How much house can I actually afford?
Have you ever wondered how much house you can really afford? It can be hard to know with all the many expenses life brings. How much mortgage is too much, and what is realistic? We are here to tell you how to find out.
According to U.S. News World Report, the median Memphian’s income is $54,717. Stay tuned to find out how much home the average Memphian can afford. First, we are going to break down the essential factors that determine how much home you can get.
What is the down payment?
A down payment is a lump sum paid upfront in cash when purchasing a home. The remaining portion of your home cost will be covered in the remaining mortgage balance.
Your down payment will affect:
Your loan amount
Interest rate
Monthly payment
Many people aim to put 20% down – but that number is not realistic for many first-time homebuyers. Thankfully, there are loan products and down payment assistance programs that can help people bring 20% down to 1-5% of the total home cost.
What is your mortgage rate and what type of mortgage are you going to pursue?
There are tons of different mortgage programs available, from conventional, FHA, VA and USDA loans. All vary in requirements, which can affect your decision.
Whether you choose a 30-year mortgage or a 15-year mortgage can greatly impact your monthly payment as well.
So, what can the average Memphian afford?
At UHI, we believe your mortgage should not account for more than 30% of your monthly income. Now, it’s time to do some math:
Median annual income in Memphis: $54,717
Monthly income: $54,717 ÷ 12 = $4,559.75
30% of monthly income: $4,559.75 x 0.30 = $1,367.93
Based on this information, someone earning the median Memphis income should aim for a monthly mortgage of about $1,368 or less. If doing all this math on your own seems like a big task, don’t worry! Check out Rocket Mortgage's home affordability calculator.
