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If you’re 62 years or older and are looking to move, a Home Equity Conversion Mortgage (HECM) for Purchase could help you pay for your new home. An HECM for Purchase is a government-insured reverse mortgage that you can put toward buying a house. With an HECM for Purchase, you won’t have to make mortgage payments as long as you keep up with property taxes and other obligations. However, this type of reverse mortgage can come with high closing costs and insurance premiums, so it may not be your most affordable option for financing a home. Read on for the full story of the HECM for Purchase program, along with its pros and cons.

What Is an HECM?

An HECM for Purchase is a type of HECM, which is in turn a type of reverse mortgage — specifically, the kind that is insured by the Federal Housing Administration (FHA). HECMs allow people 62 and older to convert the equity in their home into cash. (The chief HECM vs. reverse mortgage differentiator is the FHA’s involvement in HECMs.)

You’ll need to own your property outright or have a good amount of equity built up to qualify for an HECM. Eligible borrowers can turn that equity into cash and won’t have to pay back the home mortgage loan until they move, sell the home, or die. In those events, the HECM must be paid back in its entirety, along with any interest charges. An HECM has some of the same pros and cons of reverse mortgages.

What Is an HECM for Purchase?

An HECM for Purchase is a type of HECM that allows homeowners to borrow against their current residence and pay for a new one in one transaction with one set of closing costs. It’s designed for homeowners who are looking to move into a new primary residence. You can’t use an HECM for Purchase to finance a vacation home or an investment property.

Like other HECMs, an HECM for Purchase does not require repayment during the borrower’s lifetime while they (or their surviving spouse) are living in the house. However, borrowers can pay down the loan’s principal and interest if they choose. They also must meet other payment obligations, including property taxes, homeowners insurance, and maintenance costs.

The HECM for Purchase will become due if the borrower moves or dies. As a non-recourse loan, however, the HECM for Purchase will never charge more than the value of the home it was used to finance.

HECM for Purchase Requirements

There are several requirements you’ll need to meet to qualify for an HECM for Purchase. Here are the main ones.

Age Requirement (62+)

HECM for Purchase loans are exclusively offered to borrowers who are age 62 or older. By contrast, traditional mortgages don’t have an age restriction, apart from the age of majority in your state (typically at least 18).

Income and Credit Qualifications

You’ll also need to meet income and credit requirements to qualify for an HECM for Purchase. While there’s no stated minimum credit score, having debts in delinquency or default could be an obstacle to qualifying.

Lenders also consider your residual income, or the amount of income you have after subtracting certain expenses. You’ll need to show that you have sufficient residual income to keep up with living expenses.

Financial Assessment

A lender will also assess your overall finances to ensure you can meet the financial obligations of the HECM for Purchase loan, which include paying property taxes and homeowners insurance. Plus, you’ll need to make a sufficient down payment on the new property, typically around 50%.

How HECM for Purchase Works

An HECM for Purchase lets you draw on the equity of your current home to finance the purchase of your next home. It combines two transactions — a reverse mortgage and a new mortgage — into one to simplify the home purchase process.

You won’t have to make payments on your HECM for Purchase while you live in your house, but you will have to keep up with payments of property taxes, homeowners insurance, maintenance expenses, and any homeowners association fees.

HECM for Purchase loans are backed by the FHA, so you’ll need to work with a lender that specializes in these loans to get one.

Down Payment Amount

To use an HECM for Purchase, you’ll need to sell your original home and use the proceeds to make a sufficient down payment on your new home. Then you can finance the remaining amount with your HECM loan. The required down payment may range from 45% to 62% of the home’s purchase price, depending on the borrower’s and spouse’s age. If you have money left over after making the down payment, you can receive it as a lump sum or as fixed monthly payments.

Recommended: Getting a Mortgage in Retirement

Pros of HECM for Purchase

There are several benefits to taking out an HECM for Purchase loan.

•   No mortgage payments: With an HECM reverse mortgage for purchase loan, you won’t have to make principal and interest payments while you live in the house and cover essential charges, like taxes. A conventional mortgage, by contrast, requires monthly repayment.

•   More purchasing power: An HECM for Mortgage could increase your purchasing power and bring your goal of buying a new home within reach, especially if you’ve built up a good deal of equity in your current property.

•   Avoid dipping into savings: By using an HECM for Purchase to buy a home rather exhausting your savings, you can avoid draining your retirement funds or other accounts to buy a house.

•   Debt won’t exceed home value: As noted above, an HECM for Purchase is a non-recourse loan, so the debt you or your heirs owe will never exceed the home’s value, even if the property value dips in the future.

Cons of HECM for Purchase

At the same time, an HECM for Purchase loan has some downsides to consider before you borrow.

•   Charges interest, closing costs, and premiums: The HECM for Purchase can come with high closing costs, which include origination fees, title insurance, and appraisal fees. It also charges annual Mortgage Insurance Premiums and accrues interest based on the reverse mortgage interest rate you’re given at the outset of the loan.

•   Requires you to pay property taxes and other expenses: You’ll need to pay property taxes and homeowners insurance to keep the loan in deferred repayment, as well as maintain the property to acceptable standards.

•   Demands that you live in the new home full-time: Your home must be your new primary residence. If you move or sell, you’ll have to pay back the HECM for Purchase loan.

•   Calls for a large down payment: This loan program is reserved for borrowers who can make a large down payment, sometimes 50% or higher, for their new home.

