I Make $100,000 a Year. How Much House Can I Afford?
On a salary of $100,000 per year, as long as you have minimal debt, you can afford a house priced at around $311,000 with a monthly payment of $2,333. This number assumes a 6.5% interest rate and a down payment of around $30,000.
The 28/36 rule is often used as a guide when deciding how much house you can afford. The rule stipulates that you should not spend more than 28 percent of your salary on overall housing costs and no more than 36 percent on housing costs and your debt. On a salary of $100K with debts of about $250 per month, a house costing $311,000 just fits in your budget.
However, how much home you can afford depends on other factors also, such as where you intend to live and how much you have saved as a down payment.
This article looks at how all of these factors affect your home purchase and gives some examples of how much home you can realistically afford on a salary of $100,000.
What Kind of House Can I Afford With $100K a Year?
Another rule of thumb often applied when buying a home is to not spend more than three times your annual income on a home. If you earn $100,000 a year, that would be $300,000.
A salary of $100,000 is well above the national median income (according to Census data, the national median income was $74,580 in 2022). That puts you in a good position if you want to buy a home, particularly if the cost of living is low in the area that you are targeting. If you have substantial savings for a down payment and little debt, you’re even better positioned. Debt is important because lenders look at how much debt you have when they qualify you for a mortgage.
Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is the amount of income you receive relative to the amount of payments you make each month to cover your debt. You’ll get better loan terms, and your monthly mortgage loan payments will be less, if you have less debt.
That’s why many experts also recommend the 28/36 rule. So, if you earn $100K, your housing costs should be less than $28,000, $2,333 a month, and your debt and housing costs should not exceed $36,000, or $3,000 a month.
Your Down Payment
Unless you qualify for a zero-down USDA or VA loan, most lenders will expect a down payment of between 3% and 20%. The more you put down, the more house you can afford, but as you think about your down payment amount, make sure you reserve funds for closing costs, moving costs, and an emergency fund for unexpected expenses.
Home Affordability
Homes are more affordable in certain areas. Some areas have a higher cost of living and higher property taxes.
Your credit score will also affect how much home you can afford. If you have a high credit score, you will qualify for a lower interest rate loan. If you pay less interest, you can borrow more and still meet your monthly payments.
Depending on where you want to live, the housing market might dictate how big a home you can afford. House prices are affected by the economic conditions, and low unemployment rates and healthy economic growth gives buyers more purchasing power. If buyers have more purchasing power, they can afford bigger loans, and this will push up house prices.
How to Afford More House with Down Payment Assistance
Some people, such as first-time buyers or certain professionals like nurses and teachers, can qualify for down payment assistance from federal, state, and local government, private entities, and charitable organizations. Assistance might be in the form of a low-rate loan, cash grant, tax credit, or a reduced interest rate.
Applying for down payment assistance can add weeks or months to your home buying timeline, but for more information, the U.S. Department of Housing and Urban Development (HUD) keeps a list of programs listed by state, county, and city.
Here are typical down payment amounts for various types of mortgages.
Conventional mortgages require a 3% down payment for first-time buyers
FHA mortgages require 3.5% down
VA mortgages require 0% down
USDA: These zero down payment loans serve low-income borrowers in rural areas.
Home Affordability Examples
Let’s take a look at some hypothetical examples for those wondering, “If I make $100K how much home can I afford?” These examples assume an interest rate of 6.5% and average property taxes.
Example #1: Low Down Payment and Significant Debt
Gross annual income: $100,000
Down payment: $10,000
Monthly debt: $1000
Home budget: $238,441
Monthly mortgage payment: $2,000
Payment breakdown:
Principal and interest: $1,444
Property taxes: $208
Private mortgage insurance: $264
Homeowner’s insurance: $83
Example #2: Bigger Down Payment, Less Debt
Gross annual income: $100,000
Down payment: $40,000
Monthly debt: $300
Home budget: $333,212
Monthly mortgage payment: $2,333
Payment breakdown:
Principal and interest: $1,853
Property taxes: $208
Private mortgage insurance: $188
Homeowner’s insurance: $83
How to Calculate How Much House You Can Afford
You need a budget to find out how much house you can afford. Keeping a budget will show you how much you are spending each month versus how much income you have. Whatever you have leftover after paying essentials like food, clothing, and utilities is how much you can afford to spend on housing.
You can also use a mortgage calculator to help you. Just plug in your own numbers to find out what your monthly payments would be.
How Your Monthly Payment Affects Your Price Range
The more you can afford to pay each month for your mortgage and other housing expenses, the more house you can afford. However if you have significant debt payments each month, or you have a poor credit score that results in a higher interest rate for your loan, that will reduce the amount of loan you can afford and the price range.
