What Income Do I Need To Afford A $200K House? | Bankrate (2024)

If you’re on the market for a $200,000 home, you might find that options in your price range are limited. The national median sale price for a home in July 2023 was more than double that price point at $406,700. Before you make an offer, you’ll also need to make sure you can afford the monthly payments on a $200,000 home. That depends on many factors, including your income, down payment amount and the prevailing mortgage interest rate.

Using Bankrate’s mortgage calculator, we can get a better picture of the income needed to afford a home at this price. If you come to the table with a 20 percent down payment, with a 30-year loan at 6.8 percent interest, your monthly principal and interest payments would equal about $1,043. Adding in homeowners insurance and property taxes, which will vary by location, increases the total payment — let’s call it $1,300. That amounts to $15,600 annually on mortgage payments.

Housing-affordability guidelines suggest spending no more than about one-third of your income on housing. So, by tripling the $15,600 annual total, you’ll find that you’d need to earn at least $46,800 a year to afford the monthly payments on a $200,000 home. This estimate however, does not include the 20 percent down payment you would need: On a $200K home, that’s $40,000 that needs to be paid in full, upfront. Nor does it include closing costs, which also vary by location but will likely amount to several thousand dollars more. And don’t forget to consider the ongoing costs of homeownership.

Income to afford a $200K house

When contemplating how much you can reasonably afford for a home, consider what’s known as the 28/36 rule. This rule basically states that it’s best to limit your housing costs to no more than 28 percent of your income, while spending no more than 36 percent on your debt overall (including housing).

Let’s apply the 28/36 rule to $46,800 in annual income. This amount breaks down to $3,900 per month. Setting aside 28 percent of that amount for housing would equate to $1,092. Following the 28/36 rule, that is the maximum amount you would want to lay out for housing expenses in total — including principal and interest, property taxes, insurance premiums, HOA fees (if applicable) and ongoing maintenance.

Don’t forget the 36 percent part of the 28/36 rule. That means taking stock of all of your monthly other debts, including any credit card debt, car payments or student loans. If all of these expenses combined put you over the 36 percent mark, you may need to scale back or eliminate some of that debt before buying a home, to ensure you don’t get in over your head.

In addition, with a $200,000 home budget, you’ll need to think carefully about locations that have homes are available at your price point. Some markets might be out of your reach, but that doesn’t mean there aren’t budget-friendly options out there. For example, check out markets like Buffalo, New York, where the median home price is around $208,000 per July Redfin data, and Champaign, Illinois, where it’s $200K on the dot. And remember, median means half the homes sold were above that amount, and the other half were below — so even if a particular market’s median price is above your budget, you still have a decent chance of finding a home you can afford there.

What factors determine how much you can afford?

Many different factors play a role in how much house you can comfortably afford. These include your credit score, the type of mortgage you choose, the amount of money you have available for a down payment and more.

  • Down payment: The more money you bring to the table in the form of a down payment, the smaller a loan you will need — and that, in turn, lowers your monthly mortgage expense. A sizable down payment has other benefits as well, says Jack Kammer, vice president of mortgage lending for OriginPoint. “Down payment can have a significant impact on the interest rate, as putting more money down means a less risky loan, translating to a lower interest rate,” he says. “Also, if you’re doing a conventional loan with 20 percent down, you would not have to pay the monthly mortgage insurance.”
  • Credit score: Your credit score has a big impact on the interest rate you’ll be offered, and even the type of mortgage you’ll be eligible for. The higher your score, the better. “You may be able to do a conventional loan with a 620 credit score, but your interest rate may be far higher than doing an FHA loan that is geared toward first time home buyers and buyers with lower scores,” says Kammer.
  • Debt-to-income and loan-to-value ratios: Debt-to-income ratio, or DTI, is a measure of your monthly debts versus your monthly income. This factor is a significant consideration for mortgage lenders. So is your loan-to-value ratio, or LTV, which measures the amount of your loan versus the overall value of the home you’re purchasing.
  • Financial assistance: There are numerous assistance programs that can help cover down payment and closing costs to make homebuying more accessible, particularly if you’re a first-time buyer. These programs typically offer grants and low- or no-interest loans, and they exist at the federal, state and even local level — ask your real estate agent to help you figure out which ones you might be eligible for.

