How Much House Can I Afford on a $200k Salary?
Although it's not the only factor, your income plays a significant role when mortgage lenders determine what size loan to approve you for. So, if you're wondering how much house you can afford on a $200k salary, we’ve put together some answers.
Using assumptions, fully outlined at the end of this article, a buyer with a $200,000 salary could afford a home costing up to $755,000 with 5% down. But that figure won't be the same for everyone. We'll review why and what your true purchasing power might look like in various scenarios.
What Price Home Can I Afford With a $200k Salary?
Our base estimate is $755,000, but your actual budget will likely differ. That’s because more goes into your mortgage cost than just principal and interest payments.
You’ll also need to account for taxes, insurance premiums, and homeowners association dues for homes in an HOA. The higher these other expenses, the lower your purchasing power. The lender looks at all these costs as a lump sum when figuring your purchasing power.
What else can affect how much house you can afford on a $200k salary? Some of the things that might impact your homebuying budget include:
Your other existing debts
The interest rate
Your down payment
The length (term) of your mortgage
How Did We Get to a $755k Homebuying Budget?
To determine how much home you can purchase with a $200k salary, lenders first calculate the amount you can comfortably afford to pay on your mortgage each month. Generally, conventional lenders will allow you to attribute up to 36% of your monthly income to housing expenses.
If you have an annual salary of $200k, your monthly income is around $16,667. Applying this 36% “front-end debt-to-income (DTI)” ratio equals a maximum mortgage payment of $6,000. This payment amount would allow you to purchase a home for up to $755,000 in our example scenario.
The Impact of Other Existing Debt
Your maximum mortgage payment and purchasing power may shrink if you have too much other existing debt. In addition to capping your mortgage cost at 36% of your income, most conventional lenders limit your total debt – including the mortgage you're applying for – to 45%.
With a monthly income of $16,667, this 45% “back-end DTI” translates into a total allowable expense of $7,500.
What does this mean to you? If you have $1,500 or less of other installment payments – things like auto loans, carried credit card balance payments, or student debt – your purchasing power will not be impacted. However, if your other recurring payments are greater than $1,500, you’ll likely see your homebuying budget shrink.
Do you have more than $1,500 in existing monthly debts? Here’s an idea of how those obligations may impact the purchasing power of a $200k salary.
Other Existing Debts | Max. Monthly Mortgage | Max. Home Price |
$1,500 | $6,000 | $755,000 |
$1,750 | $5,750 | $722,000 |
$2,000 | $5,500 | $695,000 |
$2,250 | $5,250 | $654,000 |
$2,500 | $5,000 | $620,000 |
$2,750 | $4,750 | $600,000 |
$3,000 | $4,500 | $573,000 |
$3,250 | $4,250 | $533,000 |
$3,500 | $4,000 | $499,000 |
$3,750 | $3,750 | $465,000 |
$4,000 | $3,500 | $431,000 |
*$300 monthly insurance premium assumed for home prices of $600k or less
Interest Rates and the Purchasing Power of a $200k Salary
Interest rates are one of the primary drivers of mortgage costs. Most people know that higher rates equate to higher monthly payments. Still, it can be surprising how much of an impact a small rate change can make – especially with larger loans.
Our estimate of a $755,000 home price is based on an interest rate of 6.931%, the current 30-year average per the Mortgage Research Center rate tracker at the time of writing. You’ll likely qualify for a different rate, which could be higher or lower depending on your financial profile and shifts in the mortgage market.
Based on an all-inclusive monthly loan payment of $6,000, here’s what your maximum home price might look like at varying interest rates.
Interest Rate | Max. Home Price |
5.00% | $898,000 |
5.25% | $877,000 |
5.50% | $857,000 |
5.75% | $838,000 |
6.00% | $819,000 |
6.25% | $801,000 |
6.50% | $784,000 |
6.75% | $767,000 |
7.00% | $751,000 |
7.25% | $735,000 |
7.50% | $720,000 |
7.75% | $705,000 |
8.00% | $690,000 |
8.25% | $677,000 |
8.50% | $663,000 |
8.75% | $650,000 |
9.00% | $638,000 |
Have Funds Available for a Larger Down Payment?
While some lower down payment options exist, most buyers purchasing a house on a $200k salary will need at least 5% down. As the standard conventional minimum, we've used an estimated 5% down payment for our calculations.
