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Even if you’re paying a student loan or car loan, a $300,000 annual income means you can likely afford a home priced around $925,000. An income of $300,000 a year is more than four times the U.S. median household income of $74,580, so it gives you a good head start. But there are several other variables that could affect your ability to purchase the home you want — including your down payment and credit history, current interest rates, and the location you want to be in. Let’s take a look at the breakdown of the factors that affect how much of a mortgage you can manage.

What Kind of House Can I Afford on a $300,000 Annual Income?

You can get a better idea of how much house you can afford on your $300,000 income by using an online mortgage calculator with taxes and insurance or by prequalifying with one or more lenders for a home mortgage loan. Or you can run the numbers yourself using a formula lenders often consider. The 28/36 rule says your mortgage payment shouldn’t be more than 28% of your monthly gross income, and your total monthly debt, including your mortgage payment, shouldn’t be more than 36% of your income.

Whether that’s doable in a housing market in which both home prices and interest rates remain stubbornly high may depend on several factors, including home values in your specific area and the different types of mortgage loans for which you can qualify. One of the most important factors is your debt-to-income ratio.


💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

Understanding Debt-to-Income Ratio

You can expect lenders to take a close look at your debt-to-income ratio (DTI) — the second number in the 28/36 rule — when they’re deciding how much mortgage you can afford. It tells them how you’re handling your current debt, and if you can take on more.

Your DTI is calculated by dividing your total monthly debt payments by your monthly gross income. Mortgage lenders generally look for a DTI of 36% or less; but depending on the lender and the type of home loan you’re hoping to get, you may be able to qualify with a DTI up to 43% or even 50%.

Typically, the lower your DTI, the better your borrowing options. So to get the optimum loan amount, and the best rate and terms, you’ll want to keep an eye on this number.

How Your Down Payment Affects Your Costs

You may not need a big down payment to qualify for a home loan. But the more you can comfortably put down on a house, the less you’ll have to borrow, which can help lower your monthly payments. A higher down payment also could get you a lower interest rate. And if you put down at least 20%, you can avoid paying private mortgage insurance (PMI), which will further reduce your payments.

Other Factors that Can Affect Affordability

You can expect your income, debt, and down payment to play a major part in determining how much house you can afford. But these factors also can impact your ability to qualify for a mortgage that’s manageable, including:

Interest Rates

Qualifying for a lower mortgage interest rate can help you reduce your monthly mortgage payment — and the amount you’ll pay for your home over time. Though rates may seem fairly consistent from one lender to the next, banks do compete for customers. So you may be able to improve your rate — at least a little bit — if you do some comparison shopping. You also can help your chances of qualifying for a better rate by ensuring that your finances are in good shape and that you have a solid credit score.

Loan Term

Depending on the type of mortgage you choose, you may be able to choose the length of your home loan, so it’s good to know the pros and cons of each. If you’re choosing between a 15-year vs. a 30-year mortgage, for example, the shorter term may offer a less expensive interest rate, which could save you money over the life of your loan. But a 30-year term, which is the most common mortgage length, generally will have lower monthly payments.

Homeowners Insurance

Homeowners insurance premiums can be an important consideration as you plan your purchase. If you live in an area that’s considered “high-risk,” the cost — which is based in part on your home’s value — could be significant. Your costs also could increase if you need additional coverage, such as a flood or earthquake policy.

Most lenders require borrowers to have an adequate amount of coverage, so understanding how to buy homeowners insurance and comparing the policies and premiums can help you cut this expense.

Property Taxes

Property taxes, which are generally based on the assessed value of a home, are often included in a borrower’s monthly mortgage payment. The percentage you’ll be assessed can differ from state to state, and even county to county, so it’s important to include this amount whenever you calculate the affordability of a potential home purchase.

HOA Fees

Before you decide to buy a home, it’s a good idea to see if the community is governed by a homeowners association (HOA) and, if so, what the fees might be. Though the average is about $250 per month, fees can go as high as $2,500 per month or more.

Location

Home prices are typically higher in cities vs. rural areas, and the overall cost of living can vary by state. It also can be more expensive to purchase a home in a popular or established neighborhood, or in a well-rated school district.

Recommended: Best Affordable Places to Live in the U.S.

How Down Payment Assistance Can Help with Home Affordability

At $300,000 in yearly income, you likely have the means to manage a higher monthly payment but you need some help with your down payment. It’s worth looking for a down payment assistance program that can help.

Though many assistance programs set limits on how much an eligible home can cost, or on the homebuyer’s income, it may be worth researching what’s available — especially if you live in a state with higher home prices. In California, for example, where the average home value is currently $743,435, there are counties where a first-time homebuyer with a $300,000 income still may qualify for assistance.

