How Much Can I Borrow On 12k A Year
A lot of people in lower salary brackets believe that they wont be accepted for a low income mortgage, often because of misinformation or because they have been rejected by a lender in the past.
However, there are lenders that specialise in mortgages for borrowers on a lower wage.
Sometimes these mortgages can come with higher interest rates, so always speak to a mortgage broker before applying as they will have access to a range of lenders, some of which may be able to offer you a better, more affordable deal.
Take a look at the chart below to see how much you could borrow depending on your salary and potential income multiple.
As you can see, even a slightly higher salary can make a big difference:
Borrow Up To 8 Times Your Salary With A Big Down Payment
Lets assume you can make a $160,000 down payment maybe by using equity youve built up over many years in previous homes, or maybe because youve had a windfall of cash.
With such a hefty down payment, how many times your salary can you borrow for a mortgage?
- Value of the home you can afford $790,800
- Monthly payment $2,700
Again, your total monthly housing costs havent changed. But the value of the home you can afford is nudging $800K because youre making a big down payment.
Which Banks Will Lend 5 Times Salary
Nationwide will allow people looking to get on the housing ladder to borrow 5.5 times their annual income, more than the 4.5 loan-to-income ratio most lenders offer. However, borrowers will need to take out one of the building societys standard five or ten-year fixed rate mortgages in order to benefit.
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What To Do If A Lender Refuses Your Mortgage Application
A lender could refuse you for a mortgage even if youve been preapproved.
Before a lender approves your loan, theyll verify that the property you want meets certain standards. These standards will vary from lender to lender.
Each lender sets their own lending guidelines and policies. A lender may refuse to grant you a mortgage if you have a poor credit history. There may be other reasons. If you dont get a mortgage, ask your lender about other options available to you.
Other options may include:
- approving you for a lower mortgage amount
- charging you a higher interest rate on the mortgage
- requiring that you provide a larger down payment
- requiring that someone co-sign with you on the mortgage
How Much Mortgage Can I Qualify For +
The mortgage you qualify for varies according to your present circumstances. The two main factors that are typically considered in determining how much mortgage you qualify for are your monthly income and your monthly expenses. The Maximum Mortgage Calculator uses your current financial situation to calculate the maximum monthly mortgage payment that you can afford.
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Is There A Salary Mortgage Calculator I Can Use
To get a rough idea of how much of a mortgage you could borrow, check out our online mortgage calculator. All you need to do is enter a few basic details to calculate an amount.
While our salary mortgage calculator is a great starting point, for a more accurate idea of how much you could borrow, make an enquiry.
How Much House Can I Afford
So, youre thinking of buying your first home. Thats exciting. As you begin your house hunting adventure, do your homework and figure out how much you can comfortably afford.
Lets look at three key factors before you start shopping: your monthly mortgage payment, closing costs and ongoing expenses.
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How Much Can I Borrow If I Have Bad Credit
How much you can borrow will vary between lenders, as some may be more risk averse than others. Because lenders want to reduce the risk of lending to you, having bad credit could affect you in several ways:
- You may need a big deposit so that you dont have a high loan-to-value ratio
- Youre likely to have to pay a much higher rate of interest than a borrower with good credit would, so youll pay more for your mortgage
- You could have a smaller range of options to choose between as some lenders will be unwilling to lend to you at all
You can check your credit score to see what your credit rating is. You can do this for free with the three main credit reference agencies – TransUnion, Equifax and Experian. If you know youve got a bad rating, the calculator can help you assess how affordable a loan with a high interest rate, would be for you.
Fill in part one with your salary and the size of your deposit, click on the calculate button, then go on to the second part to see what difference increasing the interest rates will make to your monthly payments.
A mortgage broker could help, as theyll be familiar with lenders wholl grant mortgages where theres been a history of bad credit, and also alert you to the level of interest you could pay.
Ideally, do what you can to repair your bad credit history before you apply for a mortgage.
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Can You Afford A House Making 30k
If you were to use the 28% rule, you could afford a monthly mortgage payment of $700 a month on a yearly income of $30,000. Another guideline to follow is your home should cost no more than 2.5 to 3 times your yearly salary, which means if you make $30,000 a year, your maximum budget should be $90,000.
