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Below are some general guidelines.
I think these guidelines are generally good, but a person's exact situation is also pretty important. I'm guessing unless you live in an ultra high cost of living area, $700K is excessive though. In my state, we're faced with relatively low income and very high housing cost. When I bought my first place, I think my Debt to Gross Income ratio was more like 45%. If you looked at debt to after tax income, it was even crazier, like 65%. lol
Now, my DTI ratio is like 20% based on the formula below. Generally speaking, as long as your career keeps advancing, your debt cost on a fixed mortgage remains the same, while your income increases, reducing your ratio. Even if you start at a high ratio, as long as you don't incur unnecessary debt and budget well, it shouldn't be an issue.
2 x $70,000 household income in my state = $140,000. You can't even buy a studio in the suburbs for that much. I also own a 360sq ft rental studio that was appraised last year at $180,000. $140k would get you a leasehold studio or a small 80 year old apartment in the ghettos. Bottom line is that in some situations, it calls for you to stretch a lot further if you wish to buy a home. In those situations, you better ensure that housing is your only form of debt.
In my personal opinion, to buy a $700k house, even in my high housing area, you'd want to put 20% down payment and also have 2 people making 70k, not 1. Therefore your household income should be at least $140,000
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Generally speaking, most prospective homeowners can afford to mortgage a property that costs between 2 and 2.5 times their gross income. Under this formula, a person earning $100,000 per year can afford to mortgage between $200,000 and $250,000. But this calculation is only a general guideline.
Most lenders recommend that your DTI does not exceed 36% of your gross income. To calculate your maximum monthly debt based on this ratio, multiply your gross income by 0.36 and divide by 12. For example, if you earn $100,000 per year, your maximum monthly debt expenses should not exceed $3,000.
I think these guidelines are generally good, but a person's exact situation is also pretty important. I'm guessing unless you live in an ultra high cost of living area, $700K is excessive though. In my state, we're faced with relatively low income and very high housing cost. When I bought my first place, I think my Debt to Gross Income ratio was more like 45%. If you looked at debt to after tax income, it was even crazier, like 65%. lol
Now, my DTI ratio is like 20% based on the formula below. Generally speaking, as long as your career keeps advancing, your debt cost on a fixed mortgage remains the same, while your income increases, reducing your ratio. Even if you start at a high ratio, as long as you don't incur unnecessary debt and budget well, it shouldn't be an issue.
2 x $70,000 household income in my state = $140,000. You can't even buy a studio in the suburbs for that much. I also own a 360sq ft rental studio that was appraised last year at $180,000. $140k would get you a leasehold studio or a small 80 year old apartment in the ghettos. Bottom line is that in some situations, it calls for you to stretch a lot further if you wish to buy a home. In those situations, you better ensure that housing is your only form of debt.
In my personal opinion, to buy a $700k house, even in my high housing area, you'd want to put 20% down payment and also have 2 people making 70k, not 1. Therefore your household income should be at least $140,000
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Generally speaking, most prospective homeowners can afford to mortgage a property that costs between 2 and 2.5 times their gross income. Under this formula, a person earning $100,000 per year can afford to mortgage between $200,000 and $250,000. But this calculation is only a general guideline.
Most lenders recommend that your DTI does not exceed 36% of your gross income. To calculate your maximum monthly debt based on this ratio, multiply your gross income by 0.36 and divide by 12. For example, if you earn $100,000 per year, your maximum monthly debt expenses should not exceed $3,000.
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