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How Much Home You Can ACTUALLY Afford in 2024 (By Salary)

home tax in 2024

Introduction

Today, I want to delve into a crucial question: How much home can you afford? It’s essential to live within your means, especially when considering a significant investment like a house. Let’s break down the numbers.

Assumptions

Before we dive in, let’s establish some assumptions:

● Loan Term: 30 years

● Property Tax: 1.25% of the home value

● Homeowners Insurance: 0.7% of the home value

● Down Payment: 10%

Calculations Based on Income

a. $30,000 Household Income

If your household income is $30,000 annually, you can afford a home priced at $992,000. However, in reality, finding a decent home at this price is impractical in most parts of the US.

b. $50,000 Household Income

With a household income of $50,000, your pre-tax income is $1,167 per month. At a 7% interest rate, you can afford a home worth $153,200, whereas at 3%, it’s $215,336. The difference in interest rates significantly impacts your purchasing power.

c. $70,000 Household Income

Now, let’s consider a household earning $70,000 annually. Following the popular 28% rule, you shouldn’t spend more than 28% of your monthly pre-tax income on mortgage payments, property taxes, and insurance.

d. $80,000 Household Income

A household earning $80,000 a year, slightly above the US average, can afford a home priced at $245,200 with a 7% interest rate. This highlights the concerning home affordability crisis.

e. $100,000 Household Income

Even with a $100,000 annual income and a 7% interest rate, affording the average American home is challenging.

$125,000 Household Income

With a $125,000 annual income, many cannot afford the average home due to high interest rates.

f. $150,000 Household Income

At a $150,000 yearly income, your purchasing power increases, but the challenge of affordability remains, especially with higher interest rates.

g. $200,000 Household Income

A $200,000 annual income affords a more comfortable range of homes, reflecting better affordability.

h. $250,000 Household Income

With $250,000, your options widen further, showcasing a better housing affordability landscape.

i. $300,000 Household Income

At $300,000, your ability to afford homes at various price points improves, indicating more flexibility in housing choices.

j. $400,000 Household Income

A household earning $400,000 annually can comfortably afford homes in higher price brackets.

k. $500,000 and $1,000,000 Household Incomes

At these income levels, the affordability of homes significantly increases, offering a broader range of options.

Tips for Lowering Mortgage Payments

1. Improve Credit Score

Boosting your credit score can lead to lower interest rates, resulting in substantial savings over time.

2. Eliminate PMI

Removing Private Mortgage Insurance (PMI) can save you significant money each month.

3. Shop Around for Homeowners Insurance

Finding lower insurance rates and exploring discounts can further reduce monthly expenses.

4. Make Larger Down Payments

Increasing your down payment lowers the amount borrowed, subsequently decreasing monthly mortgage payments.

5. Refinance with Lower Interest Rates

Refinancing to a lower interest rate can substantially reduce monthly mortgage payments.

Conclusion

In conclusion, understanding how much home you can afford is crucial for financial stability. By considering your income, interest rates, and various strategies to lower mortgage payments, you can make informed decisions and avoid financial strain. Remember, living within your means is key to long-term financial health.