buying a home and becoming independent

Submitted by Expired_Water t3_yiltyb in personalfinance

Hi all, recently there's been numerous events that happened in my life which makes me want to move out of my parents house. I'm 27 and looking to leave my parents house since neither of them are working anymore due to addiction/ mental illness. I pull in about 2,300 dollars a month, contribute rent which is 200 (privileged I know), my car is paid off and my credit card bills are paid off always as I don't like having debt. I currently have a amazon prime and premium Netflix account which is about 45 bucks a month which I will cancel moving out as the only ones who use them are my parents and I subscribed to them just to stay on their good side. My current job is amazing, benefits, 401k, bonuses and another opportunity to make more money by taking more classes and recertifying to another level....

Houses in my area are around 200k+. When my sister moved out with her husband and bought a home she said her realtor gave her a "first time home buyer" discount. I just wanna know if ill be able to make it in the long run while paying a mortgage, home insurance, taxes, etc... If I do move out and find a place with a 2 car garage ill be able to finally have a side hustle of working on cars to make a few bucks extra. Should I be searching for cheaper homes since I only make about 30k a year? I do have a great amount saved up over the years for a healthy down payment if needed. I also live as sustainably as possible to keep costs down and save anywhere I can. If there's anything I need to know about buying a house and being able to afford it it would be greatly appreciated!

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lilfunky1 t1_iuja461 wrote

> I pull in about 2,300 dollars a month

> Houses in my area are around 200k+.

you're not going to be able to buy a $200k house on a $36,000 income.

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Expired_Water OP t1_iujb4uo wrote

Why not? What would be a price to look for?

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InteriorAttack t1_iujbysb wrote

because that's not affordable on your income. standard advice is 3x your salary

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jgomez916 t1_iujizlj wrote

Here is the math to show you why you can not afford a $200k house on approx $30k salary.

Here is the math formula a lender uses to decide the max approval amount they say you can afford for a PITI mortgage payment ( Principal, Interest, taxes, insurance on property and insurance on loan ie the PMI)

Gross monthly income/2 =X

X-( the SUMof the minimum debt payments on all the liabilities you have is car notes, cred cards, student loans etc) = Y

Y being the maximum a lender says you can afford

Mind you Y is the maximum at 50% debt to income and it’s not advisable to buy at your max you should always stay close to under 36% Debt to income, let’s call this Z

Example of a person making $25/ hour full time with the following debts($350 car note, $50 in minimum credit card payments)

$25x2080 hours (full time work) = $52,000 gross per year or $4,330/ monthly gross

$4,3330x50% = $2,166 (X)

$2,166- $400(monthly debt payments)

Y=$1,766= maximum mortgage they can affordable at 50% debt to income ratio.

Maximum property amount they would qualify for would be $200k and that would be buying at top limit.

This would mean 3% down payment of $8,000 at a 8% interest rate the payment would be $1,700

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Expired_Water OP t1_iujmv5o wrote

Would a larger down payment be better? I might be able to find a home around 150k several towns over. Thank you.

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jgomez916 t1_iujn2d1 wrote

Yes w larger down payment would be better and a purchase price of $90k to $120k would be better.

On $30k you max PITI is only $1,250 for a mortgage

$30k/12 months $2,500 gross monthly

$2,500x .50% is $1,250 the max mortgage payment you will get approved for on $30k salary and $0/monthly debt.

A big down payment will help but lenders use your salary in the math equation to pre-approve you.

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lilfunky1 t1_iujcqb1 wrote

> Why not? What would be a price to look for?

on your income? like $100,000

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Prestigious_Big_8743 t1_iujqvjl wrote

To give you an idea of monthly payments - we borrowed $165,000 at 3.75%. Taxes and insurance are rolled into our payment through escrow. We pay about $2600 in taxes and $600 in insurance each year. Our monthly payment is $1,239. That's more than half of your monthly take home. And that's just PAYMENT, that doesn't include any maintenance. Then you need to consider utilities - water/sewer, electricity, however you may need to heat the house (electricity, propane, gas, fuel oil, whatever). Internet. Cell phone. Car insurance, gas, groceries. I don't see how you can afford a $200k house on the day-to-day even with a $25k down payment.

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Expired_Water OP t1_iujuwn4 wrote

Yeah it all makes sense now. Although I'll just be throwing money away by renting, it's my only practical option.

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sonnyfab t1_iuja51d wrote

I'd recommend you move out and rent. Buying a house is a long and stressful process that requires a lot of planning and a lot of money upfront. You didn't mention anything about having tens of thousands of dollars sitting in the bank, so you probably shouldn't be looking to buy a house.

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Expired_Water OP t1_iujayxz wrote

I have about 30k in the bank right now. I know renting is easier but around here the cheapest place to rent is about 2,400 a month with association fees. Working on cars usually isn't allowed for apartment or townhouses.

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Werewolfdad t1_iujcacz wrote

Unless you can find a house for about $100k, you’ll be quite house poor.

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Jmb3930 t1_iujczx9 wrote

How much do you have saved for downpayment and closing cost? Rule of thumb is a mortgage of no more then 3x your yearly salary.

There is more to owning a house then the mortgage payment, thing like insurance, taxes maintenance etc.

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