Home Affordability Examples

An online home affordability calculator can give you an idea of how much house you can afford on your income. All you have to do is plug in some basic information about your salary, savings, debt, and the home you hope to buy. Here are some hypothetical examples:

Example #1: Saver with Some Debt

Though Jan has been working for several years, she’s still paying off some student debt. She also has a car payment, and she uses a couple of credit cards that she usually pays off each month.

Gross annual income: $300,000
Amount available for down payment: $70,000
Monthly debt: $1,500
Mortgage rate: 6.5%
Property tax rate: 1.125%
House budget: $990,000

Example #2: Spends Less, But Also Saved Less

Ian’s car and student loans are paid off (thanks Mom and Dad!), and he doesn’t put much on his credit cards. He and Jan have similar credit ratings, and they’re looking in the same area. But Ian hasn’t managed to save as much for a down payment, which might affect what he can afford.

Gross annual income: $300,000
Amount available for down payment: $30,000
Monthly debt: $800
Mortgage rate: 6.5
Property tax rate: 1.125%
House budget: $925,000

3 Ways You Can Calculate How Much House You Can Afford

Along with using an online calculator to figure out how much house you might be able to afford on a $300,000 income, you also can run the numbers on your own. Some different calculations include:

The 28/36 Rule

We’ve already covered the 28/36 rule, which combines two factors that lenders typically look at to determine home affordability: income and debt. The first number sets a limit of 28% of gross income as a homebuyer’s maximum total mortgage payment, including principal, interest, taxes, and insurance. The second number limits the mortgage payment plus any other debts to no more than 36% of gross income.

Here’s an example: If your gross annual income is $300,000, that’s $25,000 per month. So with the 28/36 rule, you could aim for a monthly mortgage payment of about $7,000 — as long as your total debt (including car payment, credit cards, etc.) isn’t more than $9,000 per month.

The 35/45 Model

Another DIY calculation is the 35/45 method, which recommends spending no more than 35% of your gross income on your mortgage and debt, and no more than 45% of your after-tax income on your mortgage and debt.

Here’s an example: Let’s say your gross monthly income is $25,000 and your after-tax income is about $18,500. In this scenario, you might spend between $8,325 and $8,750 per month on your debt payments and mortgage combined. This calculation can offer a bit more flexibility with the amount of your mortgage payment, as long as you aren’t overburdened with other types of debt.


💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

The 25% After-Tax Rule

If you’re worried about reining in your spending, or you have other goals you’re working toward, this calculation may be useful, because it offers a more conservative result. With this method, your target is to spend no more than 25% of your after-tax income on your mortgage.

Here’s an example: Let’s say you make $18,500 a month after taxes. With this method, you would plan to spend $4,625 on your mortgage payments.

Keep in mind that these equations can only give you a rough idea of how much you can spend. When you want to be more definite about the home price and monthly payments you can afford, it helps to go through the mortgage preapproval process.

How Your Monthly Payment Impacts the Loan You Can Manage

Some homebuyers may prioritize the overall price of a home or the interest rate they can get. But it’s how those factors and others combine to raise or reduce the monthly payments that may ultimately determine whether you can afford the home or not.Before signing on the dotted line, it’s a good idea to run the numbers on an online mortgage calculator to be confident you won’t stretch yourself too thin.

If you do find yourself struggling a bit — perhaps because your income changes or some other unexpected life change occurs — a mortgage refinance might help you lower your monthly payment (especially if interest rates drop).

Types of Home Loans Available to $300,000 Households

A $300,000 income can help a buyer qualify for multiple mortgage options, including conventional or jumbo loans. But it also could make you ineligible for a government-backed loan that has income limits. There also may be limits on the purchase price and type of property you hope to purchase, depending on the mortgage you get.

Here are a few of the options available to $300,000-income households:

Conventional Loans

A conventional loan is issued by a private lender, such as a bank, credit union or other financial institution. There are two types of conventional loans:

•   A conforming loan must abide by Federal Housing Finance Agency (FHFA) standards that apply to a borrower’s credit, debt load, and the loan size. (For 2024, the conforming loan limit is $766,550 in most areas and $1,149,825 in higher-cost areas.)

•   Nonconforming loans are loans that don’t meet one or more of the federal standards. A jumbo loan, though technically a conventional loan, is considered nonconforming because it exceeds the loan limit.

Government-Backed Loans

A government-backed mortgage is a home loan that’s insured by an agency of the federal government. There are three main types of government-backed loans:

•   FHA loans are insured by the Federal Housing Administration (FHA), and you may be able to qualify for this type of loan even if you have a lower credit score or a lower down payment. There are no limits on how much you can earn and get an FHA loan, but there are limits on how much you can borrow depending on where you plan to reside.

•   VA loans, which are guaranteed by the U.S. Department of Veterans Affairs, are for eligible members of the U.S. military and surviving spouses. There are no income limits for VA loan buyers, and there are no longer standard loan limits on VA direct or VA-backed home loans.

