Buying a Home? You Need a Six-Figure Income and a Big Down Payment

The median household income for home buyers hits a record $107,000; Down payments rise to more than two-decade highs as housing market crunch continues, NAR study shows.

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The median household income for home buyers jumped 22% to a record high of $107,000 in 2023 from $88,000 a year ago, and down payments surged to two-decade highs, according to a new survey from the National Association of Realtors.

The surge in the NAR report reflected the stark reality of the housing market: buying a home has become increasingly difficult as mortgage rates have risen over the past two years and home prices have continued to surge, partly due to low inventory. 

Even so, first-time buyers made up 32% of all homebuyers, up from last year’s historic low of 26%, but short of the average of 38% going back to 1981.

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The typical home buyer's annual household income surged 22%, or $19,000, to hit $107,000 in 2023, the largest ever year-over-year increase, underscoring the increasing pricing power needed to buy a home. Down payments also jumped, with typical payments for first-time buyers up 8% and repeat buyers up 19%, the highest since 1997 and 2005, respectively.

What do you need to buy a home?

In a time of rising prices and mortgage rates, it pays to know upfront how much house you can afford. Consider your household income, monthly debt and the amount you can comfortably afford for a down payment. A good rule of thumb is to have at least three months of payments, which may include taxes and insurance, in reserve. This will allow you to cover your mortgage payment in case of an unexpected emergency.

  • Income — Your salary, income from investments or other sources of income can help you establish a baseline for how much you can afford as a monthly mortgage payment.
  • Cash on hand — You’ll need money in the bank for your down payment and closing costs. The typical down payment on a house is between 3% and 20% of the purchase price, according to Zillow. But government-backed loans like USDA and VA allow for down payments as low as 0%. Buyer closing costs are usually between 2% to 5% of the home’s purchase price.
  • Debt and expenses — Figure in your monthly obligations, such as car payments, credit cards, student loans, utilities, insurance, groceries and other essential monthly costs.
  • Credit profile — Lenders look at your credit score and the amount of debt, or your DTI (debt-to-income) ratio, which is your total monthly debts compared to your monthly pre-tax income. This figure helps establish how much you can borrow and the mortgage interest rate you’ll earn.

The National Association of Realtors® is America's largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries. Data gathered in this report is based on primary-residence home buyers. Data collected for the annual NAR survey tracked buyers' and sellers' transactions between July 2022 and June 2023. 

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Kathryn Pomroy

For the past 18+ years, Kathryn has highlighted the humanity in personal finance by shaping stories that identify the opportunities and obstacles in managing a person's finances. All the same, she’ll jump on other equally important topics if needed. Kathryn graduated with a degree in Journalism and lives in Duluth, Minnesota. She joined Kiplinger in 2023 as a contributor.