Alternatives to Consider

Before applying for an HECM for Purchase, it’s worth considering alternative financing options, such as:

•   Traditional mortgage: A conventional mortgage typically requires a credit score of at least 620, a down payment (though not as high as 50%), and a debt-to-income ratio below 50% — and sometimes as low as 43%. You’ll also need to have sufficient income to qualify.

•   Home equity loan or home equity line of credit (HELOC): Homeowners can also tap into their equity with a home equity loan or HELOC. You could use this “second mortgage” to finance another home, but be cautious about over-borrowing. A lender can foreclose on your home if you miss payments.

•   Proceeds from home sale: Selling your home is another way to finance the purchase of a new one, especially if you’re downsizing to a more affordable place. In this case, you might have extra money left over to put into savings or invest.

Recommended: The Best Cities for Retirees

The Takeaway

The HECM for Purchase program can simplify the home-buying process for seniors who want to use a reverse mortgage to buy a new house. As long as you keep up with property taxes, homeowners insurance, and other required costs, you won’t have to make any mortgage payments on your HECM while you reside in your new home. At the same time, HECM for Purchase loans come with closing costs and premiums. Consider all your options to determine the best type of financing for your next home purchase.

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

What types of homes qualify for HECM for Purchase?

The following types of homes qualify for the HECM for Purchase program:

•   Single-family homes

•   2- to 4-unit homes where the borrower occupies one unit

•   HUD-approved condo projects

•   Individual condo units that meet FHA single-unit approved requirements

•   Manufactured homes that meet FHA requirements

The property must also meet all of the FHA’s property standards and flood requirements.

How long can I stay in the home with HECM for Purchase?

You can stay in the home you finance with an HECM for Purchase loan indefinitely. The loan will become due when the last borrower (or the borrower’s spouse) moves, sells the home, or passes away.

Are there limits on HECM for Purchase loan amounts?

An HECM for Purchase is limited to the appraised value of the home or the sales price of the new home, whichever is lower. It cannot exceed the HECM FHA mortgage limit, which is $1,149,825 for 2024.

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Photo credit: iStock/FG Trade

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.

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.

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.

^²To obtain a home equity loan, SoFi Bank (NMLS #696891) may assist you obtaining a loan from Spring EQ (NMLS #1464945).

All loan terms, fees, and rates may vary based upon individual financial and personal circumstances and state.

You may discuss with your loan officer whether a SoFi Mortgage or a home equity loan from Spring EQ is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit brokered through SoFi. Terms and conditions will apply. Before you apply for a SoFi Mortgage, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and loan amount. Minimum loan amount is $75,000. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria.

SoFi Mortgages originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org). Equal Housing Lender. SoFi Bank, N.A. is currently NOT able to accept applications for refinance loans in NY.

In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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An annual income of about $76,000 should put you in the position to afford a $250,000 mortgage, assuming you have relatively little other debt. But exactly what amount you’ll need to earn will depend on your interest rate, loan term, and debt level, among other factors. If you’re considering buying a new home, let’s take a closer look at how much you’ll need to earn to qualify for a $250,000 mortgage.

Income Needed for a $250,000 Mortgage

The exact income needed to afford a $250,000 mortgage loan can’t be nailed down without more information, but what we can get pretty close to is the P&I payment, which stands for principal and interest, and represents a majority of your monthly payment. However, even this calculation won’t give you an exact income number until you know your interest rate and desired loan term (15, 20, 30 years).

Other factors that will influence your monthly mortgage payment are:

•   Property taxes: Lenders often collect a portion of your property taxes each month and pay the local government on your behalf. And even if you don’t pay the taxes through your lender, you’ll need to include them in your budget.

•   Home insurance: Assuming you have a mortgage, your lender will require you purchase home insurance. Depending on the house and location, you may also be required to purchase earthquake insurance and flood insurance.

•   Loan specific fees: Different types of mortgage loans have unique fees that may increase the cost of your monthly mortgage payment. For example, the guarantee fee with a U.S. Department of Agriculture (USDA) loan, or mortgage insurance premium with a Federal Housing Administration (FHA) loan.

•   Homeowners association (HOA) fees: Since you’ll likely pay the HOA directly, these fees should not increase the cost of your mortgage payment, but they will increase your monthly expenses. Keep this in mind while house hunting.

Moving forward, let’s assume you choose a 30-year loan term and receive a 7.00% interest rate.

How Much Do You Need to Make to Get a $250K Mortgage?

Using a mortgage calculator, it’s easy to get some quick numbers for the P&I payment (principal and interest) on a $250,000 mortgage. If you’re willing to estimate, a mortgage calculator with taxes and insurance included will get you a little closer as to what to expect.

If we assume you take out a 30-year mortgage and have a 7.00% interest rate, the monthly P&I payment on a $250,000 mortgage would be $1,663. Assuming your lender wants you to have a maximum 28% housing-to-income ratio, then the minimum income you would need to make for your P&I payment would be $71,271 a year or $5,939 a month. Add in your property tax, home insurance, and private mortgage insurance (PMI, which a lender will require if your down payment is less than 20% of the home’s sales price) and you’re likely looking at a monthly payment of $2,234.

Another thing you may want to try is determine how much banks are likely to lend to you. If you know your exact gross income and monthly debts, try out a home affordability calculator. Another option is to move forward with a mortgage preapproval process so you know exactly how much you have to work with.

What Is a Good Debt-to-Income Ratio?

Ideally, lenders want borrowers to stick to a 36% debt-to-income (DTI) ratio, with a maximum of 28% going toward housing costs. However, depending on your income and credit score, some lenders may accept higher DTIs.

