Do you feel it’s time to take that leap of faith to find a home you can call yours after several years of renting different apartments? Although the desire to have your home is valid, you’d have to consider certain things if you earn $70,000 per year.
Albeit above the median household income of $67,521, is a yearly salary of $70,000 enough to get the home of your dreams? Another thing you’d have to ask yourself is if your finances are enough to enable you to buy a house at the moment.
Even though online affordability calculators and this link “https://homesbyardor.com/i-make-70000-a-year-how-much-house-can-i-afford/” are essential to getting your journey started without hassles, know that there are tons of factors to consider before spending money on a house.
So, if you’ve been inserting the “I make 70,000 a year — how much house can I afford” query into the Google search bar, this article will give you a detailed insight on factors to consider before buying a home.
With an understanding of these areas, you’d be able to complete that home purchase without breaking a sweat.
Let’s get started!
Just Before You Take the Leap: Vital Considerations to Make
Although several “I make 70,000 a year — how much house can I afford” search might provide you with many favorable results, not considering these crucial factors might hinder your home purchase goals.
Your Mortgage and What Goes Into It
Before you think of a home’s listing price as cheap, it’s essential to consider if you’ll be able to take a loan and make monthly repayments without defaulting.
Let’s say you made a query along the lines of — what mortgage can I afford on 70k — and you’ve sought out a suitable medium. In that case, you must factor in several variables that’ll affect your mortgage payments besides the mortgage itself.
Notable mentions are:
Taxes and Insurance
Besides the home’s valuation, you must pay a property tax on the house. The value of this tax depends on the location.
A report suggests that the average single-family home in the United States parts away with $3,719 yearly in property taxes.
For insurance, your lender will most likely require you to get a homeowner’s insurance in case anything goes wrong in the long run. According to a 2022 statistic, the average household spends $1,383 on homeowners insurance yearly for a $250,000 policy coverage.
To find insurance that matches your finances, you may want to speak to an insurance professional for viable policies.
There are over 370,000 homeowner associations (HOAs) in the USA, representing 40 million homes. HOAs make sure that properties within their jurisdiction follow a set of rules and regulations.
If you buy a house in an HOA community, you’ll have to pay monthly fees for maintaining amenities like the swimming pool, basketball court, etcetera.
HOA fees may hover around $100 to $1000, depending on the available amenities. Therefore, before buying a home, check if you’ll need to pay HOA charges. If you do, factor this expense into your monthly payments.
Private Mortgage Insurance (PMI)
Private mortgage insurance is the best route if you can’t afford a 20 percent down payment. PMI costs around 0.5 percent to 2.5 percent of your loan yearly. If you put down less on your home, your PMI increases.
Nonetheless, you won’t need to settle your PMI before your mortgage. To delete this expense altogether, refinance it once you reach 20 percent equity.
Besides mortgage payments, lenders always look into your debt. Debt can range from student loans, credit card debt, and car loans. Therefore, before hunting for a home, we advise clearing up your debts. If you don’t, your mortgage application might be denied.
If you’re making 70k a year, don’t spend more than 40 percent of your monthly salary when settling debt. That way, you won’t be confined to a specific budget.
In the real estate market, location is a driving factor for investments. Every neighborhood has a different metric in terms of the price range, taxes, and HOA fees.
So, just before purchasing a house, research the community it’s located in and weigh your finances accordingly. Conducting due diligence is essential as it saves you from “gray areas” you might not have known about earlier.
Depending on how long you’d like to make monthly payments, you can opt for a 15 or 30-year loan. As soon as you make a selection, your lender will create a custom agreement. However, note that short-term loans will consistently deliver the best interest rates.
It’ll be better to use a part of your monthly income to pay off the actual mortgage or interest when paying a mortgage. This route is more convenient than taking your entire savings to settle a mortgage.
How Much Should You Spend on Your Mortgage?
While the “how much house can I afford on 70k” query is essential, you must know how much you’ll spend on your mortgage. The consideration is vital as mortgages and their terms can make or mar your home purchase endeavor.
So, how much should you spend?
We advise spending one-third of your monthly income. If you’re on a 70k yearly income, your monthly salary should be around $5,800.
Thus, spending one-third of your $5,800 monthly salary should see you part with $1,933 in mortgage payments each month. Also consider miscellaneous expenses on your home.
However, if you’re debt-free, you can stretch payments to 40 percent of your monthly salary. This commitment will see you spending $2,320 every month.
The journey of a mile begins with a step. If you’ve had any questions about “I make 70000 a year — how much house can I afford,” we’ve examined a list of factors to consider before taking the plunge.
However, before visiting open houses with your estate agent, ensure your finances are in order. Also, don’t go overboard by choosing luxury homes. That way, you can select a house, apply for a mortgage, and make prompt payments without hassles.