When you’re buying a home, your salary and savings play a huge role in how much house you can afford. It’s how you determine your housing budget, down payment, and loan amount. There are all sorts of calculators to help you decide how much house you can afford, but one study breaks down the actual salary you need to buy a home in Kansas City or another market in the United States.
How much house can I afford?
It’s no secret home prices are up. So, you want to make sure you don’t overpay for a home. As with any home purchase, you want to make sure you’re making the right decision for your family’s financial future.
A new study by HSH, a publisher of information on mortgages and consumer loans, shows home buyers the salary they need to earn to afford a home in the 50 largest metros, including Kansas City. The study bases its numbers on current interest rates, median home prices, and available property tax and homeowners insurance costs.
In Kansas City, the average home price is $197,800. Prices dipped, slightly, in the last quarter. HSH found home buyers in Kansas City need an average salary of $44,258.91 to afford a home. That’s a lower income than the national average of $55,390.57.
For an exact breakdown based on your salary, check out NerdWallet’s house affordability calculator. It’s based on where you’re looking to buy, your household income, down payment, monthly payments for your debt, and your credit score.
It’s no secret that home prices in Kansas City are affordable, and often below other parts of the country. That’s a huge advantage to living in Kansas City. You have high-quality schools, high-paying jobs, and affordable homes throughout the metro.
Start your search for homes
Kansas City is one of the least expensive metros in the United States, according to HSH. Several other Midwest cities also made the list including St. Louis, Memphis, and Oklahoma City.
Whether you’re looking for a new construction home or a resale, there’s something for everyone. A Midwest town that gets lots of national accolades, there are housing opportunities for every budget in Kansas City.
Saving on mortgage rates
In Kansas City, the average mortgage rate for a 30-year fixed rate mortgage is 4.01 percent. Of course, mortgage rates constantly change, and they’re based on your credit, down payment, and mortgage length.
Whenever you’re buying a house, shop around for mortgage rates. It’s a great way to save thousands of dollars on the purchase of your home.
Spending an hour or two, talking to two or three lenders, saves you a lot of money in the long run. Gather up your records ahead of time, so you’re ready for the pre-approval process. Here’s a great checklist of financial documents that you’ll need for pre-approval. It’s probably the last thing you want to do when you’re trying to get pre-approved for a loan, but it’s the best decision you can make.
Unfortunately, the Consumer Financial Protection Bureau found nearly half of home buyers don’t shop for a mortgage. That’s an expensive mistake!
Home buyers save $3500 in just five years if you get a mortgage rate of 4-percent versus 4.5-percent, according to the CFPB. A half percent may not seem much on paper, but over the life of a mortgage, it makes a huge difference.
Do this at the beginning of your home search. You want a pre-approval letter in hand when you find a home, especially in today’s competitive housing market. Pre-approval makes it more likely that the seller will accept your offer.
The average monthly payment in Kansas City is $1,032.71, according to the HSH study.
Talk with your lender about different down payment amounts. It drastically changes your monthly payment.
If you put down 10-percent instead of 20-percent, the home buyer needs a salary of $50,717.64 to afford the median home in Kansas City. That is due to the added costs in attaining that loan, including Private Mortgage Insurance or PMI.
Of course, there are down payment assistance programs available to buyers. Ask your Realtor® about options for an FHA or VA loan.
How much house can you afford?
Kansas City housing market
The Kansas City housing market is strong. There are lots of new construction opportunities if you can’t find the house you’re looking for in the resale market.
When you’re buying a home in a seller’s market, you need a strong Realtor® who will show you the many options available. You want to think outside the box to find the home of your dreams. Searching for homes online is a great starting point, but it often won’t yield the house you want when competition is strong, and housing inventory is low.
As a long-time Kansas City area resident, I know the area well. With my guidance, we’ll find the perfect neighborhood for you! Plus, I’ll arm you with the knowledge you need to buy your first home, from 8 smart money moves to paying less for homeowner’s insurance. I’m a real estate matchmaker. Let me know how I can help.