Here's how much you need to earn to afford a home today

Affording a home today requires households to earn good money and have a sizeable down payment saved, according to a recent report.

Based on the current interest rate of 7.22% over a 30-year mortgage, buyers today would need to earn an annual income of roughly $120,000, plus a 10% down payment, to afford a home, according to the Clever Real Estate report. However, the average American household earns about $45,000 less than that, and many first-time buyers can't afford a 10% down payment.

Household earnings below $120,000 render the $332,494 price tag of median-priced homes in the current market unaffordable, even if buyers save for a 10% down payment. On the other hand, a smaller down payment would require households, to earn above that $120,000 salary threshold since their monthly payment would increase.

"The most expensive home the median household could comfortably afford after a 10% down payment is $207,529," Clever said. "If mortgage rates dropped to 2.5% tomorrow, that same household would be able to afford a home that cost $300,000 — underscoring the impact of high mortgage rates on affordability. However, that figure is still below the national median home price of $332,494."

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Homebuyers spend more than they should on housing

Homeownership is considered affordable if households spend at most 28% of their monthly income on housing costs. For most cities, more is needed to afford the median home at the median local income.

Higher mortgage rates and home prices mean that 20% of Americans spend roughly 30% of their paychecks on monthly home loan payments, and 10% spend more than half of their pay, according to a recent NewHomesMates.com survey. The survey said those ready to take the plunge have had to sink a larger portion of their paychecks into mortgage payments and make significant cuts to everyday spending.

"When you're saving up for a house, it can be hard to justify spending money on other things," a NewHomesMate spokesperson said in a statement. "But the unprecedented high costs of today's real estate are forcing potential buyers to make some extreme decisions. Not only are they slashing leisure spending and travel, but many are also cutting back on basic items like groceries."

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Ways you can save money to buy a home

Based on the median annual salary and a 10% down payment, most first-time buyers can afford a home priced at about $207,529 — 38% less than the current median-priced home. Increasing the down payment to 20% lowers the salary threshold to $98,202, but saving that amount could take years, the Clever report said.

Some buyers are finding creative ways to gain a foothold in the challenging market, according to a recent Realtor.com report. One option some consider to help pay off their mortgage and other bills is house hacking. This is when a buyer purchases a home intending to rent out rooms for the long or short term.

The co-buying trend is another way young buyers share homeownership costs, according to the report. Co-buying helps friends and family pool resources to come up with down payments and closing costs. It is also a way to share costly monthly mortgage payments, utility bills and maintenance and repair costs. Other tips that homebuyers should consider to boost affordability include:

Boosting buying power by improving your credit

Buyers can save additional money on home financing by understanding and improving their credit profile. A Zillow analysis showed that borrowers with an "excellent" credit score – between 760 and 850 – could save up to $103,626 in mortgage interest payments over the life of a 30-year fixed-rate loan, based on a typical home priced at $354,165.

Researching down payment assistance programs

Researching down payment assistance programs can help to defray closing costs. Freddie Mac is leading the initiative to streamline documentation to access its down payment assistance (DPA) programs to connect more lenders and homebuyers to this help.

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