The median 2018 household income in Calcasieu Parish, Louisiana is $46,457. So, if you make around $50,000 and are wondering “How Much Home Can I Afford” you are in good company. The Fall buying market is here! The housing market remains strong! Home prices and interest rates continue to climb! This means that NOW is the time to become a homeowner!
Here are a few fundamentals of wise home buying. It’s all about figuring out what you can afford — based on how much you can reasonably borrow — and then sticking to that budget.
Follow These Fundamentals of Wise Home Buying
How much can I afford to borrow using the 28/36 Rule?
Home buyers seeking a mortgage have been well-served by following the 28/36 rule. The 28/36 Rule states that a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt, including housing and other debt such as car loans, credit cards, student loans, etc.
Here is how the 28% rule works for gross yearly household incomes of $50,000, $60,000, $75,000 and $100,000. According to the 28% rule here is the maximum you should spend on monthly housing Principal/Interest/Taxes/Insurance (PITI):
|Annual income||Monthly housing limit|
All other debt payments, to include credit card bills, student loans, car loans, etc., should not exceed 36% of your gross yearly household income.
Here is how other debt comes in to play when applying the 28/36 Rule for wise home buying:
|Annual income||Monthly debts||Monthly housing limit|
Use my calculator to apply the 28/36 Rule to your wise home buying experience.
How much will I need for a down payment?
The bigger the down payment, the bigger the house you can afford to buy. But, consider how long it will take you to recover your down payment and how long you plan to stay in the home you are buying.
Seek advice from an expert when determining what type of home loan best fits your short term and long term financial situation. If you are a qualified Veteran you may choose to use your VA Eligibility. With a VA loan, often no down payment is required and there is no monthly mortgage insurance. Another loan option is a government-backed FHA loan, which requires a down payment of as little as 3.5%. FHA can be a great program for first time home buyers as it is credit and debt ratio friendly. Fannie Mae and Freddie Mac (the government-created lending institutions) now have programs that make it easier for home buyers to qualify with down payments of as little as 3%. And, if you have 20% and can qualify for a conventional loan, there will be no monthly mortgage insurance. A Rural Development/USDA loan is another great option for home buyers; it is based on income and property limitations. In a Rural Development/USDA loan often home buyers can qualify with 0% down but debt ratio is critical to eligibility in this type of loan.
So, what is an affordable purchase price?
Add how much you have for a down payment to the maximum amount you should borrow, and that’s the amount you can afford to spend on a house based on the 28/36 Rule and wise home buying strategies.
Throughout your home search you may want to revise your expectations based on homeowners insurance and property taxes (also, if you find a home in a flood zone that requires flood insurance). Remember P/I/T/I (Principal/Interest/Taxes/Insurance) will be your monthly payment and is affected more by the cost of your homeowners insurance and taxes than it is by your interest rate.
Should I use a realtor to help me with my home search?
Definitely use a realtor to help you with your home search! While it costs YOU nothing to work with a realtor- the knowledge, experience and commitment from a professional realtor is PRICELESS! A realtor has the search power and expertise to find you the home of your dreams.
Let ME help you determine how much home you can afford!
My name is Kara Davis. I have been in the mortgage industry for almost 18 years. I have an expert understanding of the Louisiana housing industry and have helped hundreds of people purchase their homes. If you or anyone you know is ready to buy, build or re-finance a home, give me a call at 337-842-0115 for a pre-approval. Let’s work together to get you in to your dream home today! When choosing your mortgage lender, consider the added value of service, accessibility and integrity. Remember! Customer Service is Key In Mortgage Lending!