How Much Should my Mortgage Be? What Mortgage Payment can I Afford? (2024)

FAQs

How Much Should my Mortgage Be? What Mortgage Payment can I Afford? ›

Understand how much house you can afford.

Most financial advisors agree that people should spend no more than 28 percent of their gross monthly income on housing expenses, and no more than 36 percent on total debt. The 28/36 percent rule is a tried-and-true home affordability rule of thumb that establishes a baseline for what you can afford to pay every month.

Generally, it's recommended to spend between 25% to 33% of your gross monthly income on housing. For a $70,000 salary, this translates to a monthly mortgage payment of approximately $1,450 to $2,000. However, the exact amount can vary based on your personal circ*mstances and the type of loan you choose.

In other words, if your monthly gross income is $10,000 or $120,000 annually, your mortgage payment should be $2,800 or less. Lenders usually require housing expenses plus long-term debt to less than or equal to 33% or 36% of monthly gross income.

Your financial situation dictates the value of homes you can afford with a 100k salary. Generally, a mortgage between $350,000 to $500,000 is feasible. However, a person with low Credit might only qualify for a $300,000 mortgage, while someone with excellent credit might qualify for a $500,000 mortgage.

So, to estimate the salary you'll need to comfortably afford a $300,000 home purchase, multiply the annual total of $24,000 by three. That leaves us with a recommended income of $72,000. (Keep in mind that this does not include a down payment or closing costs.)

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

The 28/36 rule

This guideline states that you should spend no more than 28 percent of your income on housing costs, and no more than 36 percent on your total debt payments, including housing costs. (So that would also include credit card bills, car payments and any other debt you may carry.)

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

Is 50% of take home pay too much for a mortgage? ›

While the Consumer Financial Protection Bureau (CFPB) reports that banks will qualify mortgage amounts that are up to 43% of a borrower's monthly income, you might not want to take on that much debt. “You want to make sure that your monthly mortgage is no more than 28% of your gross monthly income,” says Reyes.

How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.

That monthly payment comes to $36,000 annually. Applying the 28/36 rule, which states that you shouldn't spend more than around a third of your income on housing, multiply $36,000 by three and you get $108,000. So to afford a $500K house you'd have to make at least $108,000 per year.

For most individuals and small families, the answer to “Is $100,000 a good salary?” is a resounding “yes.” Cost of living and family size can affect how far $100,000 will go, but generally speaking, you can live comfortably on $100,000 a year. Are you hoping to make the most of your salary?

And, here is the answer to the question: You need anywhere from $100,000 to $300,000 in income to buy a $1 million dollar home right now. The reason there is so much variance is because there are so many factors that impact qualification, including: Size of down payment. Property tax rates.

Here's how the 28/36 rule works, assuming you make $6,250 per month ($75,000 per year) before taxes. If my “front-end” DTI ratio is 28%, what monthly payment can I afford? Your monthly mortgage payment, including taxes and insurance, shouldn't exceed $1,750.

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

The annual salary needed to afford a $400,000 home is about $127,000. Over the past few years, prospective homeowners have chased a moving target: homeownership. The median sales price of houses sold in the U.S. stood at $417,700 in the fourth quarter of 2023—down from a peak of $479,500 in Q4 2022.

The 28% of your income rule

Considering a 20% down payment, a 6.89% mortgage rate and a 30-year term, that's about what you can expect to pay on a $185,900 home. If you only put 5% down and had a 6.89% mortgage rate and a 30-year term, you could likely afford a $159,300 home.