If you’re considering buying a home, you probably have a lot of questions. One being, how much do you need to earn in a year to afford a mortgage in the U.S.?
Since home prices vary state-by-state, the salary you need to qualify for a mortgage in the U.S. depends a great deal on where you live. For example, the median price of a home in New York is typically more expensive than a home in Wisconsin. When shopping for a house, you might want to consider looking outside of America’s largest cities.
Last month, HSH.com used the National Association of Realtors’ 2020 third-quarter data to track the most expensive cities in the U.S., and how much a potential homeowner would need to earn to live comfortably.
Here’s a look at how much you need to earn in five of the largest U.S. cities:
1. New York City, New York
Buying a home in the U.S. is no easy feat; especially in New York City. The city is considered one of the most expensive places to live, and prices have only increased due to the housing boom.
Median home price: $480,000
Salary needed: $104,000
Monthly payment: $2,000
2. Los Angeles, California
Median home price: $701,000
Salary needed: $122,000
Monthly payment: $3,000
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3. Chicago, Illinois
The average home price in the U.S surged in 2020, and Chicago’s housing market was no different. And it looks the surge will continue into 2021 due to a tight supply of homes and low mortgage rates.
Median home price: $299,000
Salary needed: $66,000
Monthly payment: $1,600
4. Houston, Texas
In December 2020, Houston saw 25% growth in home sales compared to the same month the previous year. The housing market in Houston is booming, with buyers paying high prices for average homes.
Median home price: $272,000
Salary needed: $60,000
Monthly payment: $1,400
5. Phoenix, Arizona
Realtor.com’s 2021 Housing Forecast predicts home sales in Phoenix, Arizona will increase 11.4% from last year. These numbers will make Phoenix one of the hottest housing markets in 2021.
Median home price: $342,000
Salary needed: $59,000
Monthly payment: $1,400
Contrary to popular belief, how much you earn isn’t the only criteria for getting a mortgage. Lenders look at far more than your paycheck. They look at your credit score and debt-to-income ratio, which is the percentage of your monthly gross income that goes toward paying debts and your projected down payment.
And while these cities require a higher salary, cities like Oklahoma City ($34,000 salary needed), Cleveland ($41,000 salary needed) and Indianapolis ($44,000 salary needed) are much more affordable.