SoFi

Homebuyers choose the number of years they’d like their mortgage to last. The 30-year fixed-rate mortgage is by far the most popular, followed by the 15-year fixed-rate mortgage, but terms of 10, 20, 25, and even 40 years are available. The term that will work best for each borrower largely depends on the monthly mortgage payment they can handle and how long they plan to keep the property.

What Is a Mortgage Term?

The term is the number of years it will take to pay off a home loan if the minimum payment is made each month. Knowing how long you plan to stay in your home can affect the type of home loan that fits your situation when you shop for a mortgage — not only short or long term, but also fixed or adjustable interest rate.

Of course, every borrower’s situation is unique. But according to the National Association of Realtors®, in 2024, people who were selling homes had typically lived in the property for a decade. So it might be reasonable to expect that you’ll spend 10 years in the home unless you already know otherwise.

💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

How Mortgage Terms Work

For fixed-rate home loans, payments consist of principal and interest, with one consistent interest rate for the life of the loan. With mortgage amortization, the amount going toward the principal starts out small and grows each month, while the amount going toward interest declines each month.

A shorter term, conventional loan generally translates to higher monthly payments but less total interest paid, and a longer term, vice versa. A shorter-term loan also will have a lower interest rate. A mortgage calculator tool can show you the total amount of interest paid, which in a fixed-rate loan is predictable.

Most adjustable-rate mortgages (ARMs) also have a 30-year term. You can’t know in advance how much total interest you will pay because the interest rate changes.

How Long Can a Mortgage Term Be?

A few lenders out there offer 40-year mortgages. Qualifying is more difficult, and the rates are the highest among fixed-rate loans, while 40-year loans with adjustable rates can be unpredictable. The long term means a borrower will make the lowest possible monthly payments but pay more over the life of the loan than any other.

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

Fixed-Rate Mortgages vs. Adjustable-Rate Mortgages

When you’re first choosing mortgage terms or looking at different types of mortgages, start with one of the basic quesitons: Will the rate change over time or not?

A fixed-rate mortgage is exactly what it sounds like. You lock in an interest rate for the entire term. If market rates rise, yours will not.

An adjustable-rate mortgage is much more complicated. An ARM usually will have a lower initial rate than a comparable fixed-rate mortgage, and a borrower may be able to save significant cash over the first years of the loan.

But a rate adjustment can bring a spike in mortgage payments that could be hard or impossible to bear. With the most common variable-rate loan, the 5/1 ARM, the rate stays the same for the first five years, then changes once a year.

An interest-only ARM has an upside and downside. You’ll pay only the interest for a specified number of years, when payments will be small, but you will not be paying anything toward your mortgage loan balance.

An ARM may suit those who are confident that they can afford increases in monthly payments, even to the maximum amount, or those who plan to sell their home within a short period of time.

ARM seekers may want to prequalify for more than one loan and compare loan estimates. It’s a good idea to know the answers to these questions:

•   How high can the interest rates and my payment go?

•   How high can my interest rate go?

•   How long are my initial payments guaranteed?

•   How often do the rate and payment adjust?

•   What index is used and where is it published?

•   Will I be able to convert the ARM to a fixed-rate mortgage in the future, and are there any fees to do so?

•   Can I afford the highest payment possible if I can’t sell the home, or refinance, before the increase?

Comparing 15-Year and 30-Year Mortgages

Clearly, paying off a mortgage in 15 years rather than 30 sounds great. You’ll get a lower rate, pay much less total interest, and be done with house payments in half the time. The catch? Higher monthly payments. Here’s an example of how a 30- and 15-year fixed-rate mortgage might shake out, not including property taxes and insurance and any homeowners association (HOA) fees.

30-Year vs. 15-Year Fixed-Rate Mortgage

There’s a reason that the 30-year fixed-rate mortgage reigns supreme: manageable payments that ideally leave enough money for emergencies and retirement savings.

Borrowers making lower payments can always pay more toward the principal if they want to pay off the mortgage early.

Then again, borrowers with stable finances who can afford the higher payments of a 15-year home loan may find it quite appealing.

Recommended: Adjustable-Rate Mortgage (ARM) vs. Fixed-Rate Mortgage

The Takeaway

How to pick a mortgage term? Look at your budget, think about how long you plan to stay in the home, and weigh your financial goals and priorities. Consider getting prequalified so you can see what your options are.

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.

FAQ

What is the 28% mortgage rule?

The 28% rule is a guideline commonly used by lenders that states that no more than 28% of a homebuyer’s gross income should go to cover their housing costs. In this equation, housing costs equals the homeowner’s mortgage payment, property taxes, and homeowners insurance.

Which mortgage term should I choose?