Recommended: 2024 Home Loan Help Center

The Takeaway

There are several factors that can go into determining how much home you can afford. Besides your income, you can expect lenders to look at your credit, your debt, and your down payment to decide how much you can borrow.

To find a loan and monthly payment that’s a good fit for you, it’s a good idea to research and compare different loan types and amounts. And, if you have questions, you can always seek advice from a qualified mortgage professional.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $300,000 a good salary for a single person?

According to the U.S. Census Bureau, only 11.5% of households earned $200,000 or more in 2022. So if you’re earning $300,000 all on your own, your salary isn’t just good, it’s great.

What is a comfortable income for a single person?

“Comfortable” varies widely from one person to the next but one way to feel comfortable is to set financial goals and then chip away at achieving them.

What is a livable wage in 2024?

The Massachusetts Institute of Technology’s Living Wage Calculator calculates living costs across the U.S., and the “livable wage” varies widely based on family size and location. For a single person with no children in Honolulu County, Hawaii, for instance, the living wage is $22.76 per hour. In Marion County, Alabama, it’s $14.80 per hour.

What salary is considered rich for a single person?

According to the Economic Policy Institute, in 2021, the top 5% of earners made, on average, $335,891. (If you consider only the top 1% to be “rich,” you’d have to earn $819,324 or more.)

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Photo credit: iStock/svetikd

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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First things first: You need to understand what, exactly, you’ve inherited, with whom you may need to share the inheritance, and what liens (including but not limited to mortgages) are attached to the property. So after taking a moment to appreciate what a monumental event inheriting a house is, you’ll want to get down to the business of managing this important new asset.

The Legal Steps of Inheriting a House

Inheriting a house through a will or trust is a big deal, whether you knew that you were going to inherit the property or it comes as a complete surprise. From a financial standpoint, inheriting a house that is fully paid off can be quite different from inheriting one with a mortgage. If you don’t inherit the house free and clear, the outstanding balance on the mortgage can become your responsibility (or a responsibility that you must share with any other heirs who share in the house).

When someone dies and leaves a will, that will is typically presented to a probate court judge, (although not all wills are probated). That judge would then review the will. Typically, a will contains the name of an executor — the person whom the deceased wants to help carry out the wishes listed in the will.

The judge may approve the name of the executor listed in the will or name someone else for the task. Once there is an executor, that person has the fiduciary duty to make sure the terms of the will are carried out.

Specific duties of an executor as it relates to the house can include locating all the people who, according to the will, are to share in the ownership of the house and safeguarding the property until it is passed to the recipient(s). When a home is willed to someone, that person has a “right to ownership,” but he or she doesn’t actually own the home until the title is transferred into their name.

Inheritance situations can be reasonably simple or quite complex, and what’s true in one state isn’t necessarily so in another. Any questions you have about the legalities of your particular situation should be addressed with an attorney well versed in the laws of your state.


💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Steps to Take When You Inherit a House

Once you are notified that you have inherited a house, there are some actions that need to be taken fairly quickly:

•   It’s important to quickly determine whether there is a mortgage (or a home equity loan, or both) on the property. If so, you will need to determine how to keep up the payments and find out whether property taxes and insurance are rolled into the mortgage payments. An involuntary lien, such as those related to unpaid taxes, are also a possibility and can be identified through a title search.

•   If property taxes are not rolled into the mortgage, they may need to be paid separately (this might include overdue taxes). When you inherit a home — with a mortgage or free and clear — you may need to pay property taxes as soon as you inherit. The home can also be reassessed at current market value at this point, which may cause an increase in property tax. If you have questions about property taxes, insurance, and the like, the executor of the estate might be a good resource.

•   Contact the insurance company that’s providing homeowners insurance for the property to keep coverage from lapsing.

•   Consider getting the home appraised. This will help later, should you decide to sell the house, because it will help determine capital gains taxes (more on that later). And if you are one of multiple heirs, having an appraisal could help you start the conversation in the event that one of you wishes to buy the other out.

•   Call utility companies and cancel accounts that aren’t necessary (for example, cable television if no one will be living in the home immediately) and make arrangements to pay those that are necessary (heat, light, water, trash pick-up).

•   Determine how to keep up the yard and check or stop the mail. An untended property invites break-ins, and an overgrown yard can face fines from city government or a homeowners association.

•   The home may be full of furniture and belongings that need to be distributed to family members, sold, donated, or disposed of. The executor can help determine whether the will designates that certain items inside the home are destined for specific heirs.

Deciding if You Should Sell an Inherited House

You’ll quickly face the decision about what to do with the house you’ve inherited. You might want to move in yourself, but if you and your siblings, say, inherited it as joint owners, you’ll need to agree on a plan. If the property is a family home, emotions can come into play here. (Heirs who can’t agree may need the court system to sort things out.)

