How much house can I afford with a $200k salary?

A $200k salary is well above the national median. This income opens up many possibilities when you’re securing a loan, whether you’re looking for a family home in the suburbs, a downtown condo, or a trendy townhouse. But lenders don’t just look at your income, and your options may change depending on your full financial situation.

Discover how much house you can afford with a $200k salary and what factors impact qualification.

What house can I afford on $200k a year? 

Financial advisors often use the 28/36 rule to determine how much of a person’s income should go toward their mortgage. This means that no more than 28% of your gross monthly income goes into housing, and your DTI ratio doesn’t exceed 36%.

With a $200,000 salary, your gross monthly income is approximately $16,666. Using the guidelines above, this means you could spend up to $4,666 every month on housing costs like mortgage and property taxes. With this in mind, depending on your down payment and mortgage interest rate, you could likely afford a home that costs between $624,000 and $800,000.

What determines how much home you can afford? 7 factors

Your income is a significant component, but it’s just one of many factors that lenders examine to find your ideal budget. Here are a few additional points they consider.

1. Credit score

Lenders use your credit score to assess how risky it would be to lend you money. Higher scores help you secure lower interest rates, which reduces your monthly housing payments. Typically, the minimum rating for conventional loans is 620, though home buyers with scores above 740 get more favorable terms because mortgage providers see them as more likely to pay back the loan. 

2. Down payment

The down payment is the money you pay up front when you buy a home. Many mortgage providers let you put down 5–10%, though some allow as low as 3%. For context, 3% is a down payment of $21,000 for a $700,000 home. 

Putting more down reduces your total loan amount, giving you more financial breathing room down the road. For instance, a 20% down payment significantly lowers the principal and removes private mortgage insurance (PMI) fees.

3. Closing costs

Some buyers don’t factor closing costs into their final housing budget, but these fees can add up. Your closing disclosure will detail what you owe, including lender fees, title insurance, and buyer’s agent commission fees. Be prepared to pay between 2–5% of the home’s sale price in closing costs, which range from $14,000–$35,000 for a $700,000 home. 

4. Debt-to-income ratio

Your DTI ratio tells lenders how much of your monthly income goes toward payments on existing debt. This might include student loans, car loans, and credit card debt. When applying for a home loan, the lower your DTI ratio, the better. Lenders prefer to see a ratio below 36%, but many will accept higher ratios. For instance, you can have a DTI of up to 50% when you secure a conventional loan with Better.

5. Interest rates

Higher interest rates limit affordability, and even a 1% increase can reduce your buying power substantially. For example, a 5.5% rate on a $700,000 home results in a monthly payment of roughly $3,180. On the other hand, a 6.5% interest rate might boost costs to $3,540, which is about $200,000 more interest paid over a 30-year loan term. You can sometimes get lower interest with a larger down payment or a higher credit score, but mortgage rates primarily depend on economic conditions.

6. Loan term

Mortgage terms affect monthly payments and the final balance at the end of the loan. Most home buyers get a 30-year fixed mortgage, which means they pay it off for 30 years and the interest rate won’t change. With these loans, borrowers typically owe less each month, but they pay more interest because the mortgage has more time to accumulate it.

7. Property taxes

Taxes impact your monthly payments and overall affordability. Depending on where you live, you could pay somewhere between $200 and $800 a month. Suppose you choose a $700,000 home in Texas, where property taxes range between 1.60–1.80%. About $930 to $1,050 of your mortgage payments would go toward taxes. 

Home affordability scenarios with a $200,000 salary

Let’s see what mortgage you can afford with a $200k salary in three unique examples.

1. Conservative scenario

Imagine you choose a home that costs $600,000, which is at the lower end of what you can afford. Putting 20% down on this home keeps your monthly mortgage payments under $4,000 and removes PMI. Taking this conservative approach, you’ll have more room in your budget to put toward other costs, like savings and investments. 

2. Moderate scenario

You buy a house in the $700,000 range and put 10% down. The monthly payments are approximately $4,600, which keeps you just in line with the 28/36 rule. This gives you comfortable expenses, but you won’t have as much extra cash to put into savings and projects.