However, you can expand your purchasing power further if you're able to bring more to the closing table. It's not uncommon for buyers who have been saving or have proceeds from selling another home to make a larger down payment. Plus, there are a number of down payment assistance programs with no income limits.
Even putting 10% or 15% down would help you afford more house. Putting 20% or more down will allow you to avoid paying for mortgage insurance and stretch your homebuying budget further.
Here’s an idea of how far a $6,000 monthly mortgage might get you with a larger down payment.
Down Payment (%) | 5% | 10% | 15% | 20% | 25% |
Down Payment ($) | $37,750 | $80,100 | $127,500 | $183,000 | $241,750 |
Max. Home Price | $755,000 | $801,000 | $850,000 | $915,000 | $967,000 |
The Varying Cost of Homeowners Insurance Premiums
Depending on where you live, homeowners insurance could make up a significant portion of your monthly payment. According to data from MarketWatch, as of May 2024, homeowners in the top 10% of high-premium cities pay more than $1,000 per month on average for insurance on a $750,000 home.
Meanwhile, in the cheapest 10% of locales, homeowners pay around $200 – or less – per month for the same coverage.
Our calculations are based on a $400 monthly premium. Here’s what your purchasing power may look like if your area has lower or higher rates.
Monthly Insurance Premium | Max. Home Price |
$200 | $782,000 |
$300 | $769,000 |
$400 | $755,000 |
$500 | $742,000 |
$600 | $728,000 |
$700 | $715,000 |
$800 | $701,000 |
$900 | $688,000 |
$1,000 | $674,000 |
Tax Rates Can Impact Your Budget, Too
Like homeowners insurance, property tax costs can vary from state to state and even neighborhood to neighbhorhood.. An annual tax rate of 0.50% is the norm in some areas. In others, homeowners can expect to pay the government 2% or more of their home's value each year.
For our calculations, we assume an annual tax cost of 1% of your home's purchase price. If you live somewhere with a different property tax rate, here's what your budget might look like.
Annual Property Tax Rate | Max. Home Price |
0.50% | $800,000 |
0.75% | $777,000 |
1.00% | $755,000 |
1.25% | $735,000 |
1.50% | $715,000 |
1.75% | $696,000 |
2.00% | $679,000 |
2.25% | $662,000 |
2.50% | $646,000 |
Shorter Loans and How Much House a $200k Salary Affords
Most buyers choose to take out a 30-year loan as it typically means the lowest monthly payments and greatest purchasing power. However, some opt to shop for a slightly lower-priced house with a shorter-term loan to pay off their home faster.
By going with a shorter loan term, you can:
Get rid of monthly payments sooner
Build equity more rapidly
Pay less in total interest
Here’s an idea of how much house you may be able to afford on a $200k salary with different mortgage terms. We’ve also included the total amount of interest you would pay on the loan.
Loan Term | Max. Home Price | Total Interest Cost |
15-Year | $585,000 | $339,538 |
20-Year | $666,000 | $538,295 |
25-Year | $717,000 | $754,136 |
30-Year | $755,000 | $988,679 |
Interested in a shorter-length loan, but need to purchase a more expensive home? Don’t worry – you can refinance to a shorter-term mortgage down the road.
Note: To avoid confusion, we used a consistent interest rate of 6.931% for our calculations. However, shorter-term loans generally have lower interest rates than a 30-year mortgage. In practice, this would mean a slight increase in your purchasing power.
How Much House Can You Get With a $200k Salary?
While our $755,000 purchase price estimate is a great place to start, you won't know your true budget without speaking to a lending professional. There are many variables to consider, and each mortgage company will tend to offer different rates and overall costs.
To find out exactly how much house you can afford on a $200k salary, check out today's best mortgage rates and apply with a respected loan provider.
Methodology
Except where noted, all calculations are based on a 30-year conventional mortgage at an example interest rate of 6.931% with a 5% down payment. Estimated monthly payments include principal, interest, PMI, taxes, and insurance. Property taxes are assumed to be 1% of the purchase price per year. The monthly homeowners insurance premium is assumed to be $400. Mortgage insurance premiums are based on a credit score of 760, as per MGIC rates at the time of writing. No closing costs are wrapped into the loan.
