One rule of thumb when buying a home is to not spend more than three times your annual salary. If you earn $60K a year, that means you can afford to spend around $180,000 on a house, maybe a bit more if you have little or no other debts. However, depending on where you want to live, interest rates, and how much debt you’re carrying, that figure could change significantly.
This article looks at the factors you should consider when deciding how much house you can afford. Following this guide is the best way to get a realistic idea of how much house you really can get on a salary of $60,000.
What Kind of House Can I Afford With $60K a Year?
A salary of $60,000 is below the national median income of $74,580, according to Census data. While you will probably qualify for a mortgage in most states with that salary, it won’t buy you much of a home in areas with a high cost of living, such as New York or California.
How much house you can afford on $60,000 a year depends on how affordable your city is, