How Much House Can I Afford on 115k Salary?
First, determine how much you can afford. Many “experts” recommend that first-time homebuyers use a certain percentage of their income as a guideline, such as 33 percent. However, this guideline is flawed because it doesn’t account for other expenses and debts. The most accurate way to calculate affordability is to subtract monthly expenses from your income.
For example, if you make $50,000 per year, you can afford a house worth $180,000-$300,000 depending on where you live. However, if you’re in New York City, you’ll need to earn $98,867 to afford a house. This figure is higher in California, where a person needs to earn $120,120 to purchase a house worth $499,900. In either case, you must also consider property taxes, home insurance, and other debts.
When looking for a house, you should get pre-approval from a lender. A lender will evaluate your income, debt, credit score, and down payment to determine your monthly mortgage payments. While you should aim for a house that costs about two-and-a-half times your salary, you may need to lower your goals if you have a lot of debt. Also, remember that monthly home payments should not be more than 36% of your gross income.
Then, consider your other monthly expenses, such as car payments, credit card bills, and other recurring expenses. Make sure you also consider future expenses, such as future college costs and care for aging parents. Remember to save for these expenses so you can afford a larger house.
Once you know your income, the next step is to use a home affordability calculator. The calculator will allow you to find out how much house you can afford, based on your income, debt profile, and down payment. For a better estimate, try a calculator that includes the costs of monthly homeowners insurance, mortgage interest, and private mortgage insurance. The more variables you enter into the home affordability calculator, the more accurate it will be.
If you make $125,000 before taxes, you can afford to spend $35,000 on housing expenses each year. This works out to $2,916 per month. You can also include your mortgage principal payment in the amount you spend on housing. With this amount, you can buy a $5.5 million home.