The rule of thumb for discovering a reasonably priced price array when HUD home shopping is: take your gross annual income (that stands for before taxes) and multiply that by two and a half. If you make $50,000 a year, you supposed to be looking at homes in the $125,000 price range. Allow me forewarn you that a lending establishment will likely approve you for a home in the $175,000 to $200,000 range. You are just about to read the greatest piece of home buying recommendation anyone can ever give you.. Do not use the Banks approval amount to settle on what you can afford to pay for a HUD home.
Over the past decade, hundreds of thousands of inexperienced buyers bought homes based on their bank’s approval amount, and most of those individuals are now losing their homes in the raging foreclosure market.
Use common sense when settling on what you can manage to pay for. Consider about your monthly budget. Ideally, no more than one and a half week’s salary should go for your monthly mortgage payment. Using a yearly gross income of $50,000 as an example, that household would take home about $650 per week. One and a half week’s salary would equal a $975 mortgage payment. The monthly mortgage payment on a house priced at $125,000 will be about $750 a month; however you must keep in mind that escrow payments for yearly property taxes and home owner’s insurance will be added on. That will add another $125 to $500–maybe more, depending on where you live.
If this household decided to use the lender’s pre-approval amount of $175,000, their monthly mortgage payment would come to $1050 per month, and that is not even counting the escrow payments. Escrow payments on a $175,000 house could add anywhere from $200 to $700 per month– maybe more if you live in an area that has unusually high property taxes.
The bottom line is this-use common sense when trying to determine how much you can pay for a home. Think about your monthly budget. Do NOT take the bank’s word for how much you can afford. Only you know the details of your monthly financial commitments. Just because a lender offers to lend you $175,000 does not mean that you have to take them up on it!
Discover how much you can afford to pay for a home along with plenty of other home buying and mortgage advice and when is the best time to buy a home.
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Tags: home shopping, HUD Homes