The mortgage term that’s best for you is a very individual decision. Use a mortgage calculator to see which monthly payment amount feels like the best fit in your current budget. Choose a term that yields a monthly payment amount that allows you to maintain an emergency fund and pay down any other higher-interest debt you may be facing. When in doubt, aim for the term that yields a payment within 28% of your gross monthly income when you factor in property taxes and home insurance.

Is an adjustable-rate mortgage a good idea right now?

ARMs tend to have a lower initial rate than fixed-rate loans. An ARM might be a good idea for you if you plan to sell your home in a fairly short period of time, such as five to seven years, before the rate begins to adjust. ARMs are often more popular when interest rates are forecast to decline in the future, or when home prices and interest rates are fairly high. Just be sure that you understand when the adjustable rate will start to adjust and that you know what the maximum payment might be according to the loan agreement. You’ll want to make sure you have a plan to make that larger payment if necessary.

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-criteria for more information.

SOHL-Q425-169

On a salary of $65,000 per year, as long as you have very little debt, you can afford a house priced at around $190,000. This number assumes a 6% interest rate and a standard debt-to-income (DTI) ratio of 36%. Your homeowner’s insurance, property taxes, and private mortgage insurance would be included in your monthly payment.

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

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

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

•   Your DTI ratio

•   How much your down payment is

•   The cost of taxes and insurance where you live

•   What interest rate you qualify for

•   What type of loan you’re getting

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

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

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

Understanding Debt-to-income Ratio

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

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

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

How to Factor in Your Down Payment

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

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

Factors That Affect Home Affordability

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

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

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

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

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

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

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

Recommended: The Cost of Living by State

How to Afford More House With Down Payment Assistance

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

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

How to Calculate How Much House You Can Afford

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

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

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

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

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

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

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

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.

“If you have multiple debts, you want to make your minimum payments so you don’t hurt your credit score,” Kendall Meade, a Certified Financial Planner at SoFi said. “If you have cash left over after that, you should develop a strategy for which debts to pay off first,” she suggested.

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.

FAQ

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

A $65,000 salary is above the real median personal income of $45,140 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, $50,000 might be adequate. For others, $200,000 is not enough.

What is a livable wage in 2025?

A livable wage variest widely depending on where you live, according to the Living Wage Institute at the Massachusetts Institute of Technology, which estimates specific living wages among different household types in different states. For a single person in San Francisco, a living wage works out to be $30.91 per hour. In Reading, Pennsylvania, a single person could get by on $22.15. However, for a family with three kids that depends on a single earner in Dallas, Texas, the living wage is $60.57 per hour.

What salary is considered rich for a single person?

An annual income of $731,492 would help you claim a spot among the top 1% of earners, according to IRS data.

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-criteria for more information.

SOHL-Q425-174

If you’re thinking about buying a property, you may wonder how much you should pay for a new home. After all, that can impact the size (and type) of mortgage you apply for.

The truth is, though, your mortgage is just one piece of the puzzle when deciding how much to spend on a home. To figure out what you can realistically afford, you need to understand all of your potential housing costs, including what may seem like unexpected costs that crop up when you own a property. That way, you can truly prepare for how much money it will take to cover your expenses as a homeowner.

So, there’s a good chance you’re a member of the club whose members are wondering, “How much home can I afford?” Read on for four important tips to help determine whether a home will suit your budget. Given how big an expense homeownership can be, you will likely want to be well armed with information before you start hitting the open houses and making bids.

1. Calculate Potential Housing Costs

If you’re calculating how much you should pay for a new home, it can be an important step to write down all potential costs connected with buying a house and then paying the monthly expenses. This list can include:

•   Down payment

•   Mortgage payment

•   Property taxes

•   Homeowners’ insurance

•   Mortgage insurance, if applicable

•   Closing costs

Since the mortgage payment is typically a big-ticket budget item, it can be a good move to check out a few different options (say, fixed-rate vs. adjustable-rate; 15-year vs. 30-year terms) from a few lenders and at a couple of different amounts to get a handle on what that cost is likely to be.

Also, you may want to also make a list of:

•   Expected repairs

•   Planned updates/renovations.

Don’t forget about ongoing costs. It may be tempting to leave this out of your initial budget, but it’s unlikely you’ll find a place that won’t require some changes. These estimates could be a factor in your budget and your decision about what to buy. For instance, you’ll want to prepare for such expenses as:

•   Utilities. If you’re moving to a house from a small apartment, you could be paying considerably more in, say, heating and cooling costs.

•   Landscaping or other maintenance of your property beyond the house.

You’ll also likely want to make your new house a home, and there is nothing wrong with that as long as you’ve budgeted for the estimated expense. In other words, include the following in your calculations:

•   Moving costs

•   The cost of new furniture and furnishings (curtains, hardware, the works).

Although these latter expenses aren’t part of your required monthly housing payments, they’re worthwhile to keep in mind.

💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

Estimate Your Future Housing Costs

Need help figuring out these costs in more detail? A home affordability calculator provides additional insight into how much it costs to purchase a home and the expected monthly payment associated with being a homeowner, including insurance costs, property taxes, and closing costs.

2. Determining What Is Paid Up Front

Now that you have an all-encompassing list of what you think a potential property might cost, both for a monthly payment and possible expenses, you can divvy up those costs into two categories: upfront costs and monthly costs.

Upfront costs include things like the down payment on the home and other fees such as closing costs and paying for home inspections. “When getting ready to buy a house, you may want to give yourself time to save up for a larger down payment. Buyers who put down less than 20% may end up paying private mortgage insurance, which typically costs between 0.3% and 1.5% of your loan amount annually,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. If you’re close to having a 20% down payment it might be worth pressing on to that goal before you begin your house hunt in earnest.

Monthly costs are your recurring mortgage payment, property taxes, and insurance(s), which may be rolled into the mortgage payment or paid separately. There are also other possible expenses you may pay down the line for furniture, repairs, renovations, etc.

This will help you get a handle on how much cash you will need to spend when going through the mortgage process and becoming a homeowner. And it will also tell you what it will look like to keep your home up and running, month after month.

As you consider how much you should pay for a new home, know that it may be wise to have a cash buffer as you go into homeownership. In other words, don’t clean yourself out when buying a home. You don’t want to risk overdrafting your bank account, and you need to be prepared for how inflation could cause your expenses to tick up.

Recommended: What to Know About Getting Preapproved for a Home Loan

3. Look at Monthly Costs in Terms of Your Budget

Once you have an idea of what your monthly housing costs could be, you can begin to fit those into your overall budget. One important consideration is the amount of debt you are paying off each month, so if you haven’t explored your debt-to-income (DTI) ratio, now is the time to learn more about this equation. Most conventional lenders like to see a homebuyer’s DTI ratio at less than 45%. You can figure out yours by adding up all your monthly debts and dividing by your gross monthly income. If your DTI is creeping close to 45%, it’s a sign you might have difficulty covering a mortgage alongside your other bills. In this case, you might want to explore paying down some debt before shopping for a home.

There are different budgeting methods, but most involve knowing and balancing your take-home pay, the cost of your “needs” and “wants” each month, and how much you are putting toward savings.

As you evaluate your projected homeowner figures, you want to ask yourself:

•   Do the numbers work, leaving you with some room to breathe?

•   Are you able to save for other financial goals, such as retirement?

•   Will you be able to maintain your current quality of life, or will you have to make cuts to accommodate your new housing expenses?

•   What do the numbers look like if you were to buy a somewhat more or less expensive home? (This can help you, especially if you are interested in a house that winds up in a bidding war and potentially selling for over the asking price.)

Overextending yourself in order to purchase a home is not recommended. Living paycheck to paycheck and worrying about money after you buy a property could take some joy out of your new nest.

💡 Quick Tip: You never know when you might need funds for an unexpected repair or other big bill. So apply for a HELOC (a home equity line of credit) brokered by SoFi today: You’ll help ensure the money will be there when you need it, and at lower interest rates than with most credit cards.

4. Considering Unexpected Costs

Being a homeowner can be wonderful and rewarding, but it can also be expensive and, at times, exhausting. Roofs leak. Hot water heaters fizzle out. Gutters need cleaning.

You may want to set proper expectations regarding not only how much homeownership will cost in terms of the typical expenses, but also in terms of the full universe of maintenance and potential costs. Budget accordingly.

Next, you might want to consider what could happen in the event of a job layoff. Even great employees can lose their jobs, so have a plan in the event that this happens. And how would you keep up with costs in the unfortunate event of illness?

If you have no plan for how to make a mortgage payment in the event that you or your spouse loses work, you might not be quite ready for homeownership. You may want to build up your cash reserve before diving in.

For instance, most financial experts recommend that you save three to six months’ worth of expenses in an emergency fund in case of a job loss, health emergency, or other financially difficult events.

Those funds can be vital to see you through a tough financial moment. And if you do have this amount of money set aside (good job!), don’t be tempted to raid it for, say, your down payment or other costs related to buying a home. It’s a very important bundle of cash to have on reserve.

Recommended: How to Shop Around for a Mortgage Lender

The Takeaway

Buying a house can be a huge rite of passage and a big part of adulting. As you contemplate owning your own home, it’s important to be sure you understand both the upfront and ongoing costs of homeownership and know how they fit into your budget. In addition, understanding the unexpected expenses that may crop up can be a wise move.

A key part of your calculations will be checking your mortgage options and how much that will cost you every month. This can be one of the big recurring costs to budget 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.

Photo credit: iStock/Tijana Simic

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-criteria for more information.

SOHL-Q425-204