Can I still qualify for a $250000 loan if my income is less than 30000 a year?
I would like to purchase my first home (in this case a condo) within the next few years. I have no problem coming up with a reasonable down payment, my parents are willing to help me out with about $30000. I've been looking around at condo listings around my target area here in Los Angeles county, the ones that have caught my eye usually ranges in price from $225000-300000.
So the problem is currently my income is a little less than $30000 a year gross. I have good credit 740 and will pay off all my debt by the end of this year. I may get promoted at work but I do not want to rely solely on that. If and when I do purchase a home I do plan on renting out a room to help with my mortgage. Will the loan companies take this into consideration? Will it be real hard for me to qualify? Do other people do this also? Or is this all just a real bad idea in general? Please someone help me! I need some pointers. Thanks!
The rule of thumb is that your mortgage should be between 2x and 3x your annual salary. That means for you, your mortgage should be between $60,000 and $90,000. Not $270,000. You aren't even close right now.
Peel the onion back a layer and the banks used to use a 28/36 rule. No more than 28% of your gross monthly income to a housing payment (including principal, interest, taxes and insurance - both homeowners and PMI). No more than 36% of your gross monthly income to all debt payments (car payment, student loan payment, etc.). In your case the 28% of your gross monthly income is $700. The 36% is $900. Banks are now much more conservative than they were and they are closer to using these ratios.
For a loan of $200,000 (assume you bought the $225,000 condo with $30,000 from your parents). Your P&I on a 30 year fixed rate loan with a good interest rate (5.75%) is $1167. Add in $100 per month in insurance, $100 per month in condo fees (both of which could be higher or lower) and taxes of $285 (calculated at 1.5% of value per year - might be lower or MUCH higher) and PMI of $100 per month and your payment for this condo will be $1752 a month. WAY out of your league with your income.
Loan companies don't care if you rent a room out to help with the mortgage. If you had a separate unit to rent, they would give you some percentage of the income to work with, but not all of it.
Can you afford a payment of approximately $1750 per month on your income?
The best thing you can do is go to a bank and pre-qualify for a loan, there is no commitment and usually no cost, I would start with a bank you already have a savings or checking account with. There are also several sites that have mortgage calculators that will tell you how much your loan would cost with interest, here is one.
Your answer depends upon your net income. As a rule most lending institutions desire your costs for loan, taxes and insurance to be approximtely 25% of your net income. In L.A. that usually is allowed to be closer to 30% of net income.
I am not sure where you have looked for homes in Los Angeles, but your price range limits you to the fringes of Los Angeles County or San Bernardino County which is the home foreclosure leader at the moment. I am in the Hollywood-Los Feliz-Los Angeles area. As fast and as far as home prices are falling, they have not fallen YET to your level of affordability. They may but that might not be for six months to two years assuming continuing free fall. There are no signs that single home prices are steadying. Duplexes and Tri-plexes continue to fall less dramatically but still generally are unable to be self-supporting with present rental values.
In this market, you will likely find a property that is lender owned and that will not require you to qualify for your taking over an existing loan. Be wary....They will want your $30 K downpayment and readily foreclose a second time if they have to.
In conventional financing in conventional times, your willingness to accept a tenant will NOT matter in the loan consideration process. These are not conventional times. You are unlikely to obtain a conventional loan.
How large is your families property. Does it have room to add a "granny flat" separate out building built to code? Given your means this might be as far away as you can reasonably afford to go.
Are you in Love with L.A. ? Great city but hugely unaffordable!!! With your downpayment you could find a great property in parts of New Mexico, Texas, Oklahoma, Kansas and Arkansas. You would need to find work first!
Avoid condo's. Many homeowner associations are facing foreclosure and you could find fees and costs tripling or more in a short period of time.
It is claimed to be a great time to buy realty but if you look closer the only ones saying that are those seeking to sell realty. Hold on. Things will only get more interesting and cheaper....
Source(s)by BLCOHEN529 - 6 years ago
Way too much home for your income, and just because you plan on renting out a room does not means that it will be rented so no the mortgage companies do not take that into consideration. Here is a sight, fill in the numbers and you can get an approximate of how much your income and down payment will support