Here’s a great article from cnbc.com about how much of a monthly payment you can afford to stay within guidelines for buying a home. According to the author, if you keep your housing costs under 30%, you can only afford the following monthly payments.
- $30,000 income: $750
- $40,000 income: $1,000
- $50,000 income: $1,250
- $60,000 income: $1,500
- $70,000 income: $1,750
- $80,000 income: $2,000
- $90,000 income: $2,250
- $100,000 income: $2,500
- $110,000 income: $2,750
- $120,000 income: $3,000
That’s a nice chart. However, let’s dig a little deeper to see how much home that could actually buy you.
| Annual Income | Monthly Payment | House Price @ 6.5%, 30 yrs |
| $30,000 | $750 | $100,000 ($632 payment, does not include Taxes, Insurance, PMI) |
| $40,000 | $1,000 | |
| $50,000 | $1,250 | |
| $60,000 | $1,500 | $200,000 ($1264 payment, does not include Taxes, Insurance, PMI) |
| $70,000 | $1,750 | |
| $80,000 | $2,000 | |
| $90,000 | $2,250 | $300,000 ($1,896 payment, does not include Taxes, Insurance, PMI) |
| $100,000 | $2,500 | |
| $110.000 | $2,750 | |
| $120,000 | $3,000 | $400,000 ($2,528 payment, does not include Taxes, Insurance, PMI) |
So, what they’re saying, is that if you make $120,000 per year in my market, you can only afford an entry level condo. Let that sink in for a minute. If you’re making $120K, you can only afford an entry level condo!
So, if you want to buy a house in this market, you’re going to need more money. So, here are your options:
- Get a better job
- Get another (additional) job
In the book, Rick teaches Shawn about this concept. If you want more money, it’s like flipping a coin. You have 2 options:
- Tails = get off your tail and work, earn more money.
- Heads = use your head and figure out how to save money, bet smart with your money and figure out how to put money to work for you.
People are still buying homes. But it looks like the rules are changing. And if you’re going to find yourself in a home, you need to work, and you need to be smart.