If you’re the one who wants to live in the home and your fellow heirs aren’t interested, you could pay them rent or you could explore assuming any existing mortgage, meaning the terms would stay the same but the mortgage would be in your name. This isn’t always possible, and it is only a smart move if the terms of the existing mortgage are better than what you would get with a new loan. Otherwise, you could consider taking out a new mortgage and using the loan to pay your fellow heir(s).

You could also rent the house to someone else as a source of income and divide the proceeds among joint heirs, minus the cost of a property manager and any costs of home repairs and upkeep.

Another solution, of course, is to sell the house. Bear in mind that you will need to pay capital gains tax on any increase in value that occurs between the time you inherited the property and when it’s sold.


💡 Quick Tip: Apply for a cash-out refi for a home renovation, and you could rebuild the equity you’re taking out by improving your property. Plus, you may be able to deduct the additional interest payments on your taxes.

Using the Equity in an Inherited House

Another option you have when you inherit a house, assuming there isn’t a large mortgage or liens already on the property, is to use the equity in the home to finance renovations that could increase the home’s value or supply cash for your other needs. If you have taken over the mortgage, you could consider a cash-out refinance. In this process, you take out a new mortgage loan for the amount owed on the current mortgage, plus an additional sum in cash that you can use for any purpose.

The Takeaway

Inheriting a house brings lots of responsibility and many questions — and sharing in an inherited property can be even more complicated, especially if it is a place that holds many memories for family members. But with some quick moves to protect your new asset and calm consideration of whether to inhabit, rent, sell, or renovate, you can enjoy the benefits of the inheritance for years to come.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

A new mortgage refinance could be a game changer for your finances.

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Photo credit: iStock/Pheelings Media

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

This article is not intended to be legal advice. Please consult an attorney for advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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You’ve been getting up early weekend after weekend to go to open houses and have spent hours looking at online listings. You’ve finally found a place that you like, but before you make an offer, one good idea is to do some research on what to look for when buying a home.

Most people don’t want to buy a home that is going to require a lot of work or be difficult to finance because it’s structurally unsound or unsafe. The home might look great on the surface, but it’s recommended that a buyer order the proper home inspection(s) to see if it actually measures up prior to lifting any property contingencies. It can be stressful or even derail the home purchase to find out that you’ll need to make all sorts of costly renovations that make you go over budget or have to look for renovation financing vs. traditional financing, after you’ve worked hard to find that dream home.

Signs Your Dream Home Could Be a Nightmare

There are a lot of things to look for when buying a home. But these are 10 common home inspection red flags that would put even your dream home on the buyer-beware list because of the home repair costs and stress involved in fixing the issues. (Passing the home inspection will also be an important part of getting through the real-estate purchase contract process.) Consider these factors as you continue your search for your new nest, and especially if you’re a first-time homebuyer, lean on professional inspectors for help.

1. Structural Problems

If there is a problem with the foundation or load-bearing walls in your new home, structural repairs involving health and safety issues could derail your home loan by making the property ineligible for financing, or could wind up costing thousands of dollars. But structural problems aren’t just expensive to fix, they could also be considered unsafe — which is why they should be at the top of any list of things to check when buying a home.

Look for major cracks in the foundation, problems with doors closing, door frames not being perfectly rectangular, or walls or floors that seem to sag. You’ll want to spend the money for a professional home inspection. If the inspection reveals there is a larger issue, a structural engineer’s report may be able to provide additional insight.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

2. Water-Damage Woes

The biggest cause of rot and mold is moisture. So if your potential new home has leaking pipes or a roof that lets in water, it won’t just be expensive to replace your roof or find where the leak is coming from — the leak could have already created other problems.

Water stains and mold are home inspection red flags. Not only can mold have implications for your health, it could indicate a bigger problem with the house. If you see either of them, look into the cause of the stain, because a new roof or new plumbing could set you back a significant amount of money. Dry rot and related problems like mold can also fall under health and safety issues and, as a result, affect the home’s eligibility for most types of home mortgage loans.

3. Poor Drainage

Poor grading and drainage can potentially cause huge problems with the foundation or basement of your home, so it should be high on your list of home inspection red flags. When it comes to bad drainage, things to look for when buying a home can include but are not limited to: pooling water around the foundation; leaking in the basement; gutters that are blocked or overflowing; and soil being moved by water in any flower beds around the home. While there are ways to fix poor drainage and improper grading if it’s minor, you might struggle with larger drainage problems if the home is in a low-lying area.

4. Bad Plumbing

The last thing you want is for your sink to spring a leak. Plumbing problems could have an array of causes, including improper installation or older pipes that need to be replaced or are leaching metals into your water supply. Plumbing that regularly leaks could cause water damage, which, as noted previously, could have some pretty serious consequences (like mold and rot). The home inspector will generally test the plumbing system, but as you look at houses, be observant and try running all the faucets and flushing the toilets. Keep an eye out for any signs of possible water damage and be aware of any funky smells.

