Yahoo Finance Barbara Corcoran: How Much House You Can Afford On Your Salary
Buying a home, particularly if it’s your first, can be not only stressful, it can be confusing. This is partly because you have to determine the exact amount of house you can afford on your salary. There are some home affordability calculators out there, but sometimes you just need a quick bit of insight from a financial expert, like Barbara Corcoran, to help simplify the process.
In a short video post for CNBC, the Shark Tank star broke down how much house you can afford on a variety of salaries. Here’s what Corcoran said.
Also see why Corcoran says not to wait until interest rates go down to purchase.
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The Rule of Thumb
Corcoran said that you should spend roughly 30% of your take-home (or post-tax) pay on housing costs. This doesn’t just include mortgage, but also comprises property taxes and homeowners’ insurance.
“This is what banks are looking for,” Corcoran said.
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If You Make $50,000 a Year
“You should roughly spend four times your salary on a house,” Corcoran said. “You want to ask, ‘Hey, I’m making $50,000, what could I afford? You should multiply your salary by four, and that’s generally what you can qualify for, assuming you have a 20% downpayment.”
By using this approach, if you’re making $50,000 a year, you can afford a $200,000 home.
“A small home, like 1,300 square feet,” Corcoran said. “A starter house.”
If You Make $80,000 a Year
Corcoran says that if you make $80,000 a year, you can afford a $320,000 home.
If You Make $125,000 a Year
If you’re raking in $125,000 a year, Corcoran says you can afford a $500,000 home — and “get as much as 3,600 square footage.”
Corcoran pointed out though that “you gotta pay the taxes on that sucker.”
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