How much is the house I can buy in the US worth if I earn $70,000 a year?

Buying a home in the United States is a dream for many, but it can seem unattainable, especially if you do not have a high salary or live in high cost of living areas. With an annual income of $70,000, what type of home could you afford? Here we present an exercise so that you know how much house can you buy.

According to the census, The median household income in the United States is $74,580 per yearThis figure is very close to our proposal, which allows us to make closed calculations close to this evaluation.

In the field of personal finance, experts have developed a way to calculate how to pay a mortgage without going into default: the 28/36 rule. This strategy suggests that you should spend no more than 28% of your monthly income on housing costs, and no more than 36% on total debt payments..

Applying this rule, with an annual income of $70,000, The maximum you should allocate monthly to your mortgage would be approximately $1,633 dollars. How did we get it?

An annual income of $70,000 means a profit of $5,833 per month. And 28% of $5,833 gives the result of the maximum amount you should pay for housing expenses: $1,633 dollars. Keep in mind that within this amount you must also cover property taxes, home insurance premiums and homeowners association (HOA) dues that would also have to be paid, if not monthly, then every two or three months.

Taking this tentative amount for a mortgage, let’s now assess how much house you can buy. With a standard 20% down payment and a 30-year mortgage with an interest rate of 7%, You could comfortably buy a house for around $240,000 dollars.

This means that You would need to have $48,000 for a down paymentexcluding closing costs, home inspection, real estate agent fees and other expenses related to purchasing a new home.

To comply with the other part of the rule, You must take care not to exceed 36% of your debt-to-income ratio to confirm that you can pay your mortgage. In fact, based on this 28/36 rule, lenders accept or reject applications for a mortgage loan.

Speaking of the $5,833 in income, You should take care that the payment of your debtsincluding the mortgage, do not exceed $2,099 dollars.

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