If we consider the cost of living by state, 28% may be too much when you account for daily expenses, such as food and gas, which can skew the income needed for a $250K mortgage. Therefore, if your job and lifestyle allow you to be flexible on where you live, you might consider checking out a ranking of the most affordable states.

What Determines How Much House You Can Afford?

Lenders look at a variety of factors when determining how much house a borrower can afford, but the big four are:

•   Income

•   DTI ratio

•   Credit score

•   Down payment amount

What Mortgage Lenders Look For

If you’re a first-time homebuyer, lenders look at the following variables for each borrower:

•   Employment history

•   Income

•   DTI ratio

•   Credit score

$250,000 Mortgage Breakdown Examples

How much income is needed for a $250,000 mortgage is significantly influenced by your rate and term. Let’s take a look at the various P&I payments you can expect with different rates and different terms:

Term	Rate (APR)	Monthly P&I Payment:	Minimum annual gross income needed to cover P&I:
15	6.00%	$2,110	$90,429
15	6.25%	$2,144	$91,886
15	6.50%	$2,178	$93,343
15	6.75%	$2,212	$94,800
15	7.00%	$2,247	$96,300
20	6.00%	$1,791	$77,014
20	6.25%	$1,827	$78,300
20	6.50%	$1,864	$79,886
20	6.75%	$1,901	$81,471
20	7.00%	$1,938	$83,057
30	6.00%	$1,499	$64,243
30	6.25%	$1,539	$65,957
30	6.50%	$1,580	$67,714
30	6.75%	$1,622	$69,514
30	7.00%	$1,663	$71,271

Pros and Cons of a $250,000 Mortgage

Buying a house comes with both benefits and drawbacks. Here are some things you should consider:

Pros of a $250,000 Mortgage:

•   Each monthly payment builds equity

•   Home can be used as collateral for low rate loans

•   More freedom to make changes to home

•   Homeownership provides a hedge against inflation

Cons of a $250,000 Mortgage:

•   Homeowners are responsible for all repairs and maintenance

•   Must save up for both down payment and closing costs

•   Must purchase home insurance

•   Must pay property taxes

How Much Will You Need for a Down Payment?

If $250,000 is the purchase price, the lowest down payment a first-time borrower could make with a conventional loan is $7,500. If you choose an FHA loan, the lowest down payment you can make is $8,750. VA loans (from the U.S. Department of Veterans Affairs) and USDA loans don’t require down payments. It’s worth noting that even if you have owned a home before, you might qualify as a first-time homebuyer from a lender’s perspective if it has been at least three years since you had ownership in a principal residence.

Can You Buy a $250K Home With No Money Down?

Yes, both USDA loans and VA loans don’t require a down payment. VA loans are for qualified active and retired military and surviving spouses, while USDA loans are for homes bought in certain rural areas the USDA has deemed to be in need of economic development.

Can You Buy a $250K Home With a Small Down Payment?

If you use a conventional loan, the lowest down payment a first-time homebuyer can make is typically 3%. The lowest down payment with an FHA loan is 3.5%. USDA and VA loans don’t require a down payment, but they do have eligibility requirements.

Is a $250K Mortgage with No Down Payment a Good Idea?

Whether skipping the down payment on a home is a good idea depends on your long-term goals and what you hope to do. If you want to save money over the life of the loan, making a down payment will save you money in interest. If you need the money now for other endeavors, there’s nothing wrong with choosing a loan that doesn’t require a down payment.

Can’t Afford a $250K Mortgage With No Down Payment?

If you can’t afford a $250,000 mortgage, there are some things you can do to make homeownership a little easier.

Pay Off Debt

Paying off your debt will lower your DTI, improve your credit score, and give you more cash to work with each month. Because there are so many benefits, it may be worth your time to pay down as much debt as possible before applying for a mortgage.

Look into First-Time Homebuyer Programs

There are many first-time homebuyer programs across the United States. Assistance can come in various forms. It may be a low-rate loan, a forgivable loan, or a grant. It often comes as a forgivable loan, which doesn’t require any form of repayment as long as certain conditions are met. Assistance is often first come first served, so apply early if you’re interested.

Build Up Credit

The lower your score, the higher your interest rate. Strengthen your credit score, and you could qualify for a better interest rate that would lower your monthly payment and save you money in interest over the life of the loan.

Start Budgeting

Take steps to eliminate unnecessary spending so you can put as much as you can toward your savings. Monthly subscriptions and dining out, for example, may need to be put on the back burner as you work toward your savings goals.

Also, any lump payments you receive throughout the year could be put toward savings. For example, an end-of-the-year bonus or tax refund should be tucked away as soon as it’s received. Currently, the average federal tax refund is $2,869. That’s 33% of an $8,750 down payment.

If you’re new to the world of mortgages and financing, check out our home loan help center where we go in-depth on everything you need to know about buying your first home or moving forward with a mortgage refinance.

Alternatives to Conventional Mortgage Loans

It depends on the seller, but some sellers are open to lease-to-own or seller financing. Another option may be to pursue a portfolio loan with a local bank or credit union.

Mortgage Tips

Here are some tips to qualify for a mortgage:

•   Pay down your debts

•   Pay close attention to your credit score

•   Save up for a down payment

•   Stick with your current employer

•   Gather all supporting paperwork needed for your mortgage application

The Takeaway

For a 30-year loan on a $250,000 mortgage with a 7.00% interest rate, you’ll need a gross income of around $76,000 a year. But exactly how much income you would need to have depends on several factors that are specific to you, including your existing debts, your credit score, and what loan term you choose and what interest rate you qualify for.

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

How much income do you need to qualify for a $250,000 mortgage?

