In these states you can buy a house if your salary is less than $70,000

Housing prices have surged over the last four years, leaving fewer and fewer options available to first-time home buyers and those looking for more affordable options. Additionally, with interest rates at levels not seen in decades, the mortgage cost has increased, leaving many to question whether or not now is a good time to buy. In all likelihood, those who purchase a home in this market can refinance their mortgage when rates fall, meaning they will not be locked in at the current average for a thirty-year mortgage of 7.1 percent for the life of the loan.

For those who can afford to take on a mortgage with a higher interest rate in the short term, knowing their income is sufficiently large to make monthly payments, an annual income of $60,000 after taxes could be enough to purchase a home in most US states aside from Hawaii and California.

How was this calculation made?

We calculated this by looking at the March housing price data provided by Zillow and subtracted six percent from that figure (the average down payment for a first-time home buyer). Once we have the total value of the mortgage, we divide that figure by thirty (the life of the mortgage) and then by twelve to calculate the monthly payment. Then, by dividing $60,000 by twelve, we get a person’s monthly income. Financial experts advise clients to try to spend a third or less of their income on housing. A third of $5000 is $1,666.67. So, we subtracted $1,666.67 from the average monthly payment for a first-time home buyer and found that even when you account for a mortgage rate of 4 percent, in most states, $60,000 can be enough to afford a home. However, being able to make monthly payments by no means implies that one can afford to buy a home.

The real issue is saving for a downpayment

For many homebuyers, the most consequential barrier is not making monthly payments but saving enough for a down payment. The Federal Reserve reported that in 2022, renters spent, on average, 32 percent of their income on housing, compared to seventeen percent for homeowners. When surveyors from the Fed asked what the largest emergency expense a respondent could cover with their savings, eighteen percent gave a figure under $100, and an additional fourteen percent said under $499.

Suppose a third of households cannot cover an emergency expense over $500. In that case, a sizeable percentage of the population is saving little to no of their income each month. Under these financial conditions, saving enough for a down payment is next to impossible.