I Make $36,000 a Year, How Much House Can I Afford?

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.

Of course, you’ll want to talk to a lender for your individual situation, which could qualify you for more (or less). If it sounds overwhelming, don’t worry. We’ll walk you through what it takes to qualify for a home, no matter what your income level is.

What Kind of House Can I Afford With $36K a Year?

At a $36,000 annual income, you may need some help affording a home in today’s market. You’ll need to eliminate debt and make sure you have a good credit score, as well as find programs and lenders that can help. In addition to income and debt, your lender will take into account:

•   Your down payment savings

•   What taxes and insurance will cost

•   What interest rate you qualify for

•   The type of loan you’re applying for

•   Whether or not they can let your debt run up to 50% of your income

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


Understanding Debt-to-income Ratio

Beyond interest rates, debt is your biggest enemy to home affordability. The more debt you have to pay on a monthly basis, the less you’re able to pay toward a mortgage. In other words, your $200 monthly credit card payment could cost you thousands on the purchase price of a home.

To understand the debt-to-income ratio (DTI), add all of your debts together, and then divide that number by your monthly income. Your lender calculates your DTI ratio to determine how much you can afford as a monthly payment on a mortgage. The guideline is 36%, but some lenders can go higher on a home mortgage loan.


💡 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 increases how much home you’ll be able to qualify for. The more you’re able to put down, the more home you’ll be able to afford.

You’ll also want to consider whether you can put down a deposit of more than 20% so you don’t have to buy mortgage insurance. This may help you qualify for a higher mortgage. Use a mortgage calculator to see how a down payment affects home affordability.

Factors That Affect Home Affordability

Home affordability goes beyond your down payment and DTI ratio. You also want to look at:

•   Interest rates When interest rates are high, borrowers qualify for a lower mortgage. When they’re low, it may be possible to qualify for a higher mortgage.

•   Credit history and score Your credit score is a reflection of your credit habits, and with a higher credit score, you’ll qualify for the best interest rates, giving you more buying power.

•   Taxes and insurance If you live in an area with higher taxes, insurance, or homeowners association dues, these will be taken into account by your lender. You’ll qualify for a lower mortgage amount when these numbers are high.

•   Loan type Depending on the type of loan you get, your interest rate, credit score, and down payment amount can affect how much house you can afford.

•   Lender Lenders have the final say when it comes to approving you for a mortgage. In special circumstances, you may be able to qualify for more than a 36% DTI ratio. Some lenders approve borrowers with a DTI ratio around 50%.

•   Location If you’re shopping in a state with a high cost of living, you’ll have a hard time qualifying for a mortgage no matter what your income level is. If you’re considering other areas, you may want to look at the best affordable places to live in the U.S.

How to Afford More House With Down Payment Assistance

Down payment assistance programs can help you qualify for a larger mortgage. These types of programs have money to help with down payment or closing costs. They are usually offered at the state or local level with both grant and second mortgage programs. They may limit participation to first-time homebuyers or borrowers with lower incomes, but you should still look into these programs and see if you can qualify.

Examples include CalHFA MyHome Assistance Program and the “Home Sweet Texas” Home Loan Program. You can look for programs in your own state, county, and city.

Recommended: Tips to Qualify for a Mortgage

How to Calculate How Much House You Can Afford

Knowing how much home you are likely to qualify for doesn’t have to be a mystery. While your lender may have flexibility, they generally follow these guidelines:

The 28/36 Rule: Lenders will look for housing payments (including mortgage, taxes, and insurance) to be more more than 28% of your income and total debt payments (including mortgage, car loan, student loan, etc.) to be less than 36% of your income.

The 35/45 Rule: Some lenders allow for higher debt levels. This rule says the housing payment can be up to 35% of your income and total debt to be 45%.

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

Home Affordability Examples

On a $36,000 annual salary, you’ll have $3,000 each month for expenses. Using the 36% debt-to-income ratio, you can have a maximum debt payments of $1,080 ($3,000 * .36). In the two examples below, taxes ($2,500), insurance ($1,000), and interest (6%) are the same for a 30-year loan term.

Example #1: Debt limits home affordability, even with large down payment

Monthly credit card debt: $100
Monthly car payment: $500
Student loan payment: $100
Total debt = $700

Down payment = $20,000

Maximum DTI ratio = $3,000 * .36 = $1,080
Maximum mortgage payment = $380 ($1,080 – $700)

Home budget on $36,000 salary = $34,733

Example #2: No down payment, but little debt

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

Down payment: $0

Maximum DTI ratio = $3,000 * .36 = $1,080
Maximum mortgage payment = $980 ($1,080 – $100)

Home budget on $36,000 salary = $96,314

How Your Monthly Payment Affects Your Price Range

The amount you’re able to pay toward a mortgage each month determines how much home you’ll be able to afford. Any monthly payments you have, such as debt, can take away from how much you’re able to pay for a mortgage. Conversely, how much income you earn in a month can improve how much mortgage you can qualify for.

