You need to make a massive $140K per year in the US to afford a $500K house — here’s 3 simple tips to get into real estate without a fat six-figure salary

You need to make a massive $140K per year in the US to afford a $500K house — here’s 3 simple tips to get into real estate without a fat six-figure salary

Owning a home is becoming increasingly out of reach for the average American — even if you earn a six-figure income.

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The spring 2023 housing market has been called “a nobody’s market” as sellers hold onto their homes through fear of losing their low interest rates and buyers just can’t afford the high house prices.

“Affordability conditions will have to improve drastically, likely via both lower home prices and falling mortgage rates, to see buyers return to the market en masse,” Hannah Jones, a data analyst at told MarketWatch.

And while you could hold out and wait for the market conditions to change, there are other ways to get into real estate that don’t necessarily require an above-average salary.

Running the numbers

Jones ran the numbers and found that to afford a $500,000 home, you need to make more than $140,000 a year.

To come up with that sum, she started with that $500,000 price. Assuming you have a 10% down payment of $50,000, lock in a 30-year fixed-rate mortgage at 6.32% and pay a 1.72% tax and insurance rate, your monthly payment will add up to $3,508.

Now, considering that most lenders require you to keep your housing expenses down to around 30% of your gross income, Jones calculated that you’d have to earn $140,312 a year in order to meet that target.

You might say $500,000 seems like a lot of house, but consider that the median national home price for active listings climbed to $424,000 in March, according to

Using the same calculation above — a 10% down payment, a 30-year fixed-rate mortgage at 6.32% and a tax and insurance rate of 1.72% — your monthly housing costs would be $2,969. To afford that, you’d have to earn around $118,760 a year.

That’s a long way off the national average salary, which is $58,563 a year, according to ZipRecruiter.

If those numbers sound like a stretch, here are three straightforward tips to get into real estate.

Save a big down payment

A sufficient down payment is often the single biggest obstacle between you and buying a home.

A decent-sized down payment will reduce your monthly mortgage payment and will protect you from additional costs — like private mortgage insurance (PMI), which lenders typically require if your down payment is less than 20% of your home’s purchase price.

That being said, saving for a substantial down payment is easier said than done. A 20% down payment on a $500,000 home would be $100,000 — in cash — which few people have just lying around.

If you’re not sure where to start, a savings goal calculator can be a great resource here. Not only can it help serve as your roadmap to achieving financial goals, but you can break down your target into smaller, achievable milestones to keep you motivated.

Alternatively, if you struggle with self-discipline when budgeting and managing your money, automating your savings by diverting a portion of your earnings (if your employer pays by direct deposit) or setting up recurring transfers to a savings account can help you stay on track.

If you’re a few years out from buying a house, but already have a good amount saved for your down payment, you can lock some of that money in a bank certificate of deposit (CD) and take advantage of the current high rates.

And remember that when you buy a house you not only need cash for a down payment, you’ll also need some liquid funds to cover closing costs, appraisal and inspection fees, and legal fees up front — all of which can add up to a significant sum.

Read more: ‘Hold onto your money’: Jeff Bezos says you might want to rethink buying a ‘new automobile, refrigerator, or whatever’ — here are 3 better recession-proof buys

Get the best loan possible

Without a mega salary or a sizable financial windfall, like an inheritance, it’s unlikely you’ll be able to buy a house without getting a loan.

For homebuyers and those looking to refinance their current mortgage loan, there are several types of mortgages to choose from.

Some loans, like FHA, USDA and VA loans, are backed by the federal government and are designed for low- to moderate-income Americans, rural dwellers and veterans, while others are typically only available to borrowers with a certain amount of income and a solid credit score.

While you won’t find the same standards across all lenders, the better your credit score, the more favorable your home loan will likely be.

You can improve your score by doing things like paying your bills on time, keeping your credit utilization low and checking your credit report for errors. This should open opportunities for better loan options.

A higher credit score can help you to qualify for a lower interest rate on your mortgage, which in turn could save you thousands of dollars in interest over the life of your loan.

Regardless of what type of loan you qualify for, you should never take the first quote you’re given. Experts recommend comparing at least three different offers before settling on one.

Skip the buying process entirely

If buying a home is off the table (for now), you might want to consider investing in real estate in other ways.

Prime commercial real estate has outperformed the S&P 500 over a 25-year period — and until recently, only the ultra rich with millions to invest were able to get in on that action. But new platforms have opened up opportunities like this to regular retail investors.

Another great way to profit from the real estate market is investing in a real estate investment trust (REIT). REITs are publicly traded companies that own income-producing real estate like apartment buildings, shopping centers and office towers. They collect rent from tenants and pass that rent to shareholders in the form of regular dividend payments.

If you’re keen to dip your toe into investing in real estate, you can find an option that best suits your needs by answering a few quick questions with Moneywise’s investment-finder tool.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.


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