Home Affordability Calculator
House hunting can be stressful. That’s why we are bringing you the “Houseculator.” Just input five quick numbers, and we’ll tell you how much house you could really afford. This is just one example of SoFi’s suite of financial tools working better together to help you achieve your home goals.
Preparing to buy a house? Call us for a complimentary mortgage consultation or get pre-qualified online.
The size of the mortgage you may be offered depends on your income, debts, credit history, assets, and down payment.
Fortunately, you can get an idea of how much of a mortgage you can afford by using calculators (like the one above) and pre-qualifying with lenders, and a specific number by getting pre-approved.
An old standard, the 28/36 rule, says that your mortgage payment shouldn’t be more than 28% of your monthly gross income and 36% of your total debt.
Mortgage lenders may run your financials through a few different calculations when determining how much house you can afford based on income.
Debt-to-income ratio is simply your total debt divided by your total income, shown as a percentage. Lenders use the ratio to help determine how much mortgage you can afford. Generally, 43% is the highest acceptable ratio a buyer can have and still obtain a Qualified Mortgage (a category of lower risk loans). To assess your ratio, plug your numbers into a home affordability calculator.
The 28/36 rule combines two ratios that lenders use to determine home affordability based on income and debt. The first number sets 28% of gross income as the maximum total mortgage payment, including principal, interest, taxes, and insurance. The second number sets the limit on your mortgage payment plus any other debts you owe at no more than 36% of your gross income.
Example of the 28/36 rule: If your gross income is $6,000 per month, your magic numbers work out to be $1,680 and $2,160. According to this rule, you should aim for a monthly mortgage payment of $1,680, as long as your total debt (including credit cards, car payment, etc) doesn’t exceed $2,160.
Another option is to use the 35/45 method, which recommends that you spend no more than 35% of your gross income on your mortgage, and no more than 45% of your after-tax income to pay for all debt, including your mortgage. So if your gross monthly pay is $5,000 and your take-home income is $4,000, you should spend no more than $1,750 on your mortgage payments and $2,250 on all your debt payments together.
This model gives you a little more flexibility. However, if a large portion of your income already goes toward debt, other methods might be more suitable.
With the 25% method, you spend no more than 25% of your after-tax income on your mortgage. If you make $4,000 monthly after taxes, you should spend no more than $1,000 per month on your mortgage. Because you are using a lower percentage with this method, it gives you less spending power than the other methods above.
Remember, all of these methods are just benchmarks to help you decide how much you can afford. You’ll also need to consider your monthly budget and other financial goals (saving for a wedding, buying a second car, putting aside money for your children’s college) when determining a feasible mortgage amount. Using a home affordability calculator can help you refine and customize your estimate so you can see how different factors influence the price of the home you can afford.
Beyond the amount of debt and income you have, there are several factors that will affect how much house you can afford — primarily your down payment and credit score.
The larger the down payment you have saved, the more house you can afford. If you can manage at least a 20% down payment, you can avoid mortgage insurance, which will save you hundreds every month.
If you’re selling your current home before buying a new one, the value of your home will ultimately determine your down payment. Be modest in your appraisal, or get the help of an experienced real-estate agent.
💡 Recommended: What Is the Average Down Payment On a House?
Another factor that will determine how much house you can afford is the interest rate of your loan. Usually, the lower your interest rate, the lower your monthly payment. To qualify for the most favorable interest rates, you must have a strong credit score and a good financial standing.
While it’s easy to assume that a slight interest rate increase won’t impact your loan that much, this is far from the truth. Even an increase of two percentage points can cost you thousands of dollars over the term of your loan and add hundreds of dollars to your monthly mortgage payment.
Your credit score tells lenders the probability of timely loan repayment. A higher credit score demonstrates to lenders that you manage money responsibly. Since lenders don’t want to give funds to those who lack financial responsibility or likely won’t repay the debt, they set credit score guidelines. These guidelines help determine if they will approve a home loan.
Let’s say you apply for an FHA loan, a mortgage insured by the U.S. Federal Housing Authority. You’ll need a credit score of 580 or above to be eligible for 3.5% down payment. If you have a credit score below 500, you will need at least a 10% down payment.
Applying for a pre-qualification or pre-approval will help you pinpoint how your credit score will impact the kind of house you can afford. Basically, a pre-approval estimates the loan terms and loan amount you may qualify for, making it easier to determine the mortgage payment you can afford.
A debt-to-income (DTI) ratio is the percentage of your income that goes toward paying off your debt each month. Credit card, car, and student loan payments all go into your total DTI. The more debt you have, the higher your DTI will be. In addition to your credit score and salary, lenders look at your DTI to assess how much house you can afford.