Its Not What You Can Borrow Its What You Can Afford
In some respects, the mortgage lending industry is working against your best interest. If you are deemed a qualified borrower, a lender is prone to approve you for the maximum it believes you can afford. But in some cases, that amount may be too generous.
Buying a home always means dealing with big numbers. And the impact to your budget may seem to be a stretch, particularly in the beginning. The challenge is buying a home that meets your current and future needs, without feeling like all of your money is in your home leaving you without the financial freedom to travel, save for other priorities and have a cash flow cushion.
Now that the NerdWallet How much can I borrow calculator has given you an idea of your buying power, you may want to gut-check the number by:
Run affordability scenarios. You can get another view of your home-buying budget by running some what-ifs through the NerdWallet home affordability calculator.
Talk to more than one lender. You are more likely to get a better interest rate by comparing terms offered by multiple lenders, and it might be illuminating to see the loan amounts different lenders will qualify you for.
Consider all homeownership expenses. Its not just whats built into your monthly payment such as insurance, taxes and the rest but the other having-a-home expenses, like structural upkeep, new furniture, maybe even yard maintenance equipment.
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Personal Considerations For Homebuyers
A lender could tell you that you can afford a considerable estate, but can you? Remember, the lenders criteria look primarily at your gross pay and other debts. The problem with using gross income is simple: You are factoring in as much as 30% of your paycheckbut what about taxes, FICA deductions, and health insurance premiums, In addition, consider your pre-tax retirement contributions and college savings, if you have children. Even if you get a refund on your tax return, that doesnt help you nowand how much will you get back?
Thats why some financial experts feel its more realistic to think in terms of your net income and that you shouldnt use any more than 25% of your net income on your mortgage payment. Otherwise, while you might be able to pay the mortgage monthly, you could end up house poor.
The costs of paying for and maintaining your home could take up such a large percentage of your incomefar and above the nominal front-end ratiothat you wont have enough money left to cover other discretionary expenses or outstanding debts or to save for retirement or even a rainy day. Whether or not to be house poor is mostly a matter of personal choice getting approved for a mortgage doesnt mean you can afford the payments.
Getting Flatmates To Help With The Bills
Planning to get flatmates in to help pay the mortgage? Some lenders will count 70% to 80% of their rent towards your income. Other lenders won’t include any.
The easiest way to find out how much you can borrow through a lender is to give them your income and spending details and ask them to make the calculation. Or, you could ask a mortgage broker to do this.
Based on the details you give them, a lender may give pre-approval of the amount they are willing to lend. The key is to treat this as an upper limit rather than a starting point!
Some important things to consider when deciding how much to borrow.
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How Income Multiples Affect Your Borrowing Chances
Banks and building societies will usually lend up to four-and-a-half times the total annual income of you and anyone else you’re buying with. For example, if your total household income is £60,000 a year, you might be offered up to £270,000.
However, some mortgage lenders do offer larger amounts to people in certain professions or those with higher earnings.
For example, some ‘professional’ mortgages will let borrowers with specific jobs borrow five or five-and-a-half times their salary. Alternatively, if you have a household income of more than £80,000, you might find some banks will offer you a higher multiple.
In some cases, the income multiple you’ll be eligible for can also depend on the loan-to-value ratio you’re borrowing at. So if you’re applying for a 75% mortgage, you might be able to borrow more than if you’re applying for a 90% deal.
Following the coronavirus outbreak, some mortgage lenders have begun to impose stricter rules on how much you can borrow. For example, Barclays will now only offer loans up to four-and-a-half times annual salary, compared to the five-and-a-half times salary available to some customers before the pandemic.
Income Is A Significant Part Of Deciding How Much You Could Borrow
Income is crucial for determining how big a mortgage you can have. Traditionally, mortgage lenders applied a multiple of your income to decide how much you could borrow. So, if you earn £30,000 per year and the lender will lend four times this, they may be willing to lend £120,000.
When it comes to households with two incomes, some lenders offer a choice:
The option to add the second income on top of the multiple, so if the main breadwinner earns £30,000 and the second person’s income is £15,000 a lender might offer 4x the first income, plus the second income or
A slightly lower multiple for two incomes than for one. So £30,000 + £15,000 = £45,000. Then £45,000 x 3 = £135,000
Many lenders now only use income multiples as an overall maximum that they will lend, conducting a detailed affordability assessment to decide how much they are willing to lend. This is something that has become particularly strict following mortgage regulations introduced in 2014.
