The median sale price of a single-family home in Massachusetts exceeds $600,00. You may be asking: “I make $150,000 a year; how much house can I afford?” The answer depends on your exact situation, but if you’re able to put down even a 10% down payment, your budget could rise to as much as $660,000. Of course, the exact answer to this question depends on several broad factors: the state of the Massachusetts real estate market, your mortgage interest rate, and your personal financial situation.
Understanding the Massachusetts Housing Market
While the median sale price for single-family homes exceeds $600,000, this price is inflated by high prices in cities like Boston, where home prices have climbed to over $900,000. Outside major cities and the nearby suburbs, home prices drop considerably.
“If I make 150k a year, how much house can I afford?” The answer to this question will depend on the exact location where you plan to settle down. If you’re willing to live outside a major metropolitan area, you’ll see that you’ll have an easier time finding a home you can afford, and with a six-figure salary, you’ll also be able to afford the amenities you want.
How Much House Can I Afford With 150k Salary?
As of 2023, the national mortgage interest rate is 7.55%. However, this rate applies most directly to 30-year fixed-rate mortgages, and your exact interest rate will vary by your lender, loan type, and financial situation. But if you assume that this will be your interest rate, you can purchase a home for over $525,000 even with a modest ($30,000) down payment.
Keep in mind that your exact purchase budget will depend on your financial situation and the down payment you’re able to make. For example, here are some common purchase budgets based on adjusting for a few other variables. In each scenario, the salary remains constant, but these ranges will illustrate how other factors will affect your overall purchase budget.
150k Salary and No Down Payment
If you’re unable to make a down payment, your purchase budget drops to $489,900, even if you have strong credit and a low debt-to-income ratio. Without a down payment, you may find it challenging to find a home in a major city, though your salary is still sufficient to purchase a home in one of the more affordable areas in Massachusetts.
Just remember that when you make a down payment of less than 20%, you’ll commonly be asked to pay for private mortgage insurance, or PMI. Your PMI payments will be rolled into your monthly mortgage premiums and will add to your ongoing costs.
150k Salary and $250/mo Household Debt
“What house can I afford on $150k a year with a regular monthly debt?” Most buyers will carry ongoing debt in the form of student loans, car payments, or credit card bills. If you currently pay $250 per month in these debts, your purchasing budget will be $479,300, and that’s if you also make a $30,000 down payment. Double your monthly debt to $500/month and your purchase budget drops to $469,500. Buyers can offset this by paying a higher down payment or by reducing their monthly debt to secure a better loan.
150k Salary and High Down Payment
You might also consider saving for a higher down payment. If you make $150,000 per year and put down $60,000 on a new home, your purchase budget rises to $561,200. That’s enough purchasing power to buy a home almost anywhere in the state. Even a small monthly debt ($250/mo) will not significantly reduce your purchase budget, which drops to $532,900. The more you can save for a down payment, the greater your purchasing power will be.
150k Salary and Low Credit
Unfortunately, most traditional loans won’t be available for borrowers with a credit score under 620 — though this depends on the lender. And with a credit score between 620 and 639, you’ll likely receive an interest rate of 8% or higher. This can drop your purchase budget to $447,600, depending on your down payment and monthly debts.
Don’t get discouraged. Some lenders are willing to work with you to secure a loan even with a less-than-stellar credit history. And some loans are designed for those with below-average credit to make it easier to purchase a home.
Best Places to Live in Massachusetts
“I make $150,000 a year. How much house can I afford?” Again, the answer depends on where you are on the map. While certain cities like Boston have high prices, other areas are much more affordable. With a six-figure salary, you can find homes in Massachusetts that you can readily afford, and you may have enough to find your dream home.
I Make $150,000 a Year — How Much House Can I Afford?
As you can see, your purchasing budget will depend on your own personal financial situation. The following factors will influence the amount of your mortgage loan.
Down Payment
A high down payment will allow you to secure a larger loan. That’s partly because you simply have more cash to contribute to your purchase. But lenders are also more willing to offer favorable loan terms since your down payment will mitigate the risk of lending.
A traditional down payment is 20%. However, given the rising housing market, most lenders are willing to work with borrowers. Even traditional loans can be secured with a down payment as low as 3%, and some loan programs don't require any down payment at all.
Interest Rate
The total cost of your home will also depend on your mortgage interest rate. A higher interest rate will mean you’ll pay more over the lifespan of your loan. But a high interest rate will also restrict the size of the loan you can afford. Even a difference of a single percentage point can have a dramatic impact on the total cost of your mortgage. That’s why it’s important to compare rates from at least three different lenders when shopping for a mortgage.
Credit History
Your personal credit score will influence your eligibility for certain types of loans. It will also determine the loan amount and interest rate of your loan. The higher your credit score, the higher your purchase budget, and the lower your interest rate will likely be.
Note that your credit score will influence your interest rate, which as you saw can have an impact on the total cost of your loan over its lifespan. Raising your credit score before applying for a loan can increase your purchasing power.
Debt-to-Income Ratio (DTI)
Lenders will commonly look at your current household debt. Your debt-to-income ratio can be calculated by dividing your total monthly debt payments by your gross monthly income. Most lenders are looking for borrowers with a DTI no higher than 43%.
The lower your DTI, the higher your purchase budget will be. That’s why it helps to pay off some of your debts before applying for a mortgage, as this will affect your eligibility, interest rate, and loan amount.
Loan Type
The type of loan can also influence your total purchase budget. For example, first-time home buyers might take advantage of loan programs such as FHA loans or USDA loans. But while FHA loans are ideal for those with low credit scores, these government-backed loans have limits that vary by county. Traditional loans are the most flexible in terms of purchasing price, though these other loan programs can be helpful for home buyers who meet the eligibility criteria.
Loan Term
Mortgage loans most commonly come in two term lengths: 30-year and 15-year mortgages. On the one hand, a 15-year loan will mean you’ll spend less money in interest over the course of the loan. But a 30-year mortgage will allow you to purchase a larger/more costly home.
That’s because a 30-year loan will spread out your payments over a longer period, while a 15-year loan will saddle you with high monthly mortgage payments. The longer your loan, the more you’ll be able to absorb the cost of a more expensive home.
What Can I Afford if I Make 150K a Year?
In summary, your total purchase budget will depend on:
● Your interest rate
● Your personal financial situation (income, expenses, savings, debts)
● Your geographic location
Keep in mind that your choice of lender also matters. Different lenders can offer you different options in terms of loan eligibility, loan terms, interest rates, and even the loan amount. That’s why it’s important to compare lenders to find the best rates and terms. By partnering with a lender that understands your needs and budget, you’ll be able to secure the home of your dreams.