To cover the monthly mortgage payment on a $250,000 mortgage, you’ll need an income of around $76,000 a year. For the most accurate estimate, you will need to know your exact interest rate, property taxes, home insurance, and home loan term.

Can I afford a $250K house on a $50K salary?

It would be difficult to afford a $250,000 house on a $50,000 annual salary unless you are able to make a large down payment, which would reduce your monthly mortgage costs to a manageable level. If you earn $50,000 a year and have minimal debts, you could probably qualify for a mortgage loan of around $150,000.

What is the monthly payment on a $250K mortgage?

The monthly principal and interest payment on a $250,000 home mortgage loan ranges from around $1,500 to $2,250, depending on the loan term (15 vs. 30 years) and interest rate (6.00% to 7.00%, although a higher or lower rate might be possible). The shorter the term and the higher the interest rate, the greater your monthly payment will be.

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Photo credit: iStock/yavorskiy

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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This just in: Houses are expensive. But some houses are really expensive. If you have your heart set on a luxurious oceanside mansion (or just a modest home in an ultra-high-cost city like New York or San Francisco), you may need to seek out a jumbo mortgage: one whose dollar amount surpasses the conforming loan limits set by the Federal Housing Finance Administration (FHFA) each year. In 2024, that limit is $766,550 in most cases, though in some high-cost areas the limit can range up to $1,149,825. Any mortgage that exceeds those amounts is considered a jumbo loan.

What Are Jumbo Loans?

Jumbo loans are those in which the mortgage total surpasses the conforming loan limits set by the FHFA. The conforming loan limits change annually. As noted above, in 2024, a jumbo loan is one whose total is $766,550 or more in most areas, though in select high-cost areas, the limit goes up to $1,149,825.

Your mortgage total is the amount of money you borrow in order to purchase a house — an amount that can be calculated by subtracting your down payment from the agreed home purchase price. (Keep in mind, though, that this figure isn’t the same as how much you’ll pay in full over the lifetime of the loan, since you’ll also owe interest to the bank that provides the loan. Still have questions? Check out our mortgage payment calculator with interest.)

Jumbo vs Conventional Loan

Conventional loans are offered privately through banks, credit unions, and other financial institutions, unlike other loans which are supported by a government agency such as the Federal Housing Administration (FHA) or USDA (U.S. Department of Agriculture). Conventional loans are easily the most common type of home loan.

Jumbo loans are a type of conventional loan. But whereas most conventional loans are also conforming loans and are available with a minimum down payment as low as 3% for first-time homebuyers, jumbo loans are considered nonconforming and typically require a larger down payment — usually at least 10%. You’ll also likely need a very high credit score in order to be eligible to take out a jumbo loan.

Determining Jumbo Loan Limits

As we’ve seen above, the specific jumbo loan limits where you live (or where you’re planning to buy a home) will vary depending on the area’s cost of living. The FHFA offers a convenient conforming loan map that allows you to see what the conforming loan limits (otherwise known as jumbo loan limits) are in your area, broken down by county.

How Loan Limits Are Calculated

The jumbo loan limit is determined each year by the FHFA using current housing price data. That way, the limits are tied to real information in the world about how much it actually costs to buy a home in a given area. Conforming loan limits — also known as the jumbo loan limits — change each year; new limits for the coming year are typically announced in late November.

Current Jumbo Loan Limits

As mentioned above, in 2024, the jumbo loan limit for the vast majority of the U.S. is $766,550, and the highest conforming loan limit, in the most expensive places to live, is $1,149,825. To see exactly what the jumbo loan limits are in your area, visit the FHFA’s map.

Qualifying for a Jumbo Loan

Jumbo loans are, well, big — which means the qualification metrics for getting a home loan are pretty strict. (After all, that’s a whole lot of money the lender stands to lose if you default.) While every lender has its own specific algorithm for qualifying potential borrowers, here are some rules of thumb when it comes to qualifying for a jumbo loan:

Credit Score Requirements

While there’s no specific credit score that guarantees you’ll qualify for a jumbo loan, most lenders will likely require a high one — after all, it’s a fairly risky prospect to lend that much money to someone. Credit scores range from 300 to 850. Scores of 670 to 739 are considered good; scores of 740 to 799 are considered very good, and scores of 800 and above are considered exceptional.

Down Payment Requirements

We touched on this briefly, but jumbo loan lenders often require their borrowers to provide a more substantial down payment than conventional loan lenders do. While a minimum of 10% is a good rule of thumb, some lenders may ratchet up the minimum to 25% or 30%.

Considering how large jumbo loans are already, that means you’ll probably need a significant amount of cash lying around in order to successfully apply for one — 10% of $800,000, a relatively small jumbo loan, is already $80,000.

Debt-to-Income Ratio Requirements

Your debt-to-income ratio, or DTI, is a measurement of your existing debt burden expressed as a percentage. It’s calculated by totalling all your monthly debt payments and dividing that figure by your gross monthly income.

Conventional loans usually required a DTI of 50% or lower — and that’s the absolute max. (Many lenders cut off qualification at lower percentages.) Again, while there’s no one advertised maximum DTI for a jumbo loan, you’ll likely want to have as little debt as possible in order to qualify — not to mention in order to have the money on hand each month to make that massive mortgage payment.

Income and Asset Documentation

Jumbo loan lenders are, of course, primarily concerned with your ability to repay the loan. That means that, along with the above-mentioned factors, they’ll also want proof that you earn a reliable and high income — and in some cases that you’ve already stockpiled enough wealth that you’ll be able to make your payments for several months even if you lose your job. For this reason, qualifying for a jumbo loan can be especially challenging for a self-employed worker.