3. Aggressive scenario

Suppose you stretch your budget to buy a home for $800,000 and spend 5% on the down payment. Your mortgage costs will likely exceed $5,000 a month. If you have few debt obligations and you’re careful with money, this aggressive approach can work. But before committing, consider whether you have the long-term financial discipline to keep your nonhousing expenses to a minimum.

Home financing options for a $200,000 salary

Here are the most common mortgage loan types to consider:

— Conventional loans: Conventional loans are the most common type of mortgage. With Better, you can apply for a conventional loan in as little as three minutes and start comparing personalized mortgage rates for deep insights into your buying power.

— FHA loans: The Federal Housing Administration (FHA) insures loans to reduce lender risk and improve mortgage terms for borrowers. This makes homeownership more approachable, generally lowering down payment and credit score requirements. However, the FHA has a borrowing limit that differs based on your area, so they may not be an option depending on your target purchasing price.

— VA loans: The Department of Veterans Affairs (VA) offers home loans to eligible veterans, service members, and surviving spouses. These loans have competitive rates and often no down payment requirements.

If you’re wondering which loan type is best for your situation, talk to the experts at Better. Access our in-depth knowledge base, receive 24/7 support, and receive specialized guidance when you need it. With Better, you can move through the entire home buying journey confidently.

...in as little as 3 minutes – no credit impact

Next steps to buy a home on a $200,000 salary

Once you determine your affordability range, here are some steps to prepare for:

— Find a lender: Research mortgage providers and compare their rates, fees, and available loan types. 

— Get pre-approved: Gather documentation, like tax returns and pay stubs, and work with a lender to establish your financial profile. Then, get pre-approved to better understand your budget and show sellers you’re serious when you make an offer on a home. 

— Choose a real estate agent: Pick a realtor to guide you through the process, from answering questions to negotiating prices. Look for an agent who works in your desired area so they’re comfortable with the local market and have a license to operate in the state.

— Determine your priorities: Narrow down your main criteria, including simple preferences and must-haves. For instance, it may be nice to have four bathrooms but necessary to be close to your chosen school district.

— Work with the seller: Meet with the seller, ask questions, and negotiate on the price. A real estate agent is valuable during this stage and helps you understand which requests are reasonable and common.

If you’re ready to take the next step, let Better guide you from start to finish. Our fast, fully digital platform lets you apply for pre-approval in as little as three minutes. Ask questions, secure a favorable mortgage, and enjoy a rapid home buying process — Better closes 17 days faster than the industry average.

Ready to get pre-approved to finance your dream home?

With a $200,000 salary, there are a wide variety of homes available to you. Factor in your credit, debt, and ideal closing costs, and find a house that fits your goals. If you’re feeling overwhelmed by all these financial details, manage the process smoothly with Better.

Better lets you handle the home buying journey from a convenient online dashboard. Get pre-approved, browse loans, and receive 24/7 support from mortgage experts. Apply in as little as three minutes, and see how much house you can afford.

Enjoy a stress-free home buying experience with Better.

...in as little as 3 minutes – no credit impact

FAQ

Is $200k a good household income to buy a home?

Yes, a household income of $200,000 is considered above average in the U.S. It’s more than double the national median household income of $83,730 and offers substantial purchasing power in most housing markets.

I make $200k a year — what house can I afford?

This salary puts you in a great position to buy a home. Depending on factors like your risk tolerance, credit score, and existing debt, you might be able to afford a house that costs between $600,000 and $800,000.

How does the down payment affect how much house you can afford with a $200k salary?

A larger down payment reduces the amount you need to borrow, lowering monthly mortgage payments. You’ll also start with a smaller principal, so you’ll pay less interest over the life of the loan. This provides more financial stability and buying power.

How do changes in interest rates affect how much house you can afford with a $200k salary?

Lower interest rates decrease your monthly costs and the amount you pay over the life of your loan. This may not affect you at the time of purchase, but leads to a significant difference once payments start.