Barrons Independent


How Much House Can I Afford With A $100,000 Salary Per Year?

To buy a house, you must follow the 28% rule and reduce your monthly expenses to save money and use it for a higher down payment.

How Much House Can I Afford With A $100,000 Salary Per Year?

Morgan Barrons

Nov 10, 2023

If someone is earning $100,000 per year, according to a rough estimate, that person can buy a house for around $300,000 to $400,000. However, it's a rough estimate because several people earn $100,000 yearly and buy a home depending on their financial condition. There is only one rule that helps you calculate all your expenses: the 28/36 rule. Always ensure you have lower costs to buy a decent house and spend life there according to your lifestyle.

Breaking Down A $100,000 Salary

The best way to break down your salary is the 28/36 rule, and according to that rule, your home expenses will not exceed 28% of your gross income, and all expenditures, like debt loans, will equal 36% of your gross income. Let's break down your salary: if you earn $100,000 per year, your monthly payment will be $8,333.87, and now your home expenses will be $2,333.4836, which is 28% of your gross income. However, all costs, including home, loan, debt, etc, will cover $3,000.1932, 36% of your gross income.

Determining Your Home Buying Budget

You must make a budget before buying a house because if you earn $100,000 per year, then you have to make a rough idea before buying a house. Most importantly, your home expenses must be at most 28% of your gross income. After that, you must save more money to pay a higher down payment because it will help you pay lower interest rates. On the other hand, always go for a fixed mortgage that will also help you to pay the same interest rate in a lifetime. Always remember that you have to save more money before buying a house because if you don't save money, then you can't afford a luxury lifestyle after purchasing a home because after buying a house, you have to pay higher interest rates and taxes, etc, that will impact your gross income.

Debt-to-Income Ratio And Its Importance

It has played a significant role, and the debt-to-income ratio is your monthly debt cost divided by your monthly gross income. The debt to income ratio percentage is always the same, 43% percent. According to the obligation to income ratio, all expenses like home expenses, debt, car loans, student loans, and all other upcoming loans like interest rates mortgages will cover 43% of your monthly income. According to the debt-to-income ratio, you can't be eligible for a loan or mortgage if you don't fulfill the criteria. If you have high home expenses and, with upcoming payments, your budget exceeds 43% of your monthly income, you can get any kind of loan.

Mortgage Types Suitable For $100,000 Income Earners

Most people go for two types of mortgages: those who earn average amounts per year, those who go for adjustable mortgages, and those who make high amounts per year, like $100,000 per year, so they go for fixed mortgages. There are two types of mortgage; the first is a fixed mortgage in which you have to pay a high amount of money before purchasing a house, and then you will get lower and the same interest for a lifetime. Therefore, high-income buyers go for a fixed mortgage. The second one is an adjustable mortgage in which you have to pay a lower amount before purchasing a home, but you will get a high-interest rate, and every six months, the interest rate amount will change, and primarily low-income buyers go for this.

Calculating Mortgage Payments On A $100,000 Income

Calculating mortgage payments on a $100,000 income requires careful planning. Start by creating a budget that covers housing expenses, like loan interest, property taxes, and insurance. Keep your mortgage payment between 28% and 31% of your gross income. Use online tools to estimate monthly payments based on current interest rates and loan terms. Consider potential changes, such as higher property taxes. Taking a cautious approach will help you stay financially secure and avoid overextending yourself. Understanding your financial situation will give you confidence when buying a home and getting a mortgage that fits your income and long-term goals.

Planning For Down Payment And Closing Costs

The best recommendation is that you must pay a higher down payment. The down payment is 20% of the total house price. If you have home expenses, you must reduce them because the most essential step in home buying is the down payment. If you save more money and reduce your home expenses, you can quickly pay a higher down payment, which helps you get lower interest rates. If you have a high income, you want a luxury home to live a luxurious lifestyle. You must pay a high down payment because after buying a house, you have to pay several taxes, debt expenses, etc. So, having a low-interest rate gives you more benefits.

Long-Term Financial Planning With Homeownership

In the long term, buying to become an owner has many benefits, such as a high downpayment and high low-interest rates. Most high-income buyers go for the long term because they invest money to buy a luxury home and spend a luxurious life according to their style, and they also find the best location for purchasing a home. In the long term, a house with a good place gives them more benefits because after some years, the price of the house, like the resale value, becomes higher. Then, they can quickly sell that house at higher rates; therefore, the long-term buying a home and becoming an owner is much better.

