Mortgage lenders typically want to see a score of 620 or better before approving a conventional mortgage. There are government-insured mortgages if your score is lower, and if your score is 760 or higher you'll qualify for the best interest rates.
For most loan types, the credit score needed to buy a house is at least 620. However, a higher score significantly improves your chances of approval.
It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.
Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000. Based on these numbers, your monthly mortgage payment would be around $2,470.
Your minimum down payment for a $400K house with a pure conventional loan can be $80,000. However, read about piggyback loans, which may get you many of the advantages of a 20% down payment if you've only saved 10%.
Assuming you have a 5% down payment (which is what would be required for an FHA loan) and less than 6% in other debts per month (~$500) you could afford a $400,000 home on a $100,000 salary. This number could change substantially, however, depending on if you have a bigger down payment or less debt.
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.
Your payment should not be more than 28%. of your total gross monthly income. That means you'll need to make 11,500 dollars a month, or 138 k per year. in order to comfortably afford this 400,000 dollar home.
For example, at current mortgage rates, borrowers with an FHA loan and a 10% down payment would need to earn about $70,000 a year to afford a $400,000 house. Borrowers with a conventional loan and a 20% down payment would need a salary of $100,000 or more.
If you have poor credit, consider an FHA loan, which allows for credit scores as low as 580 (or 500 if you can make a 10 percent down payment on the home). If you're eligible, a VA loan (for service members and veterans) or a USDA loan (for buyers in rural areas) might also be easier to qualify for.
What is a good FICO score? A good FICO score is 670 to 739, according to the company's website. According to FICO's most recently available data in October 2023, the average credit score was 718, which falls in the good range.
Some types of mortgages have specific minimum credit score requirements. A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
To qualify for an FHA-insured loan, you need a minimum credit score of 580 for a loan with a 3.5% down payment, and a minimum score of 500 with 10% down. However, many FHA lenders require credit scores of at least 620.
Putting down 20% of the home's purchase price is a traditional and ideal down payment option. For a $400,000 home, a 20% down payment would be $80,000. This option may help you avoid private mortgage insurance (PMI) and can lead to more favorable loan terms.
You can generally afford a home for between $180,000 and $250,000 (perhaps nearly $300,000) on a $50K salary. But your specific home buying budget will depend on your credit score, debt-to-income ratio, and down payment size.
The 28/36 rule suggests that borrowers should devote no more than 28% of their monthly gross income to housing expenses and no more than 36% to all debt obligations. To keep up payments on a $500,000 house at today's interest rates (including taxes, insurance, etc.), you would need to make at least $14,200 a month.
With home prices just over $100,000, plus affordable property taxes and homeowner's insurance, you may be able to purchase a home making well under $40,000 per year.
How much house can I afford with 40,000 a year? With a $40,000 annual salary, you should be able to afford a home that is between $100,000 and $160,000. The final amount that a bank is willing to offer will depend on your financial history and current credit score.
On the low end, you need to make $56,000 to $62,000 to buy a $300K house. Based on a 7.31% interest rate with no down payment, your mortgage payments will be 50% of your monthly income if you make $62K a year. With a 5% down payment, your mortgage payments will be 50% of your monthly income if you make $56K a year.
Most lenders are looking for 20% down payments. That's $60,000 on a $300,000 home. With 20% down, you'll have a better chance of getting approved for a loan.