Interest rates also play a huge role in your monthly payment. Higher interest rates mean you’ll qualify for a lower mortgage while lower interest rates improve home affordability. That’s why homeowners get a mortgage refinance when interest rates drop.

Recommended: Home Loan Help Center

Types of Home Loans Available to $36K Households

The different types of mortgage loans also affect home affordability. Some have a zero down payment option, flexible credit requirements, less expensive mortgage insurance, and varying interest rates. You’ll want to consult with your lender to determine what loan type of right for you.

•   FHA loans: Loans backed by the Federal Housing Administration are great for buyers with unique credit situations that can’t get approved for conventional financing. It can be more expensive to go with an FHA loan, but there are low down payment options and flexible credit requirements for those with a score as low as 500.

•   USDA loans: United States Department of Agriculture mortgages, available in rural areas, offer great interest rates, zero down payment options, and competitive mortgage insurance rates. Some USDA mortgages are directly serviced by USDA, and have a subsidized interest rate.

•   Conventional loans: Many borrowers opt for conventional financing if they qualify. Over the course of a mortgage, this is one of the least expensive types due to competitive interest rates and mortgage insurance premiums that drop off after you pay down the loan past 80%.

•   VA loans: A loan from the U.S. Department of Veterans Affairs is hard to beat for service members, veterans, and others who qualify. You may be able to qualify for a home purchase price with no down payment. VA loans may have great interest rates and flexible credit requirements (depending on the lender).


💡 Quick Tip: Active duty service members who have served for at least 90 consecutive days are eligible for a VA loan. But so are many veterans, surviving spouses, and National Guard and Reserves members. It’s worth exploring with an online VA loan application because the low interest rates and other advantages of this loan can’t be beat.†

The Takeaway

Purchasing a home on a $36,000 salary is a feat you’ll need help with in a market where the U.S. median sale price tops $342,000. Whether it’s down payment assistance, paying down debt, nurturing your credit score, or adding income, there are a lot of moves you can make to bolster your home budget. In the end, when you move into a place that’s all yours, the hard work will be worth it.

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 $36K a good salary for a single person?

A single person can afford to live on $36,000 a year in more affordable places in the U.S., but it could still be difficult to afford to buy a home in today’s real estate market.

What is a comfortable income for a single person?

The median income for a single person is $56,929, according to data from the U.S. Census, but a comfortable income for a single person depends on your lifestyle.

What is a liveable wage in 2024?

What is livable varies greatly by location. For a single person living in San Francisco, a living wage is equivalent to $26.63 per hour. In other cities, it’s considerably less.

What salary is considered rich for a single person?

If you make more than $234,342 per year, you would make more than 95% of earners in the United States. But what feels “rich” is going to depend on your lifestyle and where you live.


Photo credit: iStock/mapodile

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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I Make $300,000 a Year, How Much House Can I Afford?

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.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


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.)


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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How to File a Tax Extension

How to File a Tax Extension

You can file a tax extension in a few different ways, such as online or by mail. This process can help people who may need more time to finalize their return, whether they are missing documents, dealing with a personal emergency, or have other reasons for being behind schedule.

While a six-month extension can be a good safety net, it’s important to learn the facts. For instance, an extension doesn’t mean you have more time to pay any taxes you may owe.

Read on to learn the facts and important considerations to know when filing a tax extension.

What Is a Tax Extension?

A tax extension extends the deadline for filing your federal tax return by six months. All you have to do to get an extension is request one by April 15, 2024. Here are important points to know:

•   A tax extension does not give you extra time to pay any taxes owed. If you can’t afford to pay your full tax bill, it’s a good idea to pay as much as you can by Tax Day and then apply for an individual payment plan on IRS.gov or call the IRS (Internal Revenue Service) at 800-829-1040 to discuss payment options.

•   The agency may waive the late-payment penalty in a few cases, but it will not waive interest charges on unpaid tax bills. The interest rate is the federal short-term rate plus three percentage points. In early 2024, for individuals, the rate was 8%, compounded daily.

•   The late-payment penalty, aka failure-to-pay penalty (you filed for an extension on time but still owe taxes), is much less severe than the failure-to-file penalty (you didn’t file your tax return by the due date and did not request an extension). The failure-to-file penalty is usually 5% of the tax owed for each month or part of a month that your return is late, up to 25% of the total owed.

Either way, a penalty plus interest on taxes owed past the deadline might be a good incentive for many taxpayers to try to cough up most of their bill on time.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Tax Extensions Work?

There are three ways to request an automatic extension of time to file your return:

1.    File IRS Form 4868 electronically using your personal computer or through a tax professional who uses e-file. You’ll be asked to provide your prior year’s adjusted gross income for verification purposes. (If you do not know your prior year’s AGI and do not have a copy of that tax return, you can find the information by signing in to your IRS online account.)

