DOWN PAYMENT AND CLOSING COSTS
FHA loans require a down payment of 3.5%. For a $500,000 home, this amounts to $17,500. Closing costs should also be taken into consideration. These include various fees and taxes and generally fall between 2% and 2.25% of the listing price.
The monthly mortgage payment on a $500,000 home typically ranges between $3,200 and $4,200. Market rates, loan programs, and down payment size significantly influence your payment structure.
To afford a $550,000 house, you typically need an annual income between $135,000 to $180,000, depending on your financial situation, down payment, credit score, and current market conditions. However, this is a general range, and your specific circumstances will determine the exact income required.
If you want to avoid mortgage insurance by putting 20% down, your down payment should be $100,000. If you plan to put 8% down (the median for first-time homebuyers) it would be $40,000. If you're a first-time homebuyer with an FHA loan and a 3% down requirement, you would need $15,000.
In most cases, $10,000 is more than enough of a down payment to buy a decent home. But that may not be true in the most expensive housing markets, such as Hawaii and California. Many aspiring home buyers still believe the myth that they need a down payment of 20% of a home's purchase price.
The Quick Answer: Present the Budget Range
However, the exact budget range depends on other factors including credit score, financial situation, and the market conditions. Someone with a $70K salary might be able to afford a house with a value between $180K and $350K, depending on these factors.
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.
To comfortably afford a $500,000 house, you'll likely need an annual income between $125,000 to $160,000, depending on your specific financial situation and the terms of your mortgage. Remember, just because you can qualify for a loan doesn't mean you should stretch your budget to the maximum.
The salary to afford a 500K house ranges between $101,040 and $180,429, assuming a 30 year mortgage, a 7.48% interest rate, and down payment between zero and $15,000. We'll talk about ways to expand this range, but this is a good baseline for setting expectations and budgeting for buying a $500,000 house.
Current mortgage interest rates in California. As of Monday, January 13, 2025, current interest rates in California are 7.33% for a 30-year fixed mortgage and 6.61% for a 15-year fixed mortgage.
To qualify for most types of mortgages, you'll need a credit score of at least 620. Some loan types, such as FHA loans, accept lower scores, but a higher score will almost always get you a lower interest rate. And that could save you a significant amount over your loan term.
For instance, the minimum required down payment for an FHA loan is only 3.5% of the purchase price.
To afford a $600,000 house, you typically need to know how much income is required, which generally falls between $150,000 to $200,000 annually, depending on your financial situation, down payment, credit score, and current market conditions.
As noted above, your estimated monthly payment for a $500K mortgage will be $3,360.16, assuming a 30-year loan term and an interest rate of 7.1%. But this payment could range between $2,600 and $4,900 depending on your term and interest rate.
A person who makes $50,000 a year might be able to afford a house worth anywhere from $180,000 to nearly $258,000. That's because your annual salary isn't the only variable that determines your home buying budget. You also have to consider your credit score, current debts, mortgage rates, and many other factors.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.
If you want to have a minimalist lifestyle, 36k/year is more then enough. If you want a home, family, car, insurance and some "toys", it's not going to be enough, at least in a majority of places in the U.S. But again, the term "decent" is pretty objective. Can you be content? Depends on your expectations.
I make $25K a year; can I buy a house? Yes, if you make $25K a year, you can likely afford around $580 per month for a monthly mortgage payment. With a 6% fixed rate and a 3% down payment, this could buy you a house worth about $100,000. However, consult a mortgage lender for exact numbers tailored to your situation.
The Bureau of Labor Statistics (BLS) reported that the average salary in the U.S. is $65,470, as of May 2023. Based on this data point, $70K a year is a good salary for a single person — one that puts you above the national average. But just how far $70,000 can carry you varies from person to person.
To afford a $700,000 house, you typically need an annual income between $175,000 to $235,000, depending on your financial situation, down payment, credit score, and current market conditions. However, this is a general range, and your specific circumstances will determine the exact income required.