Advantages and Disadvantages of Jumbo Loans

So, now that you understand them better, is a jumbo loan right for you? Like any financial decision, taking out a jumbo loan has both benefits and drawbacks to carefully consider. Here are some of the pros and cons of jumbo loans.

Advantages of Jumbo Loans

Jumbo loans offer those who qualify the opportunity to purchase a costly home that they might otherwise not have access to. They may also be available at similar interest rates to lower conforming loans, and both fixed and adjustable rates are available in 15- and 30-year terms.

Disadvantages of Jumbo Loans

On the other hand, jumbo loans are, well, jumbo-sized — which means the total amount you’ll pay over time is, too. Even a low interest rate can add up to a lot on a large principal balance, and jumbo loans also have more stringent qualification and down payment requirements than their conforming counterparts. Associated closing costs and fees can be higher, too.

Alternatives to Jumbo Loans

If you find yourself having trouble qualifying for a jumbo loan, you could look into other nonqualifying mortgages, such as bank statement loans — or potentially borrow a significant amount of money from family or friends. However, if the home you’re vying for is that much of a stretch, it may make more financial sense to find something a bit more modest and apply for a conforming loan instead.

The Takeaway

Jumbo loans are large mortgages that don’t conform to the limits set by the FHFA — and therefore come with stricter qualification requirements. While jumbo loans can help those who qualify to access a high-value house, they can also be hard to keep up with unless your income is correspondingly high.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

What does a jumbo loan mean?

Jumbo loans are those whose totals exceed the conforming loan limits set each year by the FHFA. For 2024, that limit is $766,550 in the vast majority of the U.S.; in some areas with a high cost of living, the conforming loan limit can be as high as $1,149,825.

What are the disadvantages of a jumbo loan?

Along with their extra-large monthly mortgage payments, jumbo loans also come with stricter eligibility requirements and higher minimum down payments. In most cases, you’ll need to pony up at least 10%, and some lenders may require as much as 30% up front.

Why are jumbo loan limits necessary?

Most mortgage loans issued in the U.S. are guaranteed by Fannie Mae and Freddie Mac, which helps reduce risk for lenders and ensure that loans are affordable and available to homebuyers. But the guarantee has to stop somewhere, and conforming loan limits draw that line. This is why jumbo loans have more stringent borrower requirements than conforming loans — lenders who make jumbo loans don’t have Fannie Mae and Freddie Mac to fall back on if a jumbo borrower defaults.

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Photo credit: iStock/Wirestock

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.

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.

^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.

SOHL-Q324-009

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The income needed for a $450,000 mortgage varies based on a few factors, but generally speaking, an income of $130,000 would put you in the position to afford a $450,000 mortgage. You can estimate how much you need to make by focusing on principal and interest. Together, these two factors account for a majority of a home’s monthly mortgage payment and reveal an approximate income you’ll want to bring in.

For a more accurate monthly payment estimate, you’ll need to know the home’s property taxes, home insurance costs, as well as which type of home loan you plan on using. Certain loans come with monthly fees that will increase your monthly housing costs.

If you’re thinking about borrowing $450,000 to buy a home, here’s what you need to know.

Income Needed for a $450,000 Mortgage

The income needed to qualify for a $450,000 mortgage varies on a few factors. However, the principal and interest (P&I) payment for a $450,000 mortgage would be $2,996 for a 30-year term with a 7.00% interest rate. For a 15-year term, the payment is $4,047. Keep in mind that these calculations do not include other fees that will increase how much you actually pay.

Many lenders want borrowers to stick to a 28% housing cost, meaning that they will not approve loans that take up more than 28% of the borrower’s gross monthly income. A mortgage calculator can do the math for you, but for a payment of $2,996 each month to equal 28% of your monthly income, you would need to earn about $10,800 per month, or about $130,000 per year. However, these calculations do not factor in other fees that contribute to your monthly mortgage payment.

To get a more accurate monthly payment, use a mortgage calculator with taxes and insurance included.

Recommended: First-Time Homebuyer Guide

How Much Do You Need to Make to Get a $450K Mortgage?

The income needed for a $450,000 mortgage varies based on:

•   Loan term

•   Interest rate

•   Property taxes

•   Home insurance

•   Loan-specific fees

However, the loan term and interest rate determine a majority of the costs for any monthly mortgage payment.

What Is a Good Debt-to-Income Ratio?

The maximum debt-to-income (DTI) ratio lenders often accept is 36%, with a maximum of 28% going toward housing costs. Some lenders have higher margins, and some are willing to work with borrowers who have unusually high incomes and amounts of debts.

What Determines How Much House You Can Afford?

The two biggest factors that determine how much house you can afford are your income and DTI ratio. Regardless of your debts, the mortgage payment cap is often 28% of the borrower’s gross income.

What Mortgage Lenders Look For

Mortgage lenders typically look for a low DTI ratio, a strong credit score, a history of stable employment, and a high income. All of these factors suggest you are not only responsible enough to take on a mortgage but are financially capable of repaying your debts.

$450,000 Mortgage Breakdown Examples

When determining a home’s affordability, compare loan terms. A 30-year loan may enable you to buy a more expensive home, but increases the amount you pay in interest. For example, if you borrow $450,000 with a 30-year mortgage at 7.00%, over the life of the loan you will pay about $628,208 in interest in addition to the $450,000 principal. Borrow the same amount at the same rate but pay it back over 15 years and your interest charges shrink to around $278,236.