2.    Mail a paper Form 4868. (The IRS says, though, not to mail in Form 4868 if you file electronically unless you’re making a payment with a check or money order.)

3.    Pay all or part of your estimated income tax due, and indicate that the payment is for an extension, using Direct Pay or the Electronic Federal Tax Payment System. You can also pay taxes with a credit card or debit card.

Special rules about filing extensions may apply to those serving in a combat zone or a qualified hazardous duty area or living outside the United States.

Recommended: Tax Season 2024 Help Center

Reasons to File for a Tax Extension

Many high earners routinely seek tax extensions because their business dealings and investments can take longer to sort out.
Other people might seek a tax extension for different reasons, such as:

•   Needing extra time to track down missing tax documents, especially if you’re dealing with an extenuating circumstance (for instance, the closure of a place of employment shortly before tax documents were due to be issued).

•   A major unplanned life event interrupts your plans and makes it hard to get things together on time.

•   You’re still figuring out how to do taxes as a freelancer and want to take all the deductions you can.

•   You’re going to take the home office tax deduction as a self-employed person and want to carefully crunch the numbers because you’re skipping the simplified deduction of up to $1,500.

•   General life busyness led to the deadline sneaking up on you.

•   Maybe you’re filing taxes for the first time and you simply procrastinated.

•   You have a primary and second home and are still unsure whether to itemize and take the mortgage interest deduction.

Filing for a Tax Extension Online

Remember, you don’t need to file Form 4868 if you make a payment using IRS electronic payment options or by phone and indicate that you want an extension.

If you do need to file Form 4868, you can do so electronically by accessing the IRS e-file with your tax software or by using a tax professional who uses e-file.

IRS e-file options include Free File, which lets you prepare and file your federal income tax online using guided tax preparation at an IRS partner site (for filers with AGI of $73,000 or less) or Free File fillable forms (for any income level).

Filing for a Tax Extension by Mail

You can simply download and print Form 4868 from IRS.gov, fill it out, and mail it in, along with a check for estimated income taxes owed.

The form itself includes information about where to send the document, depending on where you live.

Recommended: Steps to Prepare for Tax Season

Can I File for a Tax Extension If I Owe Money?

Yes, you can still file for a tax return extension if you owe the government money — but the money itself is still due on the original due date.

Unfortunately, there’s no way to file for an extension of taxes owed. Rather, your best bet is to pay as much of your estimated taxes as you can when you file for the extension, and then apply for a payment plan online or call the IRS to learn about your options for complete repayment.

Can Someone Be Denied a Tax Extension?

Yes, but it’s uncommon. If your tax extension was denied, it was probably because of a mistake in your personal information on Form 4868.

You can resubmit your request and make sure to enter your current address, name, and Social Security number correctly.

How to Know If You Owe Taxes

While self-employed individuals must estimate their taxes and pay on a quarterly basis, those who file using
W-2 wage reports may not do this kind of taxation math.

There are several easy ways to find out if you owe Uncle Sam.

•   You may receive a notice in the mail from the IRS, but ensure that it’s official correspondence and not a note from a scammer. The IRS will never email, text, or reach out to individuals via social media.

•   “Your Online Account” on IRS.gov allows you to see how much you owe in taxes. This user profile also allows you to pay any owed taxes directly.

•   You can always call the IRS at 800-829-1040 to confirm any amount of back taxes you might owe.

The Takeaway

Is it hard to file a tax extension? Not really. What may prove difficult is paying all taxes owed by the filing deadline (aka Tax Day) or paying a balance still owed plus a penalty and interest after the April date to file taxes.

It’s important to have a handle on your tax status and tax bill as April 15th arrives. It’s also wise to have a good banking partner and accounts that allow easy payment of any money you owe or refunds you receive.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

FAQ

How do I know if I’ve been approved for a tax extension?

Extension requests are rarely denied, but news of a denial would come by email. In the event of an error in an address or name, a taxpayer will be given a few days to remedy the error and file a tax extension again. Usually, you can get an automatic extension of time to file your tax return by filing Form 4868 electronically. You’ll receive an electronic acknowledgment of your request.

Is there a fee to file for a tax extension?

No. Filing for a tax extension is free.

Is the process for filing a tax extension easy?

Yes. You simply submit Form 4868 electronically or by mail before the filing deadline, or make a tax payment through approved methods and indicate you want an extension of time to file your federal return.

What happens if I file my taxes late and without an extension?

If you don’t pay your tax balance by the filing deadline and you did not file for an extension, you’ll get hit with a failure-to-file penalty (in most cases) and interest. Interest also compounds daily on any unpaid tax from the due date of the return until the date of payment in full.


Photo credit: iStock/Delmaine Donson

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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.

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.

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I Make $65,000 a Year, How Much House Can I Afford?

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.†

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


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.


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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I Make $40,000 a Year, How Much House Can I Afford?

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.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


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.


Photo credit: iStock/stevecoleimages

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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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