Generally, lenders use a 36% DTI as a good benchmark for loan approval. However, some lenders will approve a loan if you have a higher DTI.
When you apply for a mortgage, lenders use your salary as one of the determining factors of mortgage payment affordability. Lenders do this because they don’t want to shell out funds to borrowers who can’t afford the monthly payments. Thus, taking a look at your salary will help the lender assess if the payment works within your budget.
Unlike your credit score, lenders don’t have salary parameters for approving a mortgage. However, you must provide documentation to support how much you make. Lenders will usually want to review your W-2s and pay stubs (or 1099s for self-employed folks). If your income isn’t consistent throughout the year, either due to self-employment or seasonal work, your lender will typically want an explanation of the variations in the income stream.
💡 Never purchased a home? Check out our First-Time Home Buyer Guide to help you through the process.
Mortgages insured by the Federal Housing Administration are issued by private lenders like banks, credit unions, and mortgage companies that offer them, which weigh an applicant’s credit score (sometimes as low as 500) and two ratios:
• DTI ratio. Up to 50%, if the credit score is at least 580 and other qualifications are in place.
• Front-end ratio, or the ratio of proposed monthly mortgage payments to monthly income. Can be as high as 40% if the credit score is at least 580.
If your credit score is from 500 to 579, you may be able to get an FHA loan and put 10% down. If your score is 580 or higher, you may put as little as 3.5% down.
Home loan limits vary by area for traditional FHA loans, which may be used for up to four units as long as the buyer lives in one unit. An upfront mortgage insurance payment of 1.75% of the purchase price and annual mortgage insurance premiums (MIP) apply.
The Department of Veterans Affairs issues some home loans directly, but most VA loans are guaranteed in part by the VA and procured from private lenders.
VA loans are for active-duty service members, veterans, and some surviving spouses. Lenders often look for a minimum credit score in the low to mid-600s and a DTI of 41% or under, but those figures are not set in stone.
There is no home purchase limit if a borrower has never used a VA loan, has paid off a VA loan and sold the property, or has had a foreclosure or short sale but repaid the VA in full.
No down payment is required as long as the sales price of the one- to four-unit owner-occupied property or VA-approved condo does not exceed the appraised value. Most borrowers will pay a one-time funding fee of 1.4% to 3.6% of the amount being borrowed.
Get in touch with a Mortgage Loan Officer for a complimentary mortgage consultation. If you’re ready to jump in, get pre-qualified online in minutes.
By now, you have a good idea of how much home you can afford. However, the chart below might help you visualize the type of home you’ll be able to buy based on your income.
The chart assumes:
• 10% of monthly income going toward debt payments
• 30 year mortgage term
• 6.29% interest rate
• 25% of salary used for a down payment
| 28% = Home Price | 36% = Total Debt | |
|---|---|---|
| What kind of house can I afford making 40K a year? | $97,141 | $136,261 |
| What kind of house can I afford making 50K a year? | $121,463 | $170,363 |
| What kind of house can I afford making 60K a year? | $145,638 | $204,319 |
| What kind of house can I afford making 70K a year? | $169,960 | $238,421 |
| What kind of house can I afford making 80K a year? | $194,282 | $272,523 |
| What kind of house can I afford making 90K a year? | $218,457 | $306,478 |
| What kind of house can I afford making 100K a year? | $242,779 | $340,580 |
By now, you have a good indication of how much house you can afford based on income, debt, down payment, and credit score. If you’re ready for the next level of detail, keep these expenses in mind to help you avoid any budget-busting surprises.
The cost of homeowners insurance varies dramatically by area. Oklahoma and Texas have the highest average homeowners insurance cost at around $3,700 per year. That’s because homes there have a higher chance of being destroyed by a tornado. Areas with fewer natural disasters cost around $900. Homeowners insurance is a part of your 28% mentioned above. If your premium is especially high, you may need to pick a home at a lower price point.
In some neighborhoods and apartment buildings, a monthly homeowners association (HOA) fee helps pay for communal services like landscaping and elevator maintenance. A higher HOA fee will reduce how much you can afford to a surprising degree. Be sure to factor in the HOA fee when calculating your mortgage payment.
💡 Recommended: A Beginner’s Guide to Homeowners Associations (HOA)
When homeowners have less than a 20% down payment, they are required to carry something called mortgage insurance, or private mortgage insurance (PMI). The amount is a percentage of your loan, so the larger your mortgage, the larger mortgage insurance payment you’ll have.
But wait, there’s more! These expenses won’t affect your loan but can still have a major impact on your budget.