5. Pests

There are a few ways to avoid buying a pest-infested home, such as having a home inspector look for pests. If the general home inspection calls out pest issues, it is recommended to go a step further and request a pest inspection report from a licensed pest inspector.

If the inspector finds signs of bugs, it might be possible to request that the seller fix the infestation before you close the house. Sometimes, pest infestation can mean a significant discount, which may be appealing to some buyers. But getting rid of certain kinds of bugs can be very costly, complicated, toxic, and even require you to leave your home while the fumigation takes place. So the discount may not actually be as rosy as it seems. Lenders do not usually close on a traditional home loan with a serious pest issue because it may present a health and safety issue.

6. Electrical Problems

A general home inspection will cover basic electrical items, but some buyers opt for an additional electrical inspection. Depending on when the home was built, there could be improper or even dangerous wiring throughout the house. That could affect eligibility for home financing due to health and safety issues, increase the fire risk in your home, or affect how you budget for buying the house.

7. Neighborhood Troubles

You might have found a beautiful home, but what if the location isn’t ideal? If your home is in a neighborhood that has a high number of vacant properties, a high crime rate, or a poorly rated school system, your investment might not pay off. Ask your real estate agent and neighbors about the neighborhood, stop by at different times, search for the area’s crime statistics, and check out the reputation of local schools.


💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

8. Homeowners Association Problems

If you’re moving into a development with dues, you’ll want to know more about the homeowners association (HOA). Your lender will likely require you to obtain a completed Homeowners Association Questionnaire, and once this form is completed, it could answer many of the questions you may have, such as: How much are the HOA fees? What are the rules around making changes to your property? Is there any pending litigation against the condo association? Can you rent out your place or use it as an Airbnb when you go on vacation? Before you put in an offer, it’s a good idea to find out the answer to these or any other issues of importance to you and your family.

9. DIY Improvements

Watch out for shoddy renovations. If the house looks like it has undergone a recent facelift, have a close look at the workmanship. If there are visible shortcuts, there may be other areas of the house that weren’t properly renovated that could cause you headaches in the future. Check them carefully and make sure the major improvements or additions were done with the proper permits.

10. Older Windows

Older windows could translate into higher heating and cooling costs for your home. Moisture leakage can cause mold issues over time. Those costs add up, so you’ll want to add windows to your list of things to look at when buying a home. On your house tour, look for windows that stick, have discoloration around the indoor casing, or are warping. Updating windows (or replacing them completely) could be costly.

The Takeaway

In certain situations, a buyer may consider making an offer on a house even with one or two of these home inspection red flags. But before committing to a property that needs TLC, you’ll want to add up what the potential repairs may cost. Doing the math now could mean fewer financial surprises when you move in. And in some cases, it may be possible to negotiate with the seller so that major issues are addressed before the closing.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

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Photo credit: iStock/Jitalia17

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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On a salary of $65,000 per year, as long as you have very little debt, you can afford a house priced at around $175,000 with a monthly payment of $1,517 with no down payment. This number assumes a 6% interest rate and a standard debt-to-income (DTI) ratio of 36%. Your homeowner’s insurance, property taxes, and private mortgage insurance would be included in your monthly payment.

But there are many factors that go into home affordability beyond your $65,000 salary. Let’s take a look at how they play in concert with one another.

What Kind of House Can I Afford With $65K a Year?

Not everyone who earns $65,000 will have the same housing budget. You may qualify for a larger (or smaller) home mortgage loan, depending on a number of qualifications. These include:

•   Your DTI ratio

•   How much your down payment is

•   The cost of taxes and insurance where you live

•   What interest rate you qualify for

•   What type of loan you’re getting

•   If your lender is willing to underwrite a higher DTI level

When all is said and done, earning $65,000 may qualify some people for a home priced as high as $250,000. And if you’re buying with a partner who also has income, that changes the picture as well. You’ll need to understand how the factors on the list above affect what kind of loan you qualify for.

💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

Understanding Debt-to-income Ratio

Your DTI ratio, quite simply, is all your monthly debt payments added together and then divided by your monthly income. If you have a lot of debt, the ratio is high. If you don’t carry a lot of debt, the ratio is low. When you’re trying to get a loan, the lower, the better.

What lenders look for is your ability to repay a mortgage. Every debt that you carry and need to repay each month takes away from what you could be putting toward a mortgage. That’s why they aim for a DTI less than 36%. It is conservative, but it ensures the borrower can meet their obligations.

For a $65,000 annual income with a monthly income of $5,416, a DTI of 36% works out to be $1,950. Your mortgage payment and all of your monthly debts, such as credit card payments, student loans, and car payments should fit within the $1,950 budget.

How to Factor in Your Down Payment

A down payment can increase home affordability in a big way. The more you’re able to put down, the higher purchase price you can qualify for. This is true especially for down payments over 20%. If you have the ability to put down that much on a home, you don’t have to pay for mortgage insurance each month, which qualifies you for a higher-priced home.

