Here’s How Much You Need to Earn to Afford to Buy a Home in the U.S.
Wondering whether you can afford to buy a home in your dream city?
Statistics show you’ll likely need to earn more if you’re thinking of buying a house on your own, based on a recent HSH study of 27 U.S. metropolitan areas.
Nationally, to afford a median-priced home at $222,700, a single homebuyer needs to earn an annual salary of $51,114.62.
Do You Earn Enough to Buy a House in Your City?
Buying a home comes with a slew of variables, of course. But the study offers a quick-glance guide to determine whether homeownership could be feasible for you.
The study assumes good to excellent credit, a 20% down payment and a 30-year fixed-rate mortgage at 4% interest.
“Affordable” here means your housing expenses should be no more than 28% of your income. This is in keeping with standard advice to keep your housing costs below one-third.
The study also assumes you’ll be buying a home alone, as it only considers a single salary.
If you bring at least two salaries into the equation and consider the median household income of an area, housing looks a little more affordable -- but still often tight.
The median household income across the U.S. is $53,657, according to 2014 U.S. Census Bureau figures.
This lands above the median required salary, but just barely.
If you’re still building credit or starting with a lower down payment, your monthly costs could be significantly higher, making homeownership out of reach.
Even for Americans living within metropolitan areas, the average household income is only slightly higher: $55,855. That falls well below the $61,780 median required salary across all the metro areas covered in this study.
How Much Do You Need to Earn to Afford a Home?
The most expensive area in the country is the San Francisco Bay Area, where the median home price is $781,600. Monthly payments would be $3,453.24, and require a salary of $147,996.19.
With its lower-priced boroughs balancing the soaring costs of Manhattan and Brooklyn, New York is actually cheaper than San Francisco, whose suburbs and East Bay counterparts don’t offer the same balance to the city proper.
A median home in New York, which costs $384,600 with $2,024.64 monthly payments, would require a salary of $86,770.19.
The cheapest area to buy a home is Pittsburgh, where you need to earn just $31,134.50, well below the national median income.
The average home price in the Pittsburgh metro area is just $128,000, which requires a monthly payment of just $726.47.
Cheaper Ways to Buy a House
Before you despair at these numbers, consider your options.
For example, Boston comes out on the higher end, with a $393,600 median home price and $83,151.43 required salary.
But first-time homebuyers might consider the more affordable nearby Melrose, Massachusetts. The city is near a major metro area, has a strong local economy and quality education, but with significantly lower housing costs than Boston.
You might even look into buying your home through a Habitat for Humanity program.
Or maybe buying just isn’t your best bet.
The cost of housing in dense metro areas definitely might make renting a smart option if you want to remain in the city.
If you want to keep from sinking too much money into it, try these tips for negotiating your rent in major cities.
Your Turn: Can you afford to buy a home in your dream city?
Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more.