• Closing costs. Expect to pay between 3% and 5% of the loan amount in closing costs (lawyer fees, home inspection, etc). For the average $450,000 home in the U.S., that’s at least $13,500. Sometimes you can roll your closing costs into your loan, but that’s more common with a refinance.
• Maintenance. The costs of homeownership can be quite hefty no matter how old your home is. If you’re not used to paying for repairs, it can be a real shock how much you’ll need to pay to repair plumbing, HVAC, roofing, and other issues that will naturally come up as the home ages. Experts advise to plan for spending 1% to 4% of the value of your home each year in maintenance costs.
• Commuting costs. If you’re moving to the suburbs or an area where public transportation isn’t readily available, your commuting costs may increase substantially. Be sure to factor these into your budget before taking on a mortgage payment.
• Appraisal fee. The lender will assess the value of the new property for a fee, usually between $300 and $500.
💡 Recommended: Home Appraisals 101: What You Need to Know
• Home inspection fee. Home inspections ensure properties are structurally sound and there are no underlying issues with the home that might deter a potential buyer. Home inspections cost between $250 and $400 on average.
Let’s say you don’t qualify for a mortgage sufficient to buy a home in your desired area. Don’t give up: There are some things you can do to keep moving toward homeownership.
You may qualify for down payment assistance, grants, or programs designed for low-income households. Self-help build programs, which allow you to build equity by making improvements to the house, also subsidize the interest rate on your mortgage or offer a longer term on your loan. This can help make the monthly payment match your budget. A Housing and Urban Development (HUD) counselor may be able to point you in the direction of programs in your area.
💡 For additional help, check out these first-time homebuyer programs.
It’s not uncommon to see a cosigner alongside a mortgage applicant. A cosigner is responsible for the mortgage if the primary borrower is unable to pay. They must have a credit score above 670 and show they have sufficient income to make payments on the loan if the original borrower defaults. If you’re sure you’re able to make the mortgage payment, a cosigner could be just what you need to become qualified.
Sure, it’s easier said than done to increase your income. However, negotiating a pay raise, finding higher-paying work, or taking on a side hustle could help the income equation on your mortgage application.
Rural areas tend to be much more affordable. You can also finance a home with a zero-down United States Department of Agriculture (USDA) loan in a qualified rural area. You’ll have to weigh the benefits of cheaper housing against living farther from family support and possibly fewer available job opportunities.
If debt is preventing you from qualifying for a mortgage and your top goal is to get into a home, a laser-like focus on paying off your debt can help. Try using any “bonus” money — your tax refund, birthday cash — to pay it down. Above all, make a solid, strategic plan (and get your partner on board). This debt payoff planner can help.
Many conventional lenders (banks, credit unions, etc.) accept a 3% down payment if you meet specific requirements. Some requirements include a DTI of less than 43% and a credit score of 640 or above. FHA loans require as little as 3.5% down, whereas VA loans have no down-payment requirements. If you haven’t saved much cash, a loan with lower down-payment requirements can help you qualify for a mortgage.
Requesting down payment gifts from your close relatives may ease the financial burden of buying a home. However, conventional loans may require you to use some of your funds to qualify for a mortgage. Remember, you can also use some gift money to pay for closing costs or other housing expenses.
If you need extra cash for a down payment, consider taking a traditional IRA withdrawal or a 401(k) loan. Traditional and Roth IRA rules state that you can withdraw up to $10,000 for a down payment without paying the 10% early distribution penalty. And if you have a 401(k), your employer may allow loans. This means that you can borrow money against your 401(k) for a home. However, you must pay interest and usually pay back the principal within five years.
A home affordability calculator can help you identify how much house you can afford, and determine a mortgage payment that fits within your budget. This way, you can be confident that you won’t ever feel “house poor.”
A salary between $135,000 and $140,000 will help you afford a 450k home. But of course, affordability will also depend on your down payment and other financial factors like your credit score and debt-to-income ratio.
Generally, you need a 3% to 20% down payment to purchase a home, depending on the type of loan. So, if your lender requires a 20% down payment, $50,000 will help you qualify for up to a $250,000 loan.
Aim to buy a house that equals three to five times your yearly income. If you have more debt, you’re looking at the lower end. Less debt means you can aim for a higher number. However, this calculation may not work for every situation and housing market. A mortgage lender can help with your unique situation.
For a conventional loan with a 20% down payment and an interest rate of 5%, the payment for a $500K house would be $2,147 for principal and interest. The real number for the mortgage on a $500K house will depend on your interest rate, down payment, and loan type.