Stay the course until you actually close

When you’re purchasing a home, whether you’re just getting started or in the final stages of a deal, it’s best to keep your finances in tip-top shape. This means not making any big purchases (like a new car) or running up the tab on your credit cards, both of which could impact your credit score. Remember, if your credit score declines, your lender still might decline your mortgage application.

It’s also important to have an agent you trust by your side to help you navigate the home search and negotiation process. A local real estate agent who knows the market you’re searching well can help you find a home you love within your $200,000 budget.

FAQs

  • Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300. A $50,000 annual salary amounts to about $4,166 per month. Applying the 28/36 rule, 28 percent would be $1,166, which gives you a bit of wiggle room before you hit the max of $1,300. Of course, these figures would vary depending on your specific circumstances, location and mortgage rate.

  • Assuming a 20 percent down payment and an interest rate of 6.8 percent, the monthly principal and interest payment on a $200K home would be about $1,043. For the total monthly payment you’d need to add the monthly costs of homeowners insurance, property taxes and HOA fees, which will vary depending on your location.

What Income Do I Need To Afford A $200K House? | Bankrate (2024)

FAQs

What Income Do I Need To Afford A $200K House? | Bankrate? ›

With a 5% down payment and an interest rate of 7.158% (the average according to Mortgage Research Center's rate tracker at the time of writing), you will want to earn at least $4,544 per month – $54,528 per year – to buy a $200,000 house. This is based on an estimated monthly mortgage payment of $1,636.

What should my salary be to afford a 200K house? ›

Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300.

Can I afford a 250k house on 50K salary? ›

You can generally afford a home for between $180,000 and $250,000 (perhaps nearly $300,000) on a $50K salary. But your specific home buying budget will depend on your credit score, debt-to-income ratio, and down payment size.

How much house can I afford if I make $36,000 a year? ›

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

Can I afford a 300k house on a 70K salary? ›

If you make $70K a year, you can likely afford a new home between $290,000 and $310,000*. That translates to a monthly house payment between $2,000 and $2,500, which includes your monthly mortgage payment, taxes, and home insurance.

Is it possible to buy a home making 40K a year? ›

Using the 28/36 rule to calculate your home purchase budget

A mortgage might be good debt, but it's still debt and must be treated as such for budgeting purposes. If we're following the 28/36 rule, your mortgage payment with a 40K salary tops out at $933 each month, and your other debts are capped at $267.

How much down payment for a 200K house? ›

For a government-backed mortgage like an FHA mortgage, the minimum down payment is 3.5%. For a home that costs $200,000, you'll need to save $7,000 to get a home mortgage loan.

How much would monthly payments be on a $200,000 mortgage? ›

As far as the simple math goes, a $200,000 home loan at a 7% interest rate on a 30-year term will give you a $1,330.60 monthly payment. That $200K monthly mortgage payment includes the principal and interest.

How much house can I afford with a 1 million salary? ›

One rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower.

Can I buy a house making 60K a year? ›

If you earn $60K a year, that means you can afford to spend around $180,000 on a house, maybe a bit more if you have little or no other debts. However, depending on where you want to live, interest rates, and how much debt you're carrying, that figure could change significantly.

Can a single person live on $36,000 a year? ›

If you want to have a minimalist lifestyle, 36k/year is more then enough. If you want a home, family, car, insurance and some "toys", it's not going to be enough, at least in a majority of places in the U.S. But again, the term "decent" is pretty objective.

What credit score is needed to buy a house? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).

How much house for $3,500 a month? ›

A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.

What income is needed for a 200k mortgage? ›

What income is required for a 200k mortgage? To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually.

What is 70k a year hourly? ›

If you make $70,000 a year, your hourly salary would be $33.65.

What credit score is needed to buy a $300K house? ›

What credit score is needed to buy a $300K house? The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

What income do you need for an $800000 mortgage? ›

Ideally, you should make $208,000 or more a year to comfortably manage an $800,000 home purchase, based on the commonly used 28 percent rule (which states that you shouldn't spend more than 28 percent of your income on housing).

How much does a 200K house cost a month? ›

As far as the simple math goes, a $200,000 home loan at a 7% interest rate on a 30-year term will give you a $1,330.60 monthly payment. That $200K monthly mortgage payment includes the principal and interest.

Can I afford a 300K house on a 60k salary? ›

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

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