SoFi’s mortgage calculator is helpful for seeing how a down payment can affect your monthly payment and how much house you can afford.

Factors That Affect Home Affordability

A number of factors beyond your down payment and DTI ratio affect how much home you’ll be able to afford. You’ll want to take a close look at:

•   Interest rates Lower interest rates qualify you for a higher purchase price on a home. This is why borrowers seek out a mortgage refinance when rates are low. This is also why you’ll want to take great care of your credit score.

•   Credit score When your credit score is stellar, you’ll qualify for the lowest interest rates your lender can offer. This will save you a significant amount of money over the life of a loan, not to mention help you qualify for a higher mortgage. Paying less in interest means you can pay more for a home.

•   Taxes, insurance and homeowners association dues Your lender will take these numbers into account when determining how much they can lend you.

•   Loan type How much house you can afford can depend on the loan type.

•   Lender Your lender can help with home affordability. Some lenders make it possible to qualify for a higher mortgage by increasing the allowable DTI ratio — in certain cases it can be as high as as 50%.

•   Location If you’re really looking for home affordability, you might want to consider a more affordable area. Check out a list of the best affordable places to live in the U.S.

Recommended: The Cost of Living by State

How to Afford More House With Down Payment Assistance

Another of the tips to help you qualify for a mortgage: A down payment assistance (DPA) program could help you afford more house. DPAs assist with the down payment or closing costs associated with buying a home. Sometimes they come as a grant you don’t have to ever repay, and sometimes they’re underwritten as a second mortgage that may or may not need to be repaid (depending on the program).

You’ll see DPAs offered by housing authorities, either at the state or local level. You may need to be a first-time homebuyer or qualify with lower income to take advantage of these programs.

How to Calculate How Much House You Can Afford

There are some generally accepted guidelines that can help you get an idea of the amount of mortgage you’ll be able to qualify for.

The 28/36 Rule: This rule states that your home payment should not be more than 28% of your income and your total debts should not exceed 36% of your income. It’s also known as the front-end (28%) and back-end ratio (36%).

Front-end ratio (28%): At 28% of your income, a monthly housing payment from a monthly income of $5,416 should be no more than $1,517 ($5,416*.28).

Back-end ratio (36%): At 36% of your income, your debt-to-income ratio on a monthly income at $5,416, should be no more than $1,950 ($5,416*.36).

The 35/45 Rule: If your lender is more flexible, they may instead follow the 35/45 ratio, which allows for a higher mortgage payment. It’s just like the 28/36 rule, but this one allows your housing payment to be 35% of your monthly income. Your debt-to-income ratio can be as high as 45%. With a monthly income of $5,416, the housing allowance (35% of your income) increases to $1,895 and the total monthly debts (45% of your income) increases to $2,437.

If you want to skip the manual calculations, you can always use a home affordability calculator.

💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.1

Home Affordability Examples

Making $65,000 a year gives you around $5,416 of monthly income, but there’s a lot of varying situations. Some people have car loans, student loans, or credit card debt. Each of these affect home affordability. Your lender’s job is to help you afford a mortgage and still meet all your monthly debt obligations.

In these examples, we use the 36% debt-to-income ratio to determine payments and home affordability. (Keep in mind that your lender may be able to qualify you for a higher amount if they’re willing to accept a higher debt load.) For each example, taxes ($2,500), insurance ($1,000), and APR (6%) remain the same for a 30-year loan term.

Example #1: Some Debt, High Down Payment

Monthly credit card debt: $50
Monthly car payment: $300
Student loan payment: $200
Total debt = $550

Down payment = $20,000

Maximum DTI ratio = $5,416 * .36 = $1,950
Maximum mortgage payment = $1,400 ($1,950 – $550)

Home affordability = $180,000

Example #2: Thrifty Saver

Monthly credit card debt: $0
Monthly car payment: $0
Student loan payment: $200
Total debt = $200

Down payment: $20,000

Maximum DTI ratio = $5,416 * .36 = $1,950
Maximum mortgage payment = $1,750 ($1,950 – $200)

Home budget = $197,000

How Your Monthly Payment Affects Your Price Range

The monthly payment you’re able to qualify for directly affects how big a mortgage you can get. With a lot of monthly debt payments, it might be tough to qualify for the home you want. Interest rates also play a huge role in what your monthly payment is going to be. Even after you’ve bought a home, you’ll want to take care of your credit so you can refinance into a lower rate when interest rates drop.

Recommended: Home Loan Help Center

Types of Home Loans Available to $65K Households

Different types of mortgage loans can affect home affordability. This is due to the fact that they have different interest rates and different requirements for down payments, mortgage insurance, and creditworthiness.