Types of Home Loans Available to $100K Households
Four types of loans are the most common. These are conventional loans, FHA loans, USDA, and VA loans.
Conventional loans typically require a credit score of 620 or more, but the down payment can be as low as 3 percent. Remember that a lower down payment means higher monthly payments because you will have to borrow more.
FHA loans. With an FHA loan, home buyers with a credit score over 580 can borrow up to 96.5% of a home’s value. Home buyers with a lower credit score, between 500 to 579, can still qualify for a loan as long as they have a 10% down payment.
USDA: USDA loans are zero down payment financing for low-income borrowers in designated rural areas.
VA: VA loans also require no down payment and are available to qualified military service members, veterans, and their spouses.
The Takeaway
If you are looking to buy a home and would like a more realistic idea of what you can afford, first find out how much you are spending on necessities like food, clothing, transportation, and, most importantly, debt. What you have leftover is how much you can spend each month on housing expenses.
Once you have a grasp on your finances, you can use an affordability calculator to see how much of a house you can afford. The size of home that the amount will buy depends on the local housing market and the cost of living where you want to live.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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Do You Make More Than the Average Person in Your State?
Whether you’re deciding on a new career path or wondering if you’re being paid enough, it can help to know what the typical American worker earns per year.
Based on the latest data available from the Social Security Administration (SSA), the average annual pay in the U.S. in 2022 was $63,795 — a 5.32% jump from the previous year. The U.S. Bureau of Labor Statistics (BLS) estimates the average worker made closer to $69,986 that same year. The amount you make may depend on a number of factors, including your occupation, where you live, your gender, and your level of education.
AndreyPopov / iStock
Let’s take a closer look at how the average annual pay in the U.S. has changed over a three-year period based on data from both the SSA and BLS.
Sofi
It can also be helpful to look at median earnings, which represent the midpoint of salaries in the U.S. In other words, half of the salaries fall below the median, and half are higher than the median.
As you can see, average and median incomes have risen each year. However, average salaries can be affected by various factors such as your occupation, age, and gender. Note that the numbers above also don’t include unearned income.
The following table shows the median annual salary for a three-year period.
Sofi
Some industries tend to pay more than others, which means the career you choose may affect how much you earn. Here’s a sampling of high-paying jobs and their average annual salary, according to the BLS:
- Cardiologist, $421,330
- Dentist, $172,290
- Aircraft pilots and flight engineer, $225,740
- Lawyer and judicial law clerk, $161,680
- Public relations manager, $150,030
- Air traffic controller, $130,840
While salaries tend to vary based on geography, seeing how much certain types of jobs pay can be informative. Let’s take a look at different occupations and how much they typically pay.
Keep in mind that average salaries may differ depending on the specific occupation you have. For example, although claims adjusters fall under the business and financial operations category, their average salary is around $72,040.
Demographics, specifically gender, are another factor to consider. By and large, men tend to outearn women throughout their career. The median annual salary for a 16- to 24-year-old man is $38,688; a woman of the same age earns $36,088, per the latest data available from the BLS. Likewise, the median annual salary for a man aged 25 and older is $64,376; a woman of the same age earns $52,520.
Jacob Wackerhausen/istockphoto
Wages often vary based on where you live. In many cases, states with higher costs of living also have higher wages. For example, the median annual income in Hawaii is $104,704 — much higher than Mississippi’s median annual income of $70,950.
Next is the median income by state for a household of three people, according to data compiled by the Census Bureau between April 1 and May 14, 2023.
