By Caroline Banton ·April 15, 2024 · 8 minute read
We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey.We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide.We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.
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.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
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.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
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.
💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
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.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Is $100K a good salary for a single person?
A salary of $100k is above the national median income (according to Census data, the national median income was $74,580 in 2022). This is a good salary, but you still might struggle to buy a home in areas with a high cost of living. The larger down payment you have, and the better your credit score, the bigger house you can buy.
What is a comfortable income for a single person?
A comfortable income for a single person is dependent upon where that person lives. The findings from a study using data from the Bureau of Labor Statistics to calculate the cost of necessities to determine a living wage shows wide variance existing among states. According to the study, Hawaii is the most expensive state, and singles require an annual salary of $112,411 to live comfortably. In Mississippi, you can live comfortably on $45,906 a year.
What is a liveable wage in 2023?
A liveable wage will vary depending on where you live. However, the Massachusetts Institute of Technology determined that $104,07 per year was a liveable wage before taxes in 2022. This was for a family of four with two working adults and two children.
What salary is considered rich for a single person?
According to Internal Revenue Service data, an income of $540,009 per year puts a person in the top 1% earnings category.
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FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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