Proven Simple Tips For Buying a House When You Make Less Than $40,000 per Year
You can, but it will depend on where you live and how much of that $40k you’re actually putting towards your housing expenses.
Most people use 30% as a safe upper limit on a monthly payment for housing — which means you should probably spend about $1,200 per month. But do not forget about you other bills you pay monthly. Those additional expenses will reduce how much you can comfortably afford in a mortgage payment. Put a budget together and you will be on your way to becoming a homeowner!
How much money should I save before buying a house?
That depends on what your future plans are.
In all situations, it’s best to have at least a six-month safety net in place before moving into a new home. A good goal for first-time buyers would be to have a down-payment that is about 20% of the purchase price and enough available cash for furnishings and closing costs (typically 3% to 8% of the purchase price of the house).
What a first-time homebuyer should know.
First-time homebuyers should know that the most important investment they can make is in their house, instead of putting money towards rent. A big life milestone awaits when you buy your first house – not only will you have a place to call your own, and your monthly mortgage payment will build equity in your house. No more paying for your landlord’s mortgage. You now are creating wealth for yourself and your family by owning a house!
How do I get my first mortgage?
The mortgage industry is a very different one than it was even just 10 years ago. Today, mortgage rates are at their lowest point in 30 years and there are more first-time homebuyer programs than ever.
When looking for a home, preparing financially is the most important step you can take. Follow these basic steps to best prepare yourself.
- Pay off as much debt as possible. The more you pay off the better your chances are of getting approved for a mortgage. You need your monthly mortgage payment to fit into your budget, so make sure you have factored in other funds needed for closing costs and your down payment.
- Save at least 20% of the purchase price as a down payment. Having more than that is even better! The mortgage industry wants to see that you can afford your mortgage and that you are financially stable. But do not forget to ask your lender/broker what down payment assistance programs they offer.
- Save up to six months of living expenses in the event of an emergency. This by itself will reduce your stress level considerably and puts you in a position of strength with lenders.
Is buying a house a good investment now?
The answer to this question largely depends on whether you buy now or buy later.
As interest rates are at their lowest point in generations, now is a great time for first-time buyers to buy! Not only do mortgage rates make homes more affordable, but home values also continue to go up. But be aware that bidding wars are occurring in cities across the Country.
But don’t rush into anything! While today is the best time in decades to buy a house, it can take some time to find and buy a place of your own. Basing this important decision on emotion can be costly in the long run, so be sure to buy what is best for your financial situation and buy when you are ready.
With a few simple steps, you can buy your first home. As long as you have the money for closing costs and down payment in hand, it’s not hard to do so – even if you make $40k per year. Just follow these three basic rules: Pay off as much debt as possible (including credit cards), save at least 20% of the purchase price upfront, and save six months’ worth of living expenses in an emergency fund. If any of this sounds overwhelming or confusing, don’t worry! Every week we will share some tips to help you through the home buying process. Happy house hunting!