A 20% down payment would keep many home buyers locked out of the housing market. Fortunately, 20% is no longer the benchmark for a down payment on a house. According to the National Association of REALTORS®, in 2022, the average down payment was 6% for first-time home buyers and 17% for repeat buyers.
If you can easily afford it, you should probably put 20% down on a house. You'll avoid paying for private mortgage insurance, and you'll have a lower loan amount and smaller monthly payments to worry about. You could save a lot of money in the long run.
You may qualify for a lower interest rate
Since you're assuming more of the financial risk, a 20% down payment puts you in a great spot to negotiate with your lender for a more favorable mortgage rate. A lower interest rate can save you thousands of dollars over the life of the loan.
To purchase a $200,000 house, you need a down payment of at least $40,000 (20% of the home price) to avoid PMI on a conventional mortgage. If you're a first-time home buyer, you could save a smaller down payment of $10,000–20,000 (5–10%). But remember, that will drive up your monthly payment with PMI fees.
Most lenders are looking for 20% down payments. That's $60,000 on a $300,000 home.
If you make $70K a year, you can likely afford a home between $290,000 and $310,000*. Depending on your personal finances, that's a monthly house payment between $2,000 and $2,500. Keep in mind that figure will include your monthly mortgage payment, taxes, and insurance.
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.
If I Make $70,000 A Year What Mortgage Can I Afford? You can afford a home price up to $285,000 with a mortgage of $279,838. This assumes a 3.5% down FHA loan at 7%, a base loan amount of $275,025 plus the FHA upfront mortgage insurance premium of 1.75%, low debts, good credit, and a total debt-to-income ratio of 50%.
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
Key Takeaways. A house poor person is anyone whose housing expenses account for an exorbitant percentage of their monthly budget. Individuals in this situation are short of cash for discretionary items and tend to have trouble meeting other financial obligations, such as vehicle payments.
If you put a large chunk of it into your down payment, you may not have as much available in case of emergencies. You may also need to be more careful with your monthly budgeting. In some cases, this can be very inconvenient. The money cannot be invested elsewhere.
One common drawback is that not all borrowers will qualify for these programs. Eligibility criteria such as income limits and credit score requirements may exclude some individuals from accessing this assistance. Another downside is that receiving down payment assistance often means taking on additional debt.
Downsides of a 20% Down Payment
Won't provide as much benefit when rates are low: If mortgage rates are low, you could potentially put that money to better use by investing it or paying down high-interest debt. That could be the case even if you have to pay PMI.
Visit your My NerdWallet Settings page to see all the writers you're following. The median down payment for all home buyers is 15%, according to the National Association of Realtors (NAR). First-time buyers make smaller down payments: They put down a median 8%, compared to 19% for repeat buyers.
You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.
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.
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.
If you are a single person in Los Angeles making around $70,000 a year, you are still considered low-income, according to a new statewide study. The California Department of Housing and Community Development released the report in June and found that income limits have increased in most counties across California.
Different types of mortgages also have different minimum credit score requirements. And that can be a barrier to an uber-low down payment if your score is low. However, the minimum down payment for a $400K house would be only $2,000 more for those with a score of 580 instead of 620.
For a 15 year fixed, about 4% interest, you can afford a mortgage of about $140,000. If you're going to put down 20% as a down payment (to avoid PMI), you should be looking at houses around $175,000 and expect to put down about $35,000.
$50,000 per year is considered a moderate income in the United States, and many individuals and families manage to live comfortably on this income.