Here’s yet another data point to break the hearts of hopeful homebuyers: To afford a median-priced house, buyers need to earn at least $114,000, according to a new analysis from Realtor.com.
But wait — don’t give up on becoming a homeowner if you make less than that.
It’s true that housing affordability has seriously shrunk in recent years. In 2019, buyers only needed an income of $67,000 to afford a median-priced home, according to Realtor.com. The median household income that year (adjusted for inflation) was $81,210, according to the U.S. Census Bureau. In 2023, the median income was $80,610.
“Home prices accelerated starting really in earnest in 2020,” says Hannah Jones, a senior economic research analyst at Realtor.com. “And then mortgage rates of course picked up starting in 2022. And the combination of those two things have just served a double whammy to households.”
In spite of this, people with sub-six-figure salaries become homeowners all the time. Here’s how.
Can I buy a house if I earn less than $100k? In many areas, it’s possible.
The median listing price, according to Realtor.com, was $431,250 in April. However, first-time homebuyers typically aren’t going after median-priced homes. Instead, they tend to gravitate toward starter homes, which are smaller and more affordable than the rest of the housing stock.
In fact, a Realtor.com analysis from January found that buyers need an income of $70,164 to afford the typical starter home, which cost around $292,950 in 2024. And depending on the price of starter homes in your town, you might not even need to earn that much.
How much do I need to make to buy a house?
The income needed to buy a house depends on home prices in your area, current mortgage rates, and how much you plan to put toward your down payment.
When mortgage lenders are deciding whether or not to approve you for a home loan, they look at your debt-to-income ratio. This ratio shows how much of your income is spent on debt payments each month.
Mortgage lenders typically like to see borrowers with debt-to-income ratios below 36%, including your proposed monthly mortgage payment. So if you earn $6,000 a month pre-tax and you have no other debts, you may be able to afford a monthly payment up to $2,160 (6,000 × 0.36).
If you have a great credit score, you may be able to qualify with a higher DTI — potentially up to 50%.
Figuring out how much house you can afford
To determine how much house you can afford, plug today’s mortgage rates into a mortgage calculator and see how different home prices affect your monthly payment.
Think about your current budget and how much you can afford to spend each month on housing. Remember that homeownership will come with more costs than renting, and don’t forget to factor in property taxes and homeowners insurance to your monthly payment.
Business Insider’s simple mortgage calculator lets you see how a different price, rate, term length, or down payment amount could impact how much you’d pay to buy a home.
Homebuying tips for lower earners
Pay down debt
The money you spend on other debts, like credit cards or student loans, cuts into how much you can spend on a mortgage. If you’re able to pay some of that down, you’ll expand the range of homes you’re able to afford.
“Oftentimes when I work with first-time homebuyers, they’ve got to pay off a car payment or pay off some sort of loan to get into a range that they want to achieve,” says Jill Leberknight, an Austin-based real estate agent with eXp Realty. “So that can take anywhere from two months to a year or more.”
Get with an agent early on
Leberknight says she sees a lot of buyers who come to the process with misconceptions about what they can afford based on what they’ve heard from family or what they see when they’re scrolling online listing sites. But if you’re really trying to understand whether homeownership is possible for you, you need to talk to someone who’s an expert in your local market.
“Real estate is a hyper, hyperlocal game,” Leberknight says.
Just because most of the houses you see on Zillow are out of your price range doesn’t necessarily mean you won’t be able to find a home that suits you and your budget. A local real estate agent can help you find one.
See if you qualify for housing grants or assistance
All of Business Insider’s best mortgage lenders for first-time buyers have programs that can make homeownership more affordable, including 1% down mortgages, down payment grants or loans, and closing cost credits.
Your state’s housing finance agency may also offer assistance to buyers through participating lenders.
Cast a wider net
First-time or lower-income homebuyers often need to be more flexible when it comes to the types of homes they’ll consider or the areas they want to buy in.
“You can look at more affordable areas, either considering different parts of the country or just considering the outskirts of a town that you’re looking for,” Jones says. “Or there are options like condos, like duplexes. Those sorts of things are good ways for first-time buyers especially to access homeownership because they usually come at a lower price.”
Buying a condo can be an affordable way to get started as a homeowner, since you’re buying a unit rather than an entire property.
Have a long-term strategy
Your first home might not be exactly what you want. But that’s OK, because homeownership also comes with the benefit of building wealth through your home’s value.
“Right now, it’s not easy to get in your dream home at stage one,” Leberknight says. “So let’s get you, we’ll call it your training wheels, like your starter car or your starter bike.”
Home values generally go up over time. Over the course of five years, your home’s value could go up by 26%, according to Realtor.com. This means that with a $200,000 home, you could end up $52,000 wealthier by just staying in the home for five years.
Stay for 10 years, you could see its value increase by 57%, or $114,000. That’s money that you can use for a down payment on your next home. By getting started now, you’ll be in a better position to end up in your dream home a few years down the road.