Remember, the above calculations do not include property taxes, home insurance, and loan-specific fees.

Pros and Cons of a $450,000 Mortgage

A $450,000 mortgage loan comes with its share of pros and cons. Here are a few things to consider:

Pros:

•   You build equity with each monthly payment

•   Equity can be used to secure a low rate loan

•   Fixed housing costs

•   Freedom to make changes to the property

Cons:

•   Yearly home maintenance costs

•   Large down payment

•   Large closing costs

How Much Will You Need for a Down Payment?

The minimum down payment a buyer can make for a conventional loan is 3%, and this low rate is often only available to first-time buyers. Assuming your mortgage is for $450,000, this means the purchase price must be $463,918. A 3% down payment would be $13,918.

Can You Buy a $450K Home With No Money Down?

It’s possible to buy a $450,000 home with no money down using a loan from the U.S. Department of Agriculture or the U.S. Veterans Administration (a VA loan). All other traditional mortgages require a down payment. However, other options do exist.

Can You Buy a $450K Home With a Small Down Payment?

USDA and VA loans do not have down payment requirements. The lowest amount needed for a conventional loan for some buyers is 3% of the purchase price. FHA loans require a 3.5% down payment.

Is a $450K Mortgage with No Down Payment a Good Idea?

It certainly can be. For example, if you use a loan that doesn’t require a down payment, such as a USDA loan, you could use the money for something else. If you were to fix up the home and sell it after a few years, those renovations might bring in a good return on your investment.

Ultimately, however, it depends on the monthly payment. As long as you can comfortably afford the monthly payment, whether the mortgage requires a down payment or not doesn’t matter too much.

Can’t Afford a $450,000 Mortgage With No Down Payment?

You may want to consider lowering your maximum purchase price if you can’t afford the P&I payment.

If housing prices are high where you live, another thing you may want to consider is looking in another area. Consider looking at the cost of living by state with data that rates the most affordable states. You may find moving to a new location deserves some consideration.

You may also consider the following tips.

Pay Off Debt

Debts like student loans, credit cards, and car loans eat up your monthly income. As they are paid off, three things happen:

•   You free up cash

•   You lower your DTI ratio

•   You cultivate a better credit score

Once you do this, you may be approved for a higher loan amount or the monthly payment on a $450K mortgage will become more manageable.

Look into First-Time Homebuyer Programs

First-time homebuyer programs help homebuyers with down payments and closing costs. They often come in the form of grants, forgivable loans, or low interest loans. Many programs can be found through HUD and are first-come-first-served. Apply early if you’re interested.

Build Up Credit

The stronger your credit score, the more confidence lenders have in you. This will likely result in a lower rate, and may also result in a higher loan limit. However, your lender will still likely want you to stick to a 28% DTI for housing costs.

Start Budgeting

Create a monthly budget to intentionally track how much you spend and save. See if there are places where you can cut back to help save up for a larger down payment.

Alternatives to Conventional Mortgage Loans

There are alternatives to conventional mortgage loans, but they involve working with a seller who is open to nontraditional financing methods. Some nontraditional methods include seller financing and lease-to-own options.

Another option is a portfolio loan, which some banking institutions offer. A portfolio loan is a loan lenders don’t sell to another institution. Instead, they keep it in their own books, which enables them to allow for looser eligibility requirements.

Recommended: Home Loan Help Center

Mortgage Tips

Here are a few quick tips to qualify for a mortgage:

1.    Get preapproved as early as possible: The mortgage preapproval process helps with a lot of things, and it will tell you how much house you can afford.

2.    Use a mortgage calculator when shopping online: This will help you quickly crunch some numbers. There are many types of mortgage calculators online, including home affordability calculators.

3.    Compare loan types: There are many different types of mortgage loans, each of which comes with different requirements and different fees.

4.    Pay down your debts: The fewer debts you have, the more room in your budget you’ll have for a higher mortgage.

5.    Know that you can always refinance in the future: A mortgage refinance will take a fresh look at your credit score and income, and will also include your existing home equity when determining your new rate.

The Takeaway

You’ll need an annual income of around $130,000 if you want to be in a good position to make payments on a $450,000 home mortgage loan. Remember that your payments will likely include principal and interest, but also homeowners insurance and property taxes. Getting preapproved by a lender can help make your search less stressful.

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

How much do you need to make to qualify for a $450K mortgage?

Just considering the P&I payment of a $450K mortgage, the minimum you would need to make is around $130K a year. This is for a 30 year mortgage with a 7.00% interest rate.

What would my mortgage be on a $450,000 house?

How much money you would have to borrow to buy a $450,000 house would depend on the size of your down payment. First-time homebuyers can sometimes put down as little as 3% ($13,500). In this case, you would need a home mortgage loan for $436,500. If you put down 20% ($90,000), you would need a mortgage loan for $360,000.

Can you buy a house with a $40,000 salary?

Yes, but it depends on the purchase price of the home. The gross monthly income is $3,333, which means the maximum amount spent on housing should be $933. This puts the purchase price around $140,000.

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Photo credit: iStock/FreshSplash

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.

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.

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.

SOHL-Q224-1906859-V1

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It’s tough to afford a home these days. If you’re looking at a $275,000 mortgage, you’ll have a monthly payment of around $2,400 with today’s interest rates at 7% on a 30-year loan. You’ll need an income of about $80,000 per year to afford this mortgage.

This can change if you have a significant amount of debt, a low down payment amount, or a less-than-perfect credit history. We’ll run through a few scenarios to show you how much income is needed for a $275K mortgage.