•   FHA loans Federal Housing Administration loans come with required mortgage insurance, but if you have a situation where you need credit flexibility, FHA is the way to go. FHA loans allow for credit scores as low as 500, though you’ll still need to find a lender that’s willing to work with you.

•   USDA loans United States Department of Agriculture loans offer no-down-payment options and competitive APRs—but only for those who live in the right areas. They’re specifically for rural communities, but there may be some areas near you that qualify.

•   Conventional loans Conventional financing is usually one of the least expensive in terms of financing costs, but your finances need to be in order to qualify.

•   VA loans Like USDA loans, U.S. Department of Veterans Affairs loans have no-down-payment options, flexible credit requirements, and the lowest interest rates out there. If you’re a qualified servicemember or veteran, you’ll generally want to go with a VA loan because they’re so much better than the other options.

The Takeaway

Affording a home in this market is tough no matter what salary you make. If you make $65,000 a year, you’re earning more than the average single. Yet you may still have a few steps to take before you can afford a home: Think about paying down debt as this makes a big impact on how much home you can afford. Also think about making moves to improve your credit score, find down payment assistance programs, or locate a lender who can work with your situation. With the right moves, a home is within reach on a $65,000 salary.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $65K a good salary for a single person?

A $65,000 salary is above the median income of $56,929 for a single person, according to data from the U.S. Census. While you might be doing better than most singles in terms of salary, whether you feel comfortable will depend on your lifestyle and spending habits.

What is a comfortable income for a single person?

A comfortable income for a single person is determined by your lifestyle. For some, $40,000 is plenty. For others, $200,000 is not enough.

What is a liveable wage in 2024?

For a single person in San Francisco, a living wage works out to be $26.63 per hour, according to the Massachusetts Institute of Technology Living Wage Calculator. In Pennsylvania, a single person could get by on $16.41. However, for a family with three kids that depends on a single earner in Dallas, Texas, the living wage is $43.65 per hour.

What salary is considered rich for a single person?

According to the IRS, an income of $540,009 puts you in the top 1% of all earners.

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Photo credit: iStock/PeopleImages

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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On a salary of $40,000 per year, you can afford a house priced at around $100,000-$110,000, assuming you have some money — say, $10,000 or $15,000 — for a down payment and are not already carrying debt, such as a car loan or student loan. The number can change quite a bit when you factor in your specific numbers:

•   Your debt

•   Your down payment

•   Your taxes, insurance (and homeowners association dues, if applicable)

•   Your interest rate

•   Your loan type

•   Your lender

Understanding how these factors play into home affordability can get you closer to finding a home you can afford on your $40,000 salary.

What Kind of House Can I Afford With $40K a Year?

On a $40,000 salary, you want to get the nicest home you can. But what amount of home mortgage loan you qualify for depends on a number of factors, including your debt, income, interest rate, down payment, type of loan, and lender.

Understanding Debt-to-income Ratio

You may have heard that debt can seriously derail your plan to buy a house, but you might not know exactly how it does that. Here’s the scoop: A potential lender will calculate your debt-to-income (DTI) ratio by adding all your monthly debts and dividing that number by your monthly income.

Your DTI ratio determines how much home you can afford. If you have more debt, you can’t afford a bigger monthly housing payment, which means you’ll qualify for a smaller home loan. For example, if your total debt amounts are $3,000 each month and your income is $6,000 per month, your debt-to-income ratio would be 50%. This is well above the 36% guideline many mortgage lenders want to see.


💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

How to Factor in Your Down Payment

A down payment can also drastically impact home affordability. If you have a larger down payment, you’ll be able to afford a higher-priced home. With a down payment of 20% or more, you’ll be able to avoid the added expense of private mortgage insurance (PMI), which will in turn increase the loan amount you’ll be able to qualify for.

Try using a mortgage calculator to see how different down payment amount can affect how much home you’ll be able to qualify for.

Factors That Affect Home Affordability

To complete the picture of home affordability, you’ll also need to consider these factors:

•   Interest rates A higher interest rate means you’ll qualify for a smaller home purchase price. A lower interest rate increases how much home you’ll be able to afford.

•   Credit history and score You’ll also see that your credit score directly affects home affordability. With a good credit score, you’ll qualify for a better rate, which means you’ll qualify for a higher mortgage.

•   Taxes and insurance Higher taxes and insurance can also affect home affordability. Your lender has to take into account how much you’ll be paying in taxes and insurance and include it as part of your monthly payment.

•   Loan type Different loan types have different interest rates, down payment options, and credit requirements, which can affect home affordability.

•   Lender Your lender may be able to approve you at a higher DTI ratio — some lenders will allow the DTI to be as much as 50%.

•   Area The cost of living in your state is a top factor in determining home affordability. Price varies greatly around the country, so you may want to consider the best affordable places to live in the U.S. if you’re open to moving.

