I’m 26 and looking to buy my first house in the $300-350k range in metro Atlanta in about a year. I make $80k a year, and I expect that to increase to at least $85k soon. I’ve been with the same employer for 5 years. My wife, who makes $90k, will be living with me, but she won’t be on the mortgage, so her income won’t count for the loan. This will be a 30-year conventional mortgage in my name only.
My credit score is 760+ and I have no debt or car payments, just regular expenses like rent, utilities, and groceries. We also don’t have kids and don’t plan on having any for at least 5 years.
We expect to have $50k in savings when we buy the house. This is how we plan to use it:
- $10k for closing costs
- $10k for emergency house repairs
- $12k for 6 months of expenses
This leaves $18k for the down payment, which is about 5% of the purchase price.
We’re budgeting for monthly housing costs of around $3,000-3,200, including:
- $1,800 for the loan payment
- $150 for PMI
- $400 for property tax
- $150 for homeowner’s insurance
- $400 for utilities
- $300 for maintenance
We feel comfortable with these costs and will still have money left over for savings and other activities. We already have furniture, so that’s not an added expense.
We might ask our parents to help with the down payment, but only if it helps us get approved or if we find a house slightly out of our price range.
Based on all this, do you think I can get approved for a mortgage in this price range and afford the house?
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You’re in a good position.
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Yes, you’re in a good position. You can expect approval for $375-400k, but it’s more practical to aim for something $330k or less.
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Thank you. When you’re approved for an amount, does that typically refer to the house price or the loan amount? For example, if you mention $330k, is that the price of the house or the loan amount after accounting for the down payment?
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My wife and I just closed on a $311,500 30-year fixed mortgage at 5.65%, with a total monthly payment of $2,300.
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Your approval will include the sales price, down payment, loan amount, and the terms (such as a 30-year fixed rate).
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Your mortgage approval is less about the purchase price or loan amount and more about whether you can afford the monthly PITI (Principal, Interest, Taxes, and Insurance). As long as you don’t have any other debts, you can generally qualify for a mortgage payment that’s under 50% of your monthly income. So, with an annual income of $80k, or $6,666 per month, you could potentially qualify for a mortgage payment of up to $3,333 or less if you have no other financial obligations like credit cards, student loans, or personal loans. Hope this helps.
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What you’re actually approved for is a total monthly housing payment (which includes your mortgage, taxes, insurance, mortgage insurance, and HOA fees) based on specific factors like your down payment percentage, available funds for down payment and closing costs, current debt obligations, and the loan program you’re using.
The home price and loan amount are just part of the equation to stay within that payment range.
A good mortgage broker or advisor will thoroughly review your application, credit, income, and assets, guiding you through your options. They’re well-compensated for their expertise, so don’t hesitate to ask any and all questions; and make sure you fully understand the answers. It’s a good idea to get recommendations from friends or colleagues and interview a few brokers before choosing one.
It sounds like you’re likely to qualify for the house you have in mind, but be sure to get a comprehensive pre-approval before making an offer.
Keep in mind, you probably won’t be able to lock in an interest rate until you’re under contract for a home.
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Your debt-to-income ratio will be a key factor.
To calculate it, take your annual income, divide it by 12 for your monthly income, then multiply by 0.5 to get the maximum allowable debt ratio for conventional mortgage qualification.
For example:
$80,000 ÷ 12 = $6,667
$6,667 × 0.5 = $3,333.34 max monthly debt payments.
This amount includes your total house payment (mortgage, taxes, insurance, HOA fees, etc.) plus any minimum payments listed on your credit report. You can get a free copy of your credit report from annualcreditreport.com to verify your debts. Keep in mind, even if you pay off your credit cards monthly, a payment may still appear on the report.
Add up your payments, then use an online mortgage calculator to estimate your total house payment, including taxes and insurance.
Feel free to reach out if you have more detailed questions. Good luck.
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Thank you so much. I don’t have any debt payments. My plan is to charge a very small amount (around $2, which I’ve heard is the minimum for reporting) on one of my credit cards in the months leading up to the application to keep an active balance. Other than that, I’ll be paying everything in cash to ensure none of those charges impact my maximum allowable debt payments.
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It seems like you’re on the right track. Generally, you don’t need to use your credit cards at all; they can show a $0 balance and no missed payments each month. However, it’s important to prevent the creditor from closing the account. To keep it active, use the cards occasionally, and your $2 plan will be effective.
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A $350k loan with an $85k salary is manageable and likely to get approved, although it might take a significant portion of your monthly income. However, if you factor in your wife’s income, it becomes much more comfortable. Why aren’t you considering her for the loan?
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Unfortunately, her credit isn’t strong. She grew up with a very anti-credit mindset and hasn’t taken many steps to improve her credit score. Currently, she has just an active car loan, and her scores are in the low 600s. I’ve been comparing interest rates between high 700s and low 600s, and it appears that our rate could be as much as 1.5% higher if we use her scores. This would result in significantly higher interest payments over time, and I’d like to avoid that.
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You’ll likely qualify on your own, and the payment will be manageable if both of you are contributing.