Now that we're 12 years into a bull market in 2023+, you'd think that getting a loan would be a little easier. Nope. Getting a mortgage is as brutal as ever. As rates have moved up, the number of people who can qualify for a mortgage has gone down.
Key Takeaways
Lenders scrutinize employment and your income sources, particularly if you get paid in cash or have a second job. Mortgage lenders also review your credit history, credit score, assets, and debt. Choosing an informed and experienced loan officer is critical in the mortgage approval process.
To afford a $250,000 house, you typically need an annual income between $62,000 to $80,000, depending on your financial situation, down payment, credit score, and current market conditions.
All of this creates an atmosphere of risk around older borrowers. The upshot is that if you're over the age of 62, you're almost 30% more likely to get rejected for a standard mortgage.
Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.
Paying off your mortgage can be a game-changer for your financial health and overall peace of mind. Data collected by NASDAQ suggests that while only 28% of homeowners below retirement age have paid off their homes, nearly 63% of those 65+ have done so.
On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.
Your monthly payment for a $300,000 mortgage and a 30-year loan term could range from $1,798 to $2,201, depending on your interest rate and other factors. Learn more about the upfront and long-term costs of a home loan.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.
Several factors could keep you from getting a mortgage, including a low credit score or income, high debts, a spotty employment history and an insufficient down payment.
The average mortgage payment is $2,715 on a 30-year fixed mortgage and $3,552 on a 15-year fixed mortgage. The median payment, a more accurate measure, is $2,617, according to the Mortgage Bankers Association.
Top reasons for a declined mortgage application
your credit history. too much debt. your employment history. you don't earn enough to make repayments.
Applying for a mortgage at the beginning of the month is best because as the month progresses, loan officers become increasingly busy as they attempt to close applications before the end of the month. Applying for your loan during the final stretch could result in delays and unnecessary stress.
You could still be eligible for a mortgage even if you were denied. But you'll need to explore other loan programs that may be a better fit for you financially. Inquire with the loan officer to learn more about alternative mortgages, such as FHA loans or USDA loans, that may be available to you.
The Bottom Line. On a $70,000 salary using a 50% DTI, you could potentially afford a house worth between $200,000 to $250,000, depending on your specific financial situation.
If your lender offered you a $300,000 loan with a 15-year fixed-rate term at a 7% annual percentage rate (APR), you could expect your monthly payment — principal and interest — to be about $2,696. If you took out a 30-year fixed-rate mortgage with a 7% APR, your payment could be about $1,995.
2021: The lowest 30-year mortgage rates ever
And it kept falling to a new record low of just 2.65% in January 2021. The average mortgage rate for that year was 2.96%. That year marked an incredibly appealing homeownership opportunity for first-time homebuyers to enter the housing market.
According to HHS's measurement, a family of four in 2023 would be considered impoverished if their income is $30,000 or lower. Alaska and Hawaii use a slightly different measure due to a higher cost of living in those states. The poverty guideline is $37,500 in Alaska and $34,500 in Hawaii.
I make $25K a year; can I buy a house? Yes, if you make $25K a year, you can likely afford around $580 per month for a monthly mortgage payment. With a 6% fixed rate and a 3% down payment, this could buy you a house worth about $100,000. However, consult a mortgage lender for exact numbers tailored to your situation.
If you make $3,000 a month ($36,000 a year), your DTI with an FHA loan should be no more than $1,290 ($3,000 x 0.43) — which means you can afford a house with a monthly payment that is no more than $900 ($3,000 x 0.31). FHA loans typically allow for a lower down payment and credit score if certain requirements are met.
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
"If you want to find financial freedom, you need to retire all debt — and yes that includes your mortgage," the personal finance author and co-host of ABC's "Shark Tank" tells CNBC Make It. You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says.
If you can afford to pay off your mortgage ahead of schedule, you'll save money on your loan's interest. Getting rid of your home loan just one or two years early could save you hundreds or thousands of dollars.