In the US, you cannot afford more than about $150,000 for a mortgage. At an interest rate of 4.5% for 30 years, the payment would be $760 monthly for principal and interest only. A hazard insurance policy and property taxes, the amount of which I can't answer (it's unique to each property) is considered part of the allowable payment amount, so you need to leave room for that.
In the US, you would be allowed a monthly payment of no more than 28% of your monthly gross income, and a total debt load of no more than 36%. I'll show you what that works out to for 40k.
40,000/52 weeks = 769 weekly. 769 x 4.33 weeks (in a month) = 3,330 per month. Your maximum mortgage payment is 3,300 x 28% = $932. Your maximum additional debt load (car payment, student loans, credit cards etc) is 3,300 x 8% = $266. Any amount over that $266 per month is subtracted from the $932 mortgage payment.
Those are the maximums. Ideally, a lender does not want to see you right at those limits.
Then there is the issue of a down payment. You would have to check with lenders to see what those requirements are. In the US, to get the best rate and a 28/36 debt ratio, you need a 20% down payment. There are programs for little to no down payment, but interest rates are generally higher and the debt ratios lower, meaning you can afford less house.
Any good mortgage lender in the UK should be able to steer you in the right direction. Over here, real estate agents are well-versed, and know how to 'qualify' a prospective buyer so that they aren't wasting anybody's time showing properties to unqualified buyers. I imagine it's the same over there.
A couple of other things. You will need a good credit history and a record of steady employment. Over here, lenders want to see you working in the same industry for at least two years, if you haven't had your present job for that long.
Good God no! $40,000 a year is slightly above poverty where i live. I make about $80,000 and own a $150,000 home. I was approved for $280,000. You would be looking at a monthly payment of over $2500, and making about $700 a week gross. My mortgage with taxes is $750 a month and my loan was only for 100,000 at 4.5% because I put 50 down
A good way to decide what you can afford is your monthly mortgage payment shouldn't be more than one weeks take home pay.
40 or 400? Your question says both. You asked this in the UK group. Is this a US or UK question? Dollars or pounds?
In the US, I would not try to buy a house on a $40,000 salary unless I had at least 20% to put down, and had a least six months' worth of expenses in an emergency savings fund. I'd also only do it if I had no other debt.
Think about it. After taxes, you are making about $28,000. That is about $2,300 a month. If your mortgage, taxes, insurance, and annual home owners dues total $1,000 a month on a $100k house), that leaves you 1,300 for gas, electricity, lawn care, car maintenance, auto insurance, food, clothing, healthcare, savings for retirement, etc.
It is better than a poke in the eye with a sharp stick lol.
I suspect $40,000 is not enough to buy a house for $200k let alone $400k.
It all depends where abouts in the States you live, central Manhattan and you will struggle to get a mortgage for a dog kennel.
Whereas out in the sticks there might be some nice starter places for $140k
You are on similar to me, here in Blighty, and you should be able to get a mortgage for a house about $140 with a decent lump sum deposit.
Depends on how long you have been working and how much money you have saved up by way of deposit on the house. I hope you are not so naive as to think you can simply walk into a bank and claim that you earn $40k and that you want to buy a $400k house. They will laugh you off into the streets.
You should ask these questions to a lender who could tell you what you can and can not afford.Good luck.
Would I be able to afford a house at $400,000 if I took a mortgage out?
I'm really new to all of this and I have no clue, I just need an insight as to what to do and how to manage money