How to Afford More House With Down Payment Assistance

If you make $40,000, how much house you can afford also depends on what programs you’re able to qualify for. Down payment assistance programs can help with home affordability. These programs offer a grant or a second mortgage to cover a down payment. These programs are often offered by the state or city you live in. They may be restricted to first-time homebuyers or low-income borrowers, but these programs are worth looking into. Examples include Washington state’s Home Advantage DPA and Virginia’s HOMEownership DPA. Look for programs in your state, county, and city. You may also want to read tips to qualify for a mortgage.


💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.1

How to Calculate How Much House You Can Afford

There are some guidelines lenders use to qualify borrowers for a mortgage. Knowing how home affordability is calculated can help you understand what income you need to make and what debts you need to pay off to qualify for a mortgage. Lenders often follow the 28/36 rule, looking for a housing payment less than 28% of a borrower’s income and total debt payments less than 36% of your income. Here’s how to calculate it.

Back-end ratio (36%): The back-end ratio is your debt-to-income ratio. Add together all of your debts (including the new mortgage payment) to make sure all debts are under 36% of your income. If your monthly income is $3,333 ($40,000/12 = $3,333), your debts (including the mortgage payment) should be no more than $1,200 ($3,333*.36).

Front-end ratio (28%): With a monthly income of $3,333, this number works out to $933.

The 35/45 Rule: It’s possible to qualify for a larger mortgage based on the 35/45 guideline, which is used at the discretion of your lender. With a monthly income of $3,333, the housing allowance (35% of your income) increases to $1,167 and the total monthly debts (45% of your income) increases to $1,500.

An easy way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

For homebuyers with a $40,000 annual income (a $3,333 monthly income), traditional guidelines of a 36% debt-to-income ratio give a maximum house payment of $1,200 ($3,333 * .36). Each example has the same amount for taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term.

Example #1: Too much debt

Monthly credit card debt: $100
Monthly car payment: $300
Student loan payment: $300
Total debt = $700 total debt payments

Down payment = $20,000
Maximum DTI ratio = $3,333 * .36 = $1,200
Maximum mortgage payment = $500 ($1,200 – $700)

Home budget = $54,748

Example #2: Low-debt borrower

Monthly credit card debt: $0
Monthly car payment: $100
Student loan payment: $0
Total debt = $100

Down payment: $20,000
Maximum DTI ratio = $3,333 * .36 = $1,200
Maximum mortgage payment = $1,100 ($1,200 – $100)

Home budget = $141,791

How Your Monthly Payment Affects Your Price Range

As shown above, your monthly debt obligations affect how much house you can afford. With a lot of debt, it’s hard to make a mortgage payment that qualifies you for the home you want.

It’s also important to keep in mind how interest rates affect your monthly payment. By paying so much interest over the course of 30 years, even small fluctuations in interest rates will affect your monthly payment. That’s why you see your neighbors scrambling to refinance their mortgages when interest rates drop.

Recommended: Home Loan Help Center

Types of Home Loans Available to $40K Households

There are different types of mortgage loans available for households in the $40K range:

•   FHA loans: With Federal Housing Administration loans, you don’t have to have perfect credit or a large down payment to qualify. In fact, you can apply for a FHA loan with a credit score as low as 500.

•   USDA loans: If you live in a rural area, you’ll definitely want to look at United States Department of Agriculture loans. You may be able to qualify for a USDA mortgage with no down payment and competitive interest rates.

•   Conventional loans: For borrowers with stronger financials, conventional loans are some of the least expensive mortgages in terms of interest rates, mortgage insurance premiums, and property requirements. They’re backed by the federal government, and if you’re able to qualify for a conventional mortgage, it could save you some money.

•   VA loans: For qualified veterans and servicemembers, the U.S. Department of Veterans Affairs loan is quite possibly the best out there. There are zero down payment options with great interest rates. If your credit is hurting, you still might be able to get a loan since the VA doesn’t have minimum credit score requirements (though the individual lender may).

The Takeaway

With proper planning, a salary of $40K should be able to get you into a home in many U.S. markets. However, you’ll want to make sure you keep a close eye on your credit score and save up for a down payment or find programs to help with one. Over time, the small, determined steps you take will lead you to your goals.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $40K a good salary for a single person?

You work hard for your salary, and a $40,000 salary for a single person is a good start, though it is below the median income for a single person, which is $56,929, according to data from the U.S. Census.

What is a comfortable income for a single person?

Comfortable depends on the cost of living where you live and your personal needs, but it can range from around $45,000 per year in Mississippi to $112,000 in Hawaii.

What is a liveable wage in 2024?

Your liveable wage depends on your area, working household members, and children. For example, it can range from $15.89 per hour for a single living in Beaumont, Texas, to $44.99 per hour for a household with three children in St. George, Utah.

What salary is considered rich for a single person?

A salary of $234,342 would put you in the top 5% of all earners in the U.S.

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Photo credit: iStock/stevecoleimages

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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