Income Needed for a $275,000 Mortgage

The income needed for a $275K mortgage is around $80,000. If you have more debt, the lender will need to factor that in before calculating how much income you’ll need to afford the $275,000 mortgage. For example, if you have $400 in debt payments each month, you’ll need to earn more money each month to be able to afford the $275K mortgage and still stay within the 36% debt-to-income ceiling most lenders prefer. A closer look:

$2,402 (mortgage) + $400 (other debt payments) = $2,802 total debt payments per month

For $2,802 to be 36% of your monthly income, you would need to make $7,783 each month, or $93,400 per year to qualify for the $275,000 mortgage. This estimate is based on a mortgage calculator with taxes and insurance. If you would like to see what a lender can do for you, explore getting prequalified for a home mortgage loan.

How Much Do You Need to Make to Get a $275K Mortgage?

How much income you need for a $275K mortgage also depends on your debt-to-income (DTI) ratio, down payment, loan type, lender, and credit score. Let’s take a look at these each in detail.

What Is a Good Debt-to-Income Ratio?

The gold standard for debt-to-income ratios is <36%. However, there are lenders who are able to originate loans for borrowers with a DTI ratio up to 45%. Lenders who fall outside the norm in DTI and credit score requirements will influence how much you need for a $275K mortgage.

What Determines How Much House You Can Afford?

Home affordability isn’t a simple equation. There are a number of factors that go into a lender’s decision about your loan.

Income

Reliable income is the largest determinant in loan approval. The more you make, the more you have to work with each month. However, your income and home affordability are affected by how much debt you have.

Debt

Your lender will take into account any monthly debt obligations you have. These will be added to the maximum DTI. If you have debt, your monthly mortgage will need to be lower.

Down Payment

A larger down payment can afford you a larger mortgage. If you’re able to put down 20%, you won’t need to pay for private mortgage insurance (PMI), which saves you money every month. However, 20% could be a big chunk of change to come up with, and most loans accept lower than a 20% down payment to start. See this mortgage calculator for examples.

Loan Type

Home affordability is also affected by the different types of mortgage loans. Fixed-rate loans will have a different monthly payment than adjustable-rate loans, for example. Likewise, the monthly payment on a 15-year mortgage is far different from the payment on a 30-year mortgage.

Lender and Interest Rate

Interest rates will vary from lender to lender. You may also see a different acceptable DTI ratio from lender to lender. When a lender is able to offer a lower interest rate, you’ll see your home affordability improve. When a lender has a higher acceptable DTI ratio, you may be able to qualify for a higher mortgage amount.

Recommended: Cost of Living by State

What Mortgage Lenders Look For

Worried about qualifying for a $275K mortgage? Here’s what your lender will look for during the mortgage preapproval process. These are right in line with home affordability requirements.

•   Income Your income needs to be reliable and sufficient to qualify for the loan you want.

•   Credit score A good credit score helps with approval and lower interest rates.

•   Debt-to-income ratio Too much debt could prevent you from securing the loan you want. Before you apply for a loan, work on paying off debt as best you can.

•   Down payment A higher down payment can help you qualify for a larger purchase price on a home. A down payment over 20% can help you avoid the monthly mortgage insurance payment as well.

•   Loan-to-value ratio Lenders also want to be sure the property you’re buying qualifies for a loan. They don’t want to loan more on the property than it’s worth.

$275,000 Mortgage Breakdown Examples

Your individual situation will influence the income needed for the mortgage you want. Here are a few examples created with a home affordability calculator to show you how this works. In each case, the interest rate is 7% on a 30-year mortgage.

With no debt

•   Principal and interest: $1,830

•   Taxes and insurance: $573

•   Total monthly payment: $2,403

Income needed to afford the monthly payment: $6,672 per month, or $80,064 per year.

Assumptions: 20% down payment. The original purchase price would be $343,750 to get a $275,000 mortgage with a 20% down payment.

With $1,000 per month in debt

•   Principal and interest: $1,830

•   Taxes and insurance: $573

•   Total monthly payment: $2,403

Add monthly debt obligations to the monthly mortgage payment. $2,402 + $1,000 = $3,402 monthly debts.

Income needed to afford the monthly payment: $9,450 per month, or $113,400 per year.

Assumptions: 20% down payment. The original purchase price would be $343,750 to get a $275,000 mortgage with a 20% down payment.

With no down payment and $600 in monthly debt payments

•   Principal and interest: $1,830

•   Taxes and insurance: $458

•   PMI: $252

•   Total monthly payment: $2,540

Add monthly debt obligations to the monthly mortgage payment. $2,540 + $600 = $3,140

Income needed to afford the monthly payment: $8,722 per month, or $104,664 per year.

Assumptions: No down payment. The original purchase price would be $275,000.

Pros and Cons of a $275,000 Mortgage

Pros

•   Lower mortgage payment than for the median home price in the U.S.

•   Lower income requirement than a higher-priced mortgage

Cons

•   Few homes can be found for $275,000

•   May still be unaffordable for many families

How Much Will You Need for a Down Payment?

If you’re deciding how much of your hard-earned money to put down for a down payment on a property that you plan to buy with a mortgage of $275,000, here’s how it breaks down by loan program.

Program	Minimum down payment percentage	Amount for $275,000
VA, USDA	0%	$0
Conventional	3% or more	$8,250 or more
FHA	3.5% or more	$9,625 or more

Keep in mind, when you make a payment lower than 20%, you’ll need to pay PMI each month. For some loans, like the Federal Housing Administration (FHA) mortgage, you’ll need a mortgage refinance to get rid of PMI.