coffeekai/istockphoto
Median annual income: $77,419
Cavan Images/istockphoto
Median annual income: $113,035
Milepost430Media/istockphoto
Median annual income: $90,193
Sean Pavone / istockphoto
Median annual income: $74,475
Brandon Olafsson/istockphoto
Median annual income: $104,785
choness/istockphoto
Median annual income: $113,822
Jonathan Ross/istockphoto
Median annual income: $121,958
SeanPavonePhoto/istockphoto
Median annual income: $103,598
Bo Shen/istockphoto
Median annual income: $146,440
LUNAMARINA/istockphoto
Median annual income: $83,396
ULora/istockphoto
Median annual income: $87,742
Kruck20/istockphoto
Median annual income: $104,704
todamo/istockphoto
Median annual income: $87,960
knowlesgallery/istockphoto
Median annual income: $101,951
Dawid S Swierczek/istockphoto
Median annual income: $89,800
Aaron Yoder/istockphoto
Median annual income: $95,739
Wirestock/istockphoto
Median annual income: $88,271
Median annual income: $75,700
hstiver / istockphoto
Median annual income: $73,393
Sean Pavone/istockphoto
Median annual income: $95,531
Sean Pavone/istockphoto
Median annual income: $122,385
Tim Pruss/istockphoto
Median annual income: $127,172
Sean Pavone/istockphoto
Median annual income: $93,873
JerryB7/istockphoto
Median annual income: $114,267
atosan/istockphoto
Median annual income: $70,950
SeanPavonePhoto/istockphoto
Median annual income: $89,515
Sean Pavone/istockphoto
Median annual income: $84,019
Jacob Boomsma/istockphoto
Median annual income: $99,845
Wirestock/istockphoto
Median annual income: $86,618
miroslav_1/istockphoto
Median annual income: $136,886
Ultima_Gaina/istockphoto
Median annual income: $122,540
ChrisBoswell / istockphoto
Median annual income: $71,283
Sean Pavone/istockphoto
Median annual income: $103,444
bloodua/istockphoto
Median annual income: $87,369
Wirestock/istockphoto
Median annual income: $93,240
Jacob Boomsma/istockphoto
Median annual income: $90,912
Sean Pavone/istockphoto
Median annual income: $77,166
Sean Pavone/istockphoto
Median annual income: $101,989
ChrisBoswell / istockphoto
Median annual income: $100,888
Kyle Little/Istockphoto
Median annual income: $109,514
Sanghwan Kim/istockphoto
Median annual income: $82,114
SeanPavonePhoto / istockphoto
Median annual income: $92,794
kayeway605/ iStock
Median annual income: $85,014
Ultima_Gaina/istockphoto
Median annual income: $87,228
istockphoto/f11photo
Median annual income: $102,941
legacyimagesphotography/istockphoto
Median annual income: $103,763
SeanPavonePhoto/istockphoto
Median annual income: $111,017
SeanPavonePhoto/istockphoto
Median annual income: $116,345
aiisha5/istockphoto
Median annual income: $81,964
Sean Pavone/istockphoto
Median annual income: $99,261
marchello74/istockphoto
Median annual income: $93,651
robertcicchetti/istockphoto
As the BLS data below shows, there is often a pay disparity among workers of different races and ethnicities.
- Asian, $79,456 per year
- White, $60,164
- Black or African American, $50,284
- Hispanic or Latino, $45,968
Now that you’ve seen some of the average and median annual salaries by occupation, location, gender, and race or ethnicity, how does yours compare? If you’re not making as much as you’d like, you may want to research wages in your industry and region, and use that information to help you negotiate a higher salary. If you’re ready to make a bigger change, you can use this data as you consider whether to switch to a more lucrative field or relocate to a higher-paying region.
KucherAV/istockphoto
Here are some different strategies to help you make the most of the money you make:
Track Your Spending
Understanding exactly where your money is going can help you keep tabs on where your money is going and identify areas where you can cut back. Consider using a spending app to track your spending and saving.
Negotiate Bills
Want to lower monthly expenses, such as your cell phone or internet services? Consider calling up various providers to see if you’re able to get a better deal or if there are promotions you can take advantage of.
Cut Back on Large Expenses
Housing, food, and transportation tend to be the largest line budget items. Explore ways to trim your biggest costs. Examples include refinancing your mortgage, negotiating your rent, shopping at discount grocery stores, and taking public transportation when possible.
Sharpen Your Marketable Skills
Accepting networking opportunities and taking professional development courses could help you become more marketable as an employee. This in turn could set you up to earn more in the long run. If you’re on a tight budget, look into no- or low-cost ways to cultivate high-income skills, and ask your employer if there are any free resources available.
Ridofranz/istockphoto
A high income can be great, but it does come with some downsides.
Pros:
- Improved quality of life: With more money, you can afford a higher standard of living and be able to afford different amenities such as better access to healthcare and food.
- Financial security: The more you earn, the more you can feel secure you have enough money to afford the things you want and need.
- Ability to achieve financial goals faster: Having more disposable income could mean you can set more money aside for long- and short-term savings goals, like retirement or going on a family vacation.
Cons:
- Higher taxes: Earning more can put you in a higher tax bracket. However, there are ways to reduce your taxable income.
- Pressure to maintain income: If you’re accustomed to a certain living standard, you may feel like you need to keep earning the same amount or more to maintain it.
- More work stress: In many cases, higher-paying jobs come with more responsibilities and, at times, longer hours.
Understanding what the average American worker makes in a year can come in handy, especially if you’re considering a new career path, negotiating a higher salary, or looking for a new place to live. According to the latest data from the Social Security Administration, the average annual pay in the U.S. is $63,795. But the amount you earn may depend on a wide range of factors, such as the industry you work in, where you live, your gender, and your race or ethnicity.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