Insurance, Taxes, And Additional Homeownership Expenses

Buying a home comes with many responsibilities because before buying a home, you have to pay a higher amount to get a lower interest rate. However, after purchasing a house, you will also have to pay taxes, home maintenance, insurance, etc, and most high-income buyers want to buy a luxury home. So, they must pay high property taxes and home maintenance costs. Most importantly, they must pay for insurance because a luxury home must have insurance because there are rarely chances that a house gets damaged by fire or anything else. Therefore, those are the additional homeownership expenses they had to pay after purchasing a luxury home.

The Role Of Credit In Home Affordability

Credit score plays a huge role in buying a home Because if your credit is high, you have to pay a lower interest rate. And if your credit score is too low, you'll pay high-interest rates. You will need to reduce your total credits to increase your credit scores because lenders check your credit scores, and after, according to your credit scores, they consider you for a loan. If your credit score is too low, you'll have to pay too much interest or be ineligible for any mortgage or loan. If your credit scores are too low, there are several companies like FHA, and you will get a loan from FHA if you have a 580 credit scores.

The Benefits Of Mortgage Pre-Approval

Applying for Pre-Approval before buying a home will make you appear as a severe and senior outsider. When you apply for pre-approval, you get an idea of ​​how much interest you can afford every month, and your monthly interest rate is decided based on that. Always find some good lenders and apply your pre-approval with them; this will benefit you from paying a much lower monthly interest rate. If you use it before home purchasing, you have to pay a lower interest rate for mortgage and other loans.

Exploring Government And Private Home Buying Assistance

The quest for homeownership is made possible through the vital role played by government and private home-buying assistance programs. Government initiatives, such as FHA and USDA loans, give way for first-time homebuyers by offering low down payment options and flexible eligibility criteria. These programs are crucial in making homeownership a reality for individuals facing affordability challenges. These combined efforts not only enhance accessibility to homeownership but also contribute to overall financial stability. Always explore government and private assistance because both have several benefits, so always check out for both sides.

Should You Max Out Your Budget?

Buying a home is today's every person's dream, but it's hazardous to spend all your budget on it. However, if you spend all your budget on it, you will get a luxury home in a good location instead, but you have to face many difficulties. If you spend all your or max out your budget on it, you must face financial circumstances because always remember that after buying a house, you must pay property taxes, insurance, home maintenance, etc. Therefore, the best thing is to always go for what is in your budget; if you max out your budget, it will be very risky.

Hidden Costs In The Home Buying Process

There are several hidden costs for buying a home; before purchasing a home, you have to give a higher down payment and go for a fixed mortgage, and after buying a house, you have to pay taxes, insurance, maintenance fees, etc. Otherwise, after buying a house, you have to take care of it a lot because high-income buyers always go for luxury homes, so if they care for the home, they will retain the home's resale value. After all, buying a home has many hidden costs, and always being prepared for all of those.

If you earn $100,000 per year, you must calculate your budget before buying or entering the real estate market. First, research the best location according to your lifestyle and then check the area to see the house prices and what kind of house you can afford there. After that, always keep your expenses lower and save more money for a better mortgage plan and higher down payment before buying a house. Otherwise, always check the property taxes in your selected area and then fit your budget to see if you can afford it. Always research before buying a house, and always choose that house that you can comfortably afford.

Planning For Future Expenses And Homeownership

The best thing is always to keep your expenses lower and save your money because you will need money in emergencies after buying a house. Somehow, after purchasing a home, you are the owner and have to repair everything without any problem. Like any maintenance expenses, like if the roof is scratched, the paint is damaged, the loan is damaged, or any such situation, you have extra money to spend on it. Therefore, permanently save your money being a homeowner.


To buy a house, you must follow the 28% rule and reduce your monthly expenses to save money and use it for a higher down payment. Otherwise, you have to save money for the best mortgages because, with a good amount, you will get fixed interest rates. Always select a house in a good location for you and then check your budget to see if it is worth it. If you save well and buy a home in a good location for the long term, it will give you a lot of benefits in a long time, like the resale value of the house becoming higher. So save as much as you can before buying a house, because while buying a house, you will have to pay a lot, and after purchasing a house you will have to pay a lot of cost, so save enough income to afford it.

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