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If You Make 75k How Much House Can I Afford – With a salary of $100,000, you have a good chance of having a good budget to buy a home – perhaps in the $300,000 to $400,000 range or more. But to buy a home you need more than a good income. You also need a strong credit score, low debt and a decent down payment.
If your annual salary is $100,000, the 30% rule means you should spend about $2,500 per month on your house payment. With a 10% down payment and a 6% fixed rate, you can probably afford a home worth around $350,000 to $400,000 (depending on the cost of taxes and home insurance).
If You Make 75k How Much House Can I Afford
For example, those earning $100,000 with no current debt and no children cannot spend 40% or more of their income on housing costs. Another $100,000 earner who has two car payments, a large student loan balance and a large family can only afford to pay 25% on a home.
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Your other home ownership costs—property taxes, homeowner’s insurance, private mortgage insurance, and royalties—will also affect your home buying budget. The less you spend on these “extra” monthly fees, the more housing you can ultimately afford.
Two different home buyers, both with annual incomes of $100,000, can afford homes with very different purchase prices. Because when it comes to purchasing power, a lot depends on the details of your loan.
How much house can I afford if I earn $100,000? Example Example 1: Buying a home with a $100,000 salary and good credit
The $100,000 earner in our first example has an excellent credit score of 740. This person has no monthly debt and is willing to put down 20% for a home.
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This buyer may qualify for an interest rate of 5.75 percent. For a down payment of approximately $2,495, this buyer can purchase a $450,000 home.
This scenario assumes a home insurance rate of $1,200 per year, which is the US average, with a tax rate of 0.78%. Because the borrower put 20% down, the lender does not charge a private mortgage insurance (PMI) premium.
Our other borrowers also make $100,000 a year and want to spend about $2,500 on a house payment. But this person has a credit score of 700 and pays $250 each month in non-mortgage loans. They can put 15% down on the home.
Based on these factors, this buyer could get an interest rate of 6.75 percent and qualify for a home price of about $360,000. Let’s do the math:
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A big change from the first example is that a private mortgage insurance (PMI) premium is required because the buyer put less than 20% down. PMI added $200 per month.
The good news: You can cancel PMI after you have 20 percent down on your home. With a 15% down payment, it won’t take long to get there.
Now let’s look at the example of a home buyer who makes $100,000 a year but has a low credit score and relatively high debt.
This could be someone who recently graduated with student loans and hasn’t had a chance to build their credit yet. Or who have several different lines of debt like credit cards and car loans.
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Either way, a low credit score and high debt means your home buying budget will be on the lower end of the spectrum.
This borrower earns a salary of $100,000 and has a credit score of 650 – still high enough to qualify for a conventional loan. This borrower’s PMI rate is slightly higher than the borrower in Example 2 because of the smaller down payment.
In the examples above, all three buyers earn salaries of $100,000 per year. But their home buying budget ranges from $290,000 to $450,000. How do you know where you fall on this scale? What’s Your Right Price for a New Home?
The fastest way to find out how to get pre-approved by a lender. The pre-approval process involves an initial mortgage application that will ask you about your income, credit and debt. It not only shows your price range, but also what your interest rate and monthly payment will be.
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Your FICO score has a big impact on the mortgage rates that lenders will quote you. The higher your score on a scale of 300 to 850, the more housing you can afford. Your bank or credit card company can look at your score for free, but keep in mind that these estimates often differ from the lender’s FICO score.
Beware of free credit reporting apps that don’t show FICO scores. Some of these scoring models tend to exaggerate, giving a false impression of your borrowing capacity.
Lenders check your debt-to-income, or DTI, to make sure you can afford the home payments. You can easily check your own DTI:
A larger down payment opens more doors, especially for traditional lenders. Putting 20% down on a conventional loan eliminates PMI and can also lower your interest rate. Additionally, it can help you address other weaknesses in your application, such as a high DTI or low credit.
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There is little benefit to putting 20% down on an FHA loan because these loans charge a mortgage insurance premium (MIP) regardless. But putting 10% or more down on an FHA loan means your mortgage insurance expires in 11 years instead of the life of the loan.
It may help to know that mortgage lenders use the term loan-to-value ratio (LTV) to refer to your down payment. LTV shows money down from the opposite angle. 20% down payment equals 80% LTV.
Your credit score, DTI and down payment size should inform your decisions about loan types and loan terms.
Most buyers get 30-year mortgage terms. Spreading your mortgage over a longer period of time lowers your monthly mortgage payment, meaning you can afford more of your home.
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However, a shorter loan term saves interest in the long run. For example, a 15-year fixed-rate loan has higher monthly payments but lower interest rates. Keeping your home loan for a longer term can reduce your total interest costs by thousands of dollars.
Your salary not only affects the amount of mortgage you can borrow, but also the types of loans you can take out.
Some programs, such as the USDA zero-down mortgage, have income limits on who can qualify. The USDA program limits income to 115% of Area Median Income (AMI). Note that these limits apply to the total income of the family, not just the borrower.
Fannie Mae home loans and possible Freddie Mac home loans — both of which allow 3% down — also maintain income limits.
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Earning less than $100,000 a year may prevent you from applying for Down Payment Program Assistance (DPA).
There are many DPA programs across the country, including at the state and local levels, so eligibility criteria vary from place to place. But most programs limit assistance to a certain income limit. So if you’re counting on a DPA to help you buy a home, make sure you know the requirements before including it in your plans.
A final word on boundaries. Even if you apply for a conventional loan with no income limit, the value of your home cannot exceed a certain amount – the so-called conforming loan limit.
These limits are set annually by the federal government. Mortgages above this limit are considered “jumbo loans” and are not guaranteed by the government.
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The corresponding debt limit in most US counties for 2024 is $, although it can increase to $ in high-cost areas.
It’s a good idea to find out how much home you can afford before you buy. This way you avoid falling in love with a property you can’t afford. Your monthly expenses and credit history—along with your income—determine your price range.
To find your price range, you can use a home affordability calculator. Or share your financial situation with the lender to get a quick understanding of your purchasing power. You can start here.
Casey Morris is a financial and technology journalist. She has written for Forbes Asia, The Washington Post and several financial publications and organizations. Eric J. Martin by Eric J. Written by Martinaro Senior Associate, Personal Finance Eric J. Martin is a Chicago-based freelance writer/editor whose articles have appeared in AARP Magazine, Readers Digest, The Costco Connection, The Motley Fool. Other publications. He writes frequently on topics such as real estate, business, technology, health, insurance and entertainment. Eric J. Martin
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Edited by Michelle Petrie Edited by Michelle Petriro Right Senior Editor, Home Loans Michelle Petrie is the senior editor for the site’s leader in real estate content. Connect with Michelle Petrie on LinkedIn Connect with Michelle Petrie via Email on LinkedIn Email Michelle Petrie
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