Can You Buy a $275K Home With No Money Down?

Yes, you can buy a $275K home for no money down. The two main programs that don’t require a down payment include:

•   VA (U.S. Department of Veterans Affairs) mortgages

•   USDA (U.S. Department of Agriculture) mortgages

Beyond these two programs, you may also find local housing programs that offer down payment assistance that may be able to help get you into a home with no money down (or close to it).

Can You Buy a $275K Home With a Small Down Payment?

Since a $275K mortgage loan falls under the conforming loan limits, it qualifies for loan programs with lower down payment requirements. These include conventional financing with a minimum 3% down payment for qualified first-time buyers, FHA with a 3.5% minimum down payment, as well as VA and USDA loans which have no down payment requirement.

Recommended: Best Affordable Places to Live

Is a $275K Mortgage with No Down Payment a Good Idea

It’s possible to get a $275K mortgage with no down payment. It also may help you get into a home that you otherwise wouldn’t be able to.

If you’ve run your numbers through a mortgage calculator and have worked closely with a lender to determine if the monthly payment is affordable for you, you shouldn’t hesitate to get a mortgage with no down payment.

The major downside to getting a mortgage with no down payment is the amount of mortgage insurance you’ll pay every month. That will need to be factored in when the lender determines how much mortgage you’ll be able to afford.

Can’t Afford a $275K Mortgage With No Down Payment?

If you still have a little work to get qualified for a $275K mortgage, especially if the cost of living in your state is high, there are some smart moves you can make to help your odds of approval.

Pay Off Debt

You may qualify for more house by paying down debt. Let’s take a look at our previous examples:

With no debt, a $275K mortgage will cost $2,402 per month, and you’ll need to earn $6,672 per month, or $80,064 per year.

With $1,000 monthly debt obligations, a $275K mortgage will have a total of $3,402 monthly debts and you’ll need $9,450 per month, or $113,400 per year to afford a $275K mortgage.

With a reduced debt load of $600 instead of $1,000, and a $275K mortgage, you’ll have a total debt load of $3,002. You’ll need $8,339 in income per month, or $100,067 per year to afford your debt load. This is much less than the previous example where the debt load was $1,000 per month.

Look into First-Time Homebuyer Programs

Most states and local housing programs have some type of first-time homebuyer program. It may be a down payment assistance program or a forgivable second mortgage that helps cover closing costs.

Build Up Credit

There’s nothing you can do about the current interest rates, but you can work on your credit to get the best rate you can. A better credit score translates into a better interest rate almost every time, which helps immensely with affording a $275K mortgage.

Start Budgeting

Good old-fashioned budgeting can help you zero in on your goals and save a large enough down payment to afford a $275K home. It helps to think of budgeting as a tool for achieving goals, rather than a punishment or restrictive way of life.

Alternatives to Conventional Mortgage Loans

If you’re not able to qualify for one of the different types of mortgage loans just yet, you might want to look into the following alternative financing methods:

Seller financing Seller financing is where the seller agrees to carry the mortgage and acts as lender. Usually, it’s a short-term agreement and the seller may charge a higher interest rate than what a traditional lender would. The details of the arrangements are made between buyer and seller, and can be quite complex. But it also avoids many closing costs and can be a faster transaction than a traditional sale.

Private lending A private lender is any lender not associated with a bank or lending institution. They may be more flexible with qualification and offer a wider range of lending tools, such as bridge loans to help you get from one house to another.

Recommended: Home Loan Help Center

Mortgage Tips

Getting a mortgage is intimidating at first. Once you’re done reading tips to qualify for a mortgage, you’ll want to start talking to lenders. Here’s what you’ll do to find the best rate.

1.    Shop around for a loan. Shopping around for a loan within a 45-day window only counts as a single credit inquiry on your credit report, so you can check out as many mortgage lenders as you want. This can help you find one with a great deal and terms that work for you.

2.    Compare loan estimates. A loan estimate is a document that outlines the different loan costs the lender charges. You’ll be able to compare origination fees, underwriting fees, and other closing costs in determining which loan will work best for you.

3.    Don’t get caught up in analysis paralysis. After you’ve looked at a handful of lenders, it’s time to pick one. Make a decision and go forward with excitement about moving into your home.

The Takeaway

Affording a home in today’s economy seems hard, and the amount of income needed for a $275K mortgage may feel like a heavy lift. But it’s not impossible to qualify for the mortgage you want. Even after you’ve worked out all the numbers online, you’ll still want to talk to a lender. They may have more options than you’d expect, and it’s worthwhile to start the process sooner rather than later.

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

Can I afford a $275K house on a $60K salary?

If you have a large enough down payment, you may be able to afford a $275,000 house on a $60,000 salary. For a $5,000 monthly income, you’ll need your mortgage amount to be around $1,800. To get to that payment, you’ll need a 20% down payment ($55,000) and a 6% interest rate (if rates don’t drop to that level, you can buy down your rate by paying mortgage points to your lender).

How much does a $275K mortgage cost over 10 years?

With an interest rate of 7%, a $275,000 mortgage will cost $383,158 over 10 years. So your total interest paid on this loan will top $108,000.

What credit score is needed to buy a $275K house?

Your credit score is only one factor in determining whether or not you can afford to buy a $275K house. FHA loans, for example, allow borrowers with credit scores as low as 500 (with a 10% down payment) and 580 (with a 3.5% down payment) to apply. Lenders also look at your debt-to-income ratio, income, employment history, and loan-to-value ratio.

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Photo credit: iStock/FG Trade Latin

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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