Buying a home is an exciting prospect, but you can’t do much serious home shopping until you know how much you can borrow for a mortgage.
There are many varying views on how much an individual can really afford. Most budget gurus recommend borrowing much less than a bank will loan you, while lenders can be eager to get you into a home with a higher monthly payment.
How much you can actually afford is heavily dependent on your individual situation.
Determining an Affordable Mortgage Based on Income
The best place to start when determining how much you can borrow for a mortgage is by looking at your annual household income. Most financial coaches recommend keeping your housing expenses to 25% of your monthly income. So if your household brings in $4,000 a month, your mortgage payment should be no more than $1,000.
This $1,000 mortgage payment could mean anywhere from the high $100,000s to the mid $200,000s depending on your credit score, down payment amount, and interest rate.
Talk to a Lender
Once you’ve determined your household income and have a rough idea of what kind a monthly payment you could handle, it’s time to speak to a lender. Start with your banking institution but don’t be afraid to shop around for better interest rates or the right kind of loan to fit your needs.
The lender will gather information about your current financial situation, including bank account balances, loan balances, and more. They will take all the information and use it to give you some real numbers of how much they would loan you for a mortgage.
Mortgages in Alabama
According to the United States Census Bureau, the median household income in Alabama over the last five years is $48,486. An average household making this income with reasonable expenses could qualify for a mortgage in the amount of roughly $190,000. Keep in mind, though, that this number can vary significantly depending on the down payment amount, total amount of borrower debt, credit score, and interest rate.
The good news is that if your household brings in an average income, there are probably plenty of homes in your area in your price range. Based on the market research by Zillow, the average home price in Alabama was $156,545. Home sales in the state are on the rise, even in the uncertainty of the Coronavirus crisis, bringing plenty of homes in every price range to the market.
Local Home Buyers Will Buy Your House
Are you ready to buy, but are tied to a home you don’t want or need? Local Home Buyers will buy your Huntsville, Alabama, home so you can get started with a mortgage for a new house that fits your needs. We buy houses in any condition for cash and can close on any day of your choosing. We specialize in unwanted rental properties, homes in foreclosure, homes in need of excessive repairs, and more. Call us today to see how we can help you reach your goals!