that you can purchase that’s going to determine the location that you can purchase it it’s going to determine a lot of things the financial aspect of buying the house is the most important piece it’s not finding

Your dream house like i mentioned before because if you can’t afford your dream house there’s no point in purchasing it so let’s talk about how to start figuring out what you can afford and not so these are going to be really rough estimates and may not apply to you so i’m going to try to give a couple examples so maybe you can fit under one of these categories

But really you’re going to have to dig into deep into your financial picture and your bills and your income to really figure out a true picture and i might delve into this further in a next video i’m thinking about giving the examples when i purchased my first house and going through those details but for now like i said let’s look at some broad cases so i live

In tennessee so i like to always use stats from tennessee when i’m determining general cases just because i know a lot of my audience currently lives in tennessee so i thought it was interesting the average or the mean income for a household in tennessee is actually fifty two thousand three hundred seventy five dollars so that’s for a household so that can be one

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Person or that can be a spouse you know so it’s an entire household it’s fifty two thousand three hundred and seventy five dollars i would say that that usually roughly equates to a spouse two spouses earning income because i’m pretty sure that average personal income is a little bit under that so let’s assume that most households have to earning individuals and

It is that average of about fifty two thousand dollars so based off of that i wanted you go over three scenarios one that under that amount one that’s about that amount and one that is over that amount and based off of those income levels figure out what an approximate maximum house value that those individuals should purchase so the first example i wanted to

Go over is thirty thousand dollars so obviously that is under the median income level for an average household in tennessee so with that in mind that should be able to be used by more individuals so obviously if you make more than thirty thousand dollars you might be in a different category but obviously if then mean it’s fifty two thousand there’s going to be

Some people in this $30,000 bracket so based off of a thirty thousand dollar gross income you typically make about twenty one hundred dollars take-home pay twenty one thousand fifty dollars give or take depending on how much you i’ve taken out for taxes and health insurance and all of those kind of things but i would say on average you make about 2,000 to $2,200

Take-home pay with that in mind you want to start to figure out what house you can afford and banks and other instances or other places that loan you money typically we’ll look at your debt to income ratio and a lot of factors we’re not going to go into all of that in this video but i would like to mention that a lot of times they want your monthly payment amount

For your mortgage and your taxes and your insurance so the whole cost of your house to be under 30 percent of your gross take or your gross pay so that $30,000 so on a monthly basis for a thirty thousand dollar income that would be seven hundred and fifty dollars seven hundred fifty dollars for all of your housing costs that is what they like you to stay under and

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Really if a bank wants you to standar that then it’s probably a good idea for you to set that threshold for yourself i personally don’t even like to get anywhere close to the thirty percent but again when we’re just thinking about general numbers right now it’s a good starting point so thirty thousand dollars is seven hundred and fifty dollars a month for all your

Housing costs based off of that the average house price you could afford or the maximum house price you would want to afford at that would be a hundred and twelve thousand dollar house that is factoring in the amount for the taxes and the insurance and your mortgage payment for a hundred and twelve thousand dollar house would cost you about seven hundred and fifty

Dollars for all of those things and that’s based off of a five percent interest rate i did five percent because that’s significantly higher than what the interest rate is right now i always like to go higher when i’m estimating so again this is a maximum and this is based off of also a 10% down payment a lot of banks like you to put closer to 20% other banks may

Only make you put 5% or maybe even none down but on this example this is with a 10% down payment so $11,000 on an 11 $116,000 house which would be about $750 a month that is a safe bet that you would stay under a reasonable threshold if you bought a house under that at that income level then for $50,000 let’s look at that so $50,000 you our take-home pay is about

$3500 again with skin vary a little bit but broad numbers $3,500 so based off of the same calculations that is going to be a monthly payment of about $1,200 that you would want to stay under for your housing $1,250 is what i based it off of so again based off of what that 30% of your gross pay is the 12,500 that equates to a house value of $200,000 with taxes and

Insurance factored it if you make $75,000 then that means you are probably your take-home pay is probably about fifty six hundred dollars based off of that you probably want to stay under that 30% threshold which is eighteen thousand seventy-five dollars that monthly cost equates to a house rally of about there were eight hundred and five thousand dollars with

That ten percent down payment which would be about thirty thousand dollars five hundred and that five percent interest rate so again these are very rough estimates and don’t say that just because you make $50,000 that you can afford a $200,000 house what i’m saying is that you probably shouldn’t purchase a house above $200,000 if you make $50,000 currently unless

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You’re going to put more than 10% down i would love to talk to you about your specific numbers your specific income level your debt all those kind of things to figure out a more specific dollar amount that you can afford but this is a great starting point to figure out can i even afford a house right now right now the average house price in not cil’s about a hundred

And seventy seven thousand dollars so based off of that anybody who makes on over fifty thousand dollars in knoxville can probably afford a house in knoxville somebody in that thirty thousand dollar range probably cannot afford an average house in knoxville they will probably have to go with a lower than average value house to be able to afford one because barring

That one hundred and sixteen thousand dollar range not one hundred and seventy five thousand dollar house so use this calculate where you are if you are nowhere close to these income brackets again shoot me a message i’d be glad to calculate this rough estimate or go in more depth with you so stay tuned for my next video i’m pretty sure i’m going to be going into

The nitty gritties of my income level when i purchased my first house i will give you a small hint but i was fresh out of college i never had a full-time job i really didn’t have hardly any job until i graduated so that’s just a little sneak peek into what where i was financially when i purchased my first house so it’s definitely doable at a low you can bracket

But i will go over all the details and the exact cost it was for everything from day one of my loan so stay to ask me any questions post them on the facebook group post them in the comments send me a private message i don’t care how it is just if you have any questions about figuring out what you can afford just let me know and don’t forget to subscribe and share

In the facebook group with all your friends have a great day

Transcribed from video
FINANCE- HOME BUYING SERIES PART 4- What can you afford? By FoodFinanceFitness