You are currently earning $70,000 a year, and you have finally decided to buy your own home. However, you are still wondering whether or not your income is enough to make such a big purchase.
How much home can you actually afford? How much mortgage will you be able to take out? What type of home will fit into your budget?
If this is you, then you are in the right place! In this article, we will help remove the stress in home buying with a $70K salary by giving you essential tips to make the right decision.
How Much Could You Take Out on a Mortgage with a 70K Salary
Before you check houses you can afford if you make $70,000 a year, you need to determine first how much you could take out for your mortgage.
When getting this type of loan, it’s important not to overextend yourself so that you can avoid financial difficulties in the future. A good rule of thumb is the 28/36 rule, which suggests that you shouldn’t spend more than 28% of your monthly pre-tax income on housing costs (i.e., mortgage payments), and no more than 36% on all debts including your mortgage, car loans, credit card bills, etc.
So, if you apply this rule to yourself who is making $70K a year ($5,833 per month pre-tax), you can calculate that you could afford a monthly mortgage payment of up to $1,625 without becoming house-poor.
Choosing a Mortgage Loan: Options for a 70K Salary
Based on the mortgage on a 70K salary, there are actually several types of loans you could choose from, each with its own advantages and disadvantages.
Fixed-Rate Mortgage
This is the most common type of home loan that offers a locked interest rate that doesn’t change over the life of the loan (usually 30 years). This predictability makes it easier to budget for your housing costs, but you may end up paying more in interest over time if rates drop after you lock in your rate.
Adjustable-Rate Mortgage
This type of mortgage has a lower initial interest rate that changes periodically throughout the life of the loan, usually in response to movements in market interest rates. This can make an adjustable-rate mortgage riskier since your monthly payments could go up or down based on those changes. Nonetheless, it also means that you have the potential to save money if rates go down over time.
Government-Backed Mortgage
If you’re a first-time homebuyer, you may want to consider a government-backed mortgage, like a Federal Housing Administration (FHA) loan or a Veterans Affairs (VA) loan. These loans are backed by the federal government and usually have more relaxed eligibility requirements than conventional mortgages.
However, they also come with additional fees, including mortgage insurance premiums, which can add to your costs. So, so you should take these into consideration as they will impact how much you can afford when buying a home.
Jumbo Mortgage
A jumbo mortgage is a home loan that exceeds the conforming loan limits set by government-sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac, which buy mortgages from lenders. This type of loan usually has stricter eligibility requirements since it’s not backed by the government, but it can allow you to finance a more expensive home.
So, which type of mortgage would fit home buying with a $70K salary? It basically depends on your home-buying goals and needs.
Types of Homes That You Can Buy with a 70K Salary
While you may think otherwise, you actually have several options in buying a home with a 70K yearly salary. It all comes down to doing your research, being creative, and knowing where (and how) to look.
Here are some home types that may fit into your budget.
Small Townhouse
This type of home is perfect for first-time homebuyers or those who want to downsize.
Small townhouses are usually more affordable than single-family homes, and they often come with low monthly homeowners association (HOA) fees. Plus, many of these homes are located in desirable neighborhoods that offer a sense of community that you may not find in other home types.
On average, small townhouses cost around $137,000 in most states in the US. So, if you’re looking at home prices in this range, you may be able to find a small townhouse that fits your budget.
Condo Unit
Similar to a small townhouse, condos are also a great option for first-time homebuyers or those who want to downsize. One of the main advantages of buying a condo is that you often have access to amenities that may not be available in other home types, such as a swimming pool, gym, or security services.
And like small townhouses, many condos are located in desirable neighborhoods.
Fixer-Upper
If you have the knack (and budget) for home improvement, you may want to consider buying a fixer-upper. These types of homes are usually more affordable than move-in-ready homes, but they will require some sweat equity (and often, professional help) to get them into tip-top shape.
When buying a fixer-upper, it’s important to have a realistic idea of the costs of repairs and renovations. Otherwise, you may end up spending more than you can afford. A good rule of thumb is to add 20% to your home-buying budget to account for these costs. So, if you’re looking at homes in the $100,000 range, you should set aside $20,000 for repairs and renovations.
Mobile Home
If you’re looking for an affordable home that you can move easily, a mobile home may be the right fit for you. This is often more affordable than other types of homes and comes in a wide range of sizes and styles.
You can look for modern mobile homes that come with all the bells and whistles of a traditional home. So, when doing a “mobile homes for sale near me” online search, look for things like energy-efficient appliances, spacious bedrooms, and updated bathrooms.
Where to Look for Homes That Fit Your Salary Range
In today’s technologically driven world, the best place to look for homes to buy is the internet. With just a simple “homes for sale near me” online search, you can find various listings with homes that fit your salary range. But while the internet is a great resource, it’s important to remember that there are other places to look for homes as well.
For instance, you can also check out classified ads in your local newspaper or drive around neighborhoods that you’re interested in to see if there are any “for sale” signs.
You can also attend real estate auctions or open houses in your area. These events are a great way to learn more about the home-buying process and meet potential sellers. And if you’re working with a real estate agent, they’ll likely have a list of homes that fit your budget and needs.
Buying an Old Home vs. Buying a New Home
With a 70K-per-year salary, you’re likely to have a budget that can accommodate either an old home or a new home. But which route should you choose?
Well, older homes are often more affordable than new construction homes and may also have more character and charm. However, they could come with hidden issues that can end up costing you more in the long run. These could include outdated electrical systems, plumbing problems, and structural damage.
On the other, new homes for sale are often built with the latest home technology and trends. They also require less maintenance and repairs, which can save you money over time. Plus, many new homes come with energy-efficient features that can help lower your utility bills.
At the end of the day, your decision whether to buy an old or a new home really depends on your needs and preferences. So, consider what you really want in a home and weigh the pros and cons of each type before making a decision.
Getting the Best Deal on Your Home Purchase
While you can look for houses for sale on your own, there are steps that you can take to make sure you are making a wise choice in buying a home.
For a start, you should speak with your financial advisor before looking for homes for sale. They can help you understand your financial situation and offer advice on which properties are right for you.
Apart from a financial advisor, a real estate agent is also a useful ally when buying a home. Not only that they can help you find properties that fit your budget and needs, but they can do all the legwork for you as well as negotiate on your behalf to get you the best deal possible.
In addition, it’s also a good idea to have a home inspector check out the house you are buying before you make an offer. This is especially true when you are buying an old property. They can help identify any potential problems that you may not be able to see, which you can then use as leverage when negotiating the price.
Final Thoughts
As you can see, home buying with a $70K salary is definitely possible. But it’s important that you do your research and work with the right people to make sure you are making the best decision for your needs. With a little bit of planning, you can be well on your way to owning your dream home soon.
If you have more questions in mind, do not hesitate to leave them in the comments section below. And, for more useful tips and information on buying a home, you can check out the other articles on our site.
Good luck!
