“I make $200,000 a year. How much house can I afford in Massachusetts?” The answer to this question depends on where you plan to live. Your actual purchase budget can range depending on your down payment, interest rate, and monthly debt. Here are more details about what you can expect when buying a house in Massachusetts — and how your personal financial situation can influence your purchase budget.
If I Make 200k a Year, How Much House Can I Afford?
Your purchase budget will vary based on factors such as:
● Your interest rate
● Your monthly debts
● Your down payment
● Your credit score
Even your lender will influence the amount you can borrow to purchase a home.
The following sections show the loan amount you can expect when you make $200,000 a year and purchase a home with a 30-year fixed-rate mortgage. These estimates are all based on an interest rate of 7.09%, which is the current national average.
Notice how your purchasing budget increases as you lower your debts, raise your credit score, and make a larger down payment.
200k Salary and Low Credit
Your credit score can have a dramatic impact on what type of loan you qualify for, as well as the terms and amount of the loan. If your score is under 640, you can expect an interest rate of 8% or higher. If you have only a small monthly debt ($250/mo) your purchase budget is $735,200. A modest monthly debt of $500/mo reduces your purchase budget to $702,800. The above estimates do not include a down payment, so borrowers may be able to offset a low credit score by paying more up front. And if your credit score disqualifies you from traditional loan programs, consider options like FHA loans that work with borrowers with credit scores as low as 500.
200k Salary and $250/mo Household Debt
Lenders will examine your debt-to-income ratio, which is the ratio of your monthly expenses and your gross monthly income. The more debt you have, the lower your purchase budget will be. If you currently pay $250 per month on things like credit card bills, car payments, or student loans, your max purchase budget will be $885,000 (when making a $150,000 down payment). If your debts are $500/month, your purchasing budget falls and so on. If you want to raise your purchase budget higher, you can offset your debts by paying a higher down payment or working to reduce your monthly debts.
200k Salary and High Down Payment
If you want to get the most house for your money, your best option is to make a large down payment. If you can reach a six-figure down payment, your total purchasing budget will cross the $900,000 threshold. Even if you’re not able to afford such large down payments, the more you’re able to save and contribute to the house the higher your purchasing power. Additionally, lenders will usually extend better rates and terms to those who make a strong down payment.
What House Can I Afford on 200k a Year in Massachusetts?
“I make $200,000 a year. How much house can I afford in Massachusetts?” The answer will actually vary depending on where you settle down in the Bay State. Here are some options to explore off-market.
The Massachusetts Real Estate Market
There are a lot of different opinions on where the market will head in 2024. But if you look for houses in the major city of Boston, the average price quickly jumps to more than $900,000. “How much house can I afford with 200k salary in Greater Boston?” If you have strong credit and a respectable down payment, your salary is sufficient to purchase a home even in this major city. Of course, if you want to maximize your purchasing power, you can look for housing outside of major urban areas.
This means that if you’re willing to live outside of Greater Boston and settle in other areas, your $200,000/year salary will have you living quite comfortably.
Ways to Maximize Your Purchase Budget
Your six-figure salary gives you a lot of purchasing power across Massachusetts’ real estate market. But cities like Boston can still be prohibitively high, even when you make $200,000 per year. Home buyers can maximize their purchasing power by focusing on the personal financial factors that influence the size of their loan and the terms that lenders are willing to extend.
Raise Your Credit Score
Your credit score will influence the size of your mortgage loan and the terms that come with it. The higher your score, the more house you’ll be able to afford. If your credit score could use a boost, you might consider strategies that raise it, such as:
● Paying your bills on time
● Using less than 25% of your total credit limit
● Refraining from opening multiple new credit cards
While the above strategies take time to raise your score, the fastest way to improve your credit score is by requesting a free copy of your credit report and reporting any errors. The three major credit bureaus (TransUnion, Equifax, and Experian) offer one free credit report annually, and requesting a report will not lower your credit score.
Pay Off Your Debts
When lenders examine your finances, they’ll pay particular attention to your debt-to-income ratio (DTI). This is a mathematical ratio of your total monthly debts to your gross monthly income. If you make $200,000 per year, your gross monthly income is $16,666. If your total monthly bills (credit cards, car payments, student loans, etc.) total $8,000, then your debt-to-income ratio is 48% ($8,000/$16,666). Most lenders want to see a DTI below 43% to qualify for the best loans. To maximize your loan amount, you may want to eliminate some of your monthly debt. Paying off your car or refinancing your student loans (to secure a lower payment) can lower your DTI and may help you qualify for a higher loan amount.
Make a Larger Down Payment
The more cash you have on hand, the more house you’ll be able to afford. A high down payment will mean that you have more money to contribute to the purchase of a house. And because a high down payment mitigates the risk to your lender, you may also qualify for better loan rates and terms. A traditional down payment is 20% of the total value of the home. Admittedly, this can be a challenging goal with high-end real estate. However, making a large down payment will give you better options and more purchasing power. When you make a down payment of at least 20%, you’ll also eliminate the need to make private mortgage insurance (PMI) payments that only add to the total cost of the home. Commit to saving money each month to ensure you’re building a down payment. Remember that you’ll also need money to cover closing costs, so don’t exhaust your short-term savings. But saving more each month will make it easier to make a larger down payment.
Choose the Right Lender
Lenders can make all the difference in the world when it comes to loan terms and amounts. Not every lender will offer the same type of loan or the same interest rates and loan amounts. When you’re shopping for a home, always compare the rates and terms of at least three lenders. That way you can select the lender who offers the right options that fit your needs as well as your budget. Choosing a Massachusetts lender can also ensure that you partner with someone who understands the local real estate landscape. That way you can have greater confidence in your ability to get the right house at the right price.
I Make $200,000 a Year. How Much House Can I Afford?
As you can see, your purchase budget depends on your location, your personal finances, and even your choice of lender. By following the above tips, you can maximize your purchasing power and end up in your dream home.