If part of your income is comprised of a bonus or overtime, you may not be able to use this, or if you can, you may only be able to use 50% of the money towards what the lender deems as your income. All income you declare in your mortgage application will need to be proven usually through you providing your latest pay slips, pensions and benefits statements.
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Can I Buy A House Making 35k A Year
If youre single and make $35,000 a year, then you can probably afford only about a $105,000 home. But you almost certainly cant buy a home that cheap. Single people have a tough time buying homes unless they make an above-average salary. Marriage allows a couple to combine their incomes to better afford a home.
How Do I Work Out How Many Times My Salary I Can Borrow For A Mortgage
Most mortgage lenders use an income multiple of 4-4.5 times your salary, some offer a 5 times salary mortgage and a few will use 6 times salary, under the right circumstances to work out how much mortgage you can afford.
Youre unlikely to find a mortgage provider willing to lend to a maximum of x7 your salary or more in the UK.
The specific times salary equation you can use to establish the maximum you can borrow for a mortgage will, as mentioned above, vary from lender to lender.
However, the table below provides some guidance as to how this may look:
The above figures illustrate the difference it can make to find a mortgage lender who is more generous with its income multiple criteria than others.
For somebody with a basic salary of £25,000, theres a £50,000 difference between a lender using four times your salary and one using six times your salary to work out how much you can borrow.
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How Do Lenders Work Out How Much I Can Borrow Based On My Income
Typically, lenders will determine how much you can borrow by multiplying your salary by four and a half or five times. So, for example, if you had an annual salary of £20,0000, you could be eligible for a mortgage of up to £100,000. On an interest rate of 3.92% over a 25-year term, your monthly mortgage payments could be £523.
Mortgage lenders will then conduct an affordability test to make sure you have enough monthly earnings to meet other living expenses.
There are however, lenders that may be willing to loan up to six times your annual salary, although this is usually in exceptional circumstances for borrowers with a good credit history and higher annual income.
Many borrowers apply for a joint mortgage with another applicant, whether that be a partner, relative or friend, which means that more than one income can be taken into consideration when calculating affordability.
For example, if two people applied for a mortgage and they both earned £20,000 a year, the lender would calculate their overall annual salary as £40,000. If the lender agreed to loan the pair 5 x this amount, they could borrow £200,000.
Why Use The Maximum Mortgage Calculator
Once you input your monthly obligations and income, the Maximum Mortgage Calculator will calculate the maximum monthly mortgage payment that you can afford, based on your current financial situation. This calculator will also help to determine how different interest rates and levels of personal income can have an effect on how much of a mortgage you can afford.
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What Mortgage Can I Get
Once you know how much you could borrow, your next step is to compare mortgages using our comparison service.
You’ll be able to choose from fixed-rate mortgages where the interest rate and your repayments remain the same for the term of the deal, which is typically two, three or five years. Alternatively, you can choose a variable-rate mortgage that normally tracks the Bank of England base rate. The tracker element means that your monthly repayments go up or down in line with movements in the base rate.
Money You Will Spend Beyond The Mortgage
When figuring out how much of a payment one can afford, there are other expenses that must be considered aside from the mortgage. These addition financial obligations can be:
- Home Maintenance: There will be some maintenance during ownership of the home. Appliances break down, carpet needs replaced, and roofing goes bad. Being overextended due to the mortgage can make repairs more of a burden.
- Utilities: These expenses keep the home heated, lit up, water running, and other items such as sewer, phone, and cable T.V. going.
- HOA Fees: If the community in which the borrower moves in has amenities, there may be Homeowners Association Fees that must be paid. The fees can vary based on what amenities the community is offering. Sometimes the price can be $100 per month or $100 per year.
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Higher Outgoings Reduce How Much You Could Borrow
Your regular household expenses, debts and insurances can all affect what a mortgage lender will let you borrow. Outgoings that a lender may take into consideration include:
Loan and credit card repayments Council tax Domestic utilities Insurances Car running costs Child maintenance payments
Some lenders also apply a reduction to the amount you can borrow for the number of children you have , while others have started to take things like discretionary spending into account. They’ll also require you to prove that you can afford the repayments in the event of an increase to interest rates, so make sure you have suitable means to ensure that ideally through reducing your unnecessary expenditure as this could have a clear impact on the amount of mortgage you’ll be able to borrow.