According to the Census Bureau, the median household income in the U.S. is around $71,000. Even if you make a few grand more, you might feel priced out of today’s challenging housing market — but don’t give up.
“Even though home prices are high compared to where they were a few years ago, don’t assume that you can’t afford one just because you make under $100,000 a year,” said Delaney Juarez of Keller Williams City View in San Antonio, Texas. “There are actually things like down payment assistance programs and tax exemptions that could help you get into a home you love.”
Your income might be the primary consideration, but it’s certainly not the only one. Many other factors go into what you can afford on a salary of $75,000. Here’s what you need to know.
Aim for $150,000-$250,000, but There’s a Lot To Consider
Your credit score will affect how much house you can afford, as will any other assets you own, the size of your down payment and many other factors. But you can establish a general range with some basic math.
“Allocating around 25%-30% of monthly income towards housing expenses is recommended,” said Hubert Miles, certified master inspector, HUD 203k consultant and owner of Patriot Home Inspections and Home Inspection Insider.
Since current mortgage rates are now over 6.5%, he gave an example of a 30-year loan with 7% interest.
“Individuals with a salary of $75,000 a year should aim for a home price ranging from $150,000 to $225,000, which would yield a mortgage payment of $998 to $1,497,” said Miles, who cautioned to budget for costs beyond the loan itself.
“When allocating 25%-30% of monthly income to housing expenses, this includes mortgage payments and other expenses such as property taxes, homeowner’s insurance, and any potential HOA fees,” he said.
Boyd Rudy, team leader and associate broker with MiReloTeam Keller Williams Realty Living, says that a $75,000 salary could get you beyond the threshold Miles outlined.
“Assuming an average interest rate and reasonable debt-to-income ratio, someone with a $75,000 salary could potentially afford a home in the range of $225,000 to $275,000,” he said.
Considering modern lending practices, it’s not an unreasonable assumption — but trust your math over a lender’s offer.
“Banks will often approve you for a loan that’s on the higher end of your budget than is actually wise,” said Juarez. “So, when deciding on a price point to look at, only go with what you can actually afford, not what the bank says you can afford.”
When Crunching the Numbers, Think Like a Lender
Ignoring what the bank says you can afford is good advice, but the best way to work up your numbers is from the bank’s perspective — and the bank will be very interested to know what you do with the 70%-75% of your income that isn’t allocated for housing.
“Mortgage providers will typically approve a homebuyer with a back-end debt-to-income ratio of 45%,” said Charles Vanderstelt, real estate broker with Quadwalls. “This means the monthly cost of the home, including insurance and property taxes and other recurring debts such as car payments, student loan repayment, revolving credit, child support and alimony payments must total 45% or less than the buyer’s monthly income.”
Focus on Monthly Income, Not Annual Salary
Vanderstelt’s math concludes the debt-to-income maximum for a $75,000 annual salary is $2,813 per month — and per month part is what really matters.
“Mortgage providers approve a homebuyer based on the recurring monthly cost of homeownership,” he said. “These include principal and interest repayment, property taxes, and homeowner’s insurance. To more accurately determine your housing costs, build in 1% of the purchase price for annual property taxes and $125 per month for homeowner’s insurance.”
The key when planning is to break down your $75,000 salary into 12 units of $6,250.
“It’s going to be a lot easier to figure out how much home you can afford when you look at your monthly income rather than your yearly income,” said Juarez. “That’s actually how banks figure out how much they’re willing to loan out, so I recommend you use that metric as well.”
Remember the Three Ls
According to Zillow, the median U.S. home value is $339,084, which is well above even the upper reaches of the affordability range on a $75,000 income — but it all depends on where you’re looking to buy.
“In some high-cost regions, this salary may limit affordability to smaller properties or less expensive neighborhoods,” said Joshua Haley, founder of Moving Astute. “However, in areas with more affordable real estate, it may still be possible to purchase a modest home or condo within this salary range.”
According to America Mortgages, the following 10 cities are the best places to buy a home for under $250,000:
“Assuming an average interest rate and reasonable debt-to-income ratio, someone with a $75,000 salary could potentially afford a home in the range of $225,000 to $275,000,” he said. Considering modern lending practices, it's not an unreasonable assumption — but trust your math over a lender's offer.
Aim for $150,000-$250,000, but There's a Lot To Consider
Your credit score will affect how much house you can afford, as will any other assets you own, the size of your down payment and many other factors. But you can establish a general range with some basic math.
How much income you need to buy a house in a specific price range largely depends on the type of loan you're applying for, where you live and other factors. For example, at current mortgage rates, borrowers with an FHA loan and a 10% down payment would need to earn about $70,000 a year to afford a $400,000 house.
If you make $75,000 a year, you're earning more than half of all workers in the U.S. And in fact, many people would probably consider the salary as good pay.
When using a calculation of 15% of your take-home pay per month and 20% down at the time of purchasing, a person with a $75,000 per year salary can afford a $48,000 car. Just be sure that a monthly payment of $723 is affordable based on your existing financial commitments before completing your purchase.
The Pew Research Center defines the middle class as households that earn between two-thirds and double the median U.S. household income, which was $65,000 in 2021, according to the U.S. Census Bureau.
If you are a single person in Los Angeles making around $70,000 a year, you are still considered low-income, according to a new statewide study. The California Department of Housing and Community Development released the report in June and found that income limits have increased in most counties across California.
So you're looking at somewhere near $3791 after tax per month. To be safe, a rule of thumb is that you should aim for 1/3 of your salary or less on rent. That will leave the appropriate amount for spending money, insurance, transportation, etc etc. So my suggestion is to look for $1263 per month or less.
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.
Using the 28% to 30% rule, your ideal maximum monthly payment shouldn't exceed $1,866 and $2,000. With that being said, if you're getting a 30-year fixed-rate mortgage with a 6% interest rate, you can likely afford a home valued up to $263,000 (including property taxes and insurance, and assuming a 5% down payment).
Only 12.3% of Americans make in the $75,000 to $99,999 range. An additional 16.4% make between $100,000 and $149,000. However, a large portion of Americans (16.2%) earn in the $50,000 to $74,999 range.
While ZipRecruiter is seeing annual salaries as high as $74,500 and as low as $67,000, the majority of $75000 salaries currently range between $69,500 (25th percentile) to $72,500 (75th percentile) with top earners (90th percentile) making $73,500 annually across the United States.
As of May 26, 2024, the average annual pay for a $75000 in California is $69,381 a year. Just in case you need a simple salary calculator, that works out to be approximately $33.36 an hour. This is the equivalent of $1,334/week or $5,781/month.
If you're making $75,000 each year, your monthly earnings come out to $6,250. To meet the 28 piece of the 28/36 rule, that means your monthly mortgage payment should not exceed $1,750. And for the 36 part, your total monthly debts should not come to more than $2,250.
Breaking down the math to apply the 28 percent rule, here's how much you can afford in housing payments on your salary: $70,000 per year is about $5,833 per month. 28 percent of $5,833 equals $1,633, so that's the upper limit on how much you should spend on monthly housing costs.
Keep Your Car Payment Under 15% of Your Net Income
If you earn $70,000 a year after taxes, that breaks down to roughly $5,833 a month. With the 15% rule, you can spend $875 on your monthly car payment — including interest and all other fees.
Using the 28% to 30% rule, your ideal maximum monthly payment shouldn't exceed $1,866 and $2,000. With that being said, if you're getting a 30-year fixed-rate mortgage with a 6% interest rate, you can likely afford a home valued up to $263,000 (including property taxes and insurance, and assuming a 5% down payment).
The monthly payment on a $75,000 loan ranges from $1,025 to $7,535, depending on the APR and how long the loan lasts. For example, if you take out a $75,000 loan for one year with an APR of 36%, your monthly payment will be $7,535.
So you're looking at somewhere near $3791 after tax per month. To be safe, a rule of thumb is that you should aim for 1/3 of your salary or less on rent. That will leave the appropriate amount for spending money, insurance, transportation, etc etc. So my suggestion is to look for $1263 per month or less.
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.
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