Everyone has different needs and budgets when it comes to buying a house. However, all homebuyers have one thing in common — they want to know how much house they can afford before making an offer.
Well, there are a few things that you need to take into account, like your job stability, other debts, and your savings. But don’t worry, we will walk you through everything step by step.
How Much House Can I Afford with a 100K Salary?
In most situations, you will be able to get a property worth between $350,000 and $500,000. However, this number will change depending on your circumstances, like credit score, job security, and other debts you may have.
6 Factors That Affect How Much House You Can Afford
Your salary is just one factor that affects how much house you can afford. Other factors include:
Your Credit Score
What house can I afford on 100k a year? It will depend on your credit score. Namely, the better your credit score is, the higher your chances of qualifying for a lower interest rate on your mortgage. To acquire a house with a typical loan in 2022, you’ll need at least a 620 credit score.
For example, if you make a six-figure salary, but you have a fair credit score (650), you will be able to obtain a house for under $300,000.
On the other hand, with a good credit score of 700, you might get a house for over $500,000, while an excellent credit score (760 and above) can get you a house worth over $700,000.
To obtain the lowest mortgage rate possible, make sure your credit score is above 720 and your DTI ratio is under 36%.
You can also try to improve your credit score by:
- Paying your bills on time
- Keeping your credit card balances low
- Avoiding late payments.
Your Savings
In addition to your credit score, your savings will also play a role in how much house you can afford with a 100k salary. If you don’t qualify for a VA loan or a zero-down USDA loan, you’ll have to pay some money upfront.
The percentage you will need to put down for a loan varies between 5% and 20%. Keep in mind that you’ll need to pay closing costs as well, which are usually 3–6% of the loan amount.
Your Other Debts and Expenses
If you have a lot of debt, you’ll have less money to put towards your mortgage. Therefore, you’ll want to ensure that your monthly mortgage payment is affordable in relation to your other monthly expenses, such as food, transportation, and child care.
Based on the stats, the average monthly mortgage payment for homeowners in the US is $1,500.
So what can I afford making 100k a year? A good general rule of thumb is that your mortgage payment should not be more than 28% of your household income. I.e., if you make $100,000 pre-tax each year, your monthly payment should not go over $2,333.
However, different lenders will have other requirements, so some might ask that your total monthly costs, including your mortgage, don’t exceed 32% or even 40% of your monthly earnings.
Interest Rates
Interest rates play a significant role in determining the price. The higher the interest rate, the more expensive your monthly mortgage payments will be.
The current rates of mortgage interest (as of September 2022) are as follows:
- Conventional 30-year fixed: 6.125%
- Conventional 15-year fixed: 5.389%
- Conventional 20-year fixed: 6.13%
- Conventional 10-year fixed: 5.59%
- 30-year fixed FHA: 5.851%
- 15-year fixed FHA: 5.657%
- 30-year fixed VA: 5.465%
- 15-year fixed VA: 5.572%
So, how much house can I buy with a $100k salary? With a 6% fixed interest rate, you could conceivably afford a property worth between $350,000 and $400,000.
Length of Employment
The longer you’ve been at your job, the more likely you will get approved for a loan. Most mortgage applications will require a two-year work history.
On the other hand, if you’ve been employed for less than two years, your lender will ask you to provide the following:
- The skills and expertise you’ve acquired
- Your company’s and industry’s health
- The frequency of your job changes
- Extended periods of being out of work
- Increases in salary
- Continuity of work history in the same field
Lenders like to see that you have stability and good employment history. They want to know that you’re likely to continue working and earning a steady income.
Your Down Payment
Is a 400k house on a $100k salary doable? Yes, if you can afford a minimum down payment of $14,000. The minimum down payment will depend on the loan type:
- Conventional loan: 3%–15%
- FHA loan: 3.5%
- Jumbo loan: 20%
Most homebuyers generally make a down payment of 12%. However, the ideal down payment to get the best mortgage rate is 20%. Larger down payment lowers your monthly interest rate and gives you greater purchasing power.
Conclusion
So, what house can you afford with a 100k salary? Based on the factors discussed above, you can afford a house between $350,000 and $500,000.
However, it will ultimately come down to your unique financial situation, i.e., your credit score, employment history, savings, and other debts and expenses.
FAQs
How much house can I afford with a 120k salary?
With an annual salary of $120k, you can afford to buy a house worth anywhere between $300,000 and $600,000. That is, if you can afford monthly payments between $2,000 and $3,000.
How much house can I afford making 110k a year?
If you’re making $110k per year, you’ll be able to buy a house worth $330,000. If you put 10% down on a house at a 5% interest rate, your monthly mortgage payment (including estimates for things like property taxes, mortgage insurance premiums, and hazard insurance) will be $2,198.
How much home can I afford if I make 100k a year?
If you make $100,000 per year, you can afford a house worth between $350,000 and $500,000.
Again, the overall price will depend on many factors, such as your credit score, savings, current interest rates, monthly expenses, and other debts.
Instead of asking “how much house can I afford with a 100k salary,” ask yourself how much you can afford to spend on your monthly mortgage payment. This will give you a better idea of the price range you should be looking at.
