When I was at our Fork + Spoon Supper Club on Tuesday night, I was asked a really interesting question in regards to buying a home. The question was, “What income do I need to buy an X priced home?” I thought this was a perfect topic to talk about for this week’s Real Estate Tip of the Week.
While ultimately the best way to figure this is out is to talk to a lender, I shared with him a quick calculator that he could use to determine the needed income. Click the link below to access the calculator.
It is important to note that this calculator should be used purely as a way to get a rough estimate. There are a lot of factors that go into the numbers when getting a mortgage like your down payment, assets, liabilities, any monthly expenses, credit score, the interest rate of the loan, etc… But just for example, say you wanted to buy a $600,000 single family home in Arlington, VA and had $60,000 (10%) for a down payment. Using the calculator, it shows that at a mortgage of $540,000, an interest rate of 4.25%, and a 30 year fixed mortgage, you would need an annual household income of roughly $114,000. Your maximum monthly payment (PITI – Principal, Interest, Tax, and Home Insurance) could by $2,656.48.
Also, it is important to know that if you are self-employed, lenders determine your income by looking at your last two years of tax returns. So if you have been self-employed for less than 2 years, you might have a hard time getting a mortgage.
If you are thinking about buying a home and would like to learn more about the process, give me a call at 703-350-8800. I’d be happy to introduce you to one of my preferred lenders to help you get a much clearer picture of what you realistically can afford.
*Numbers in this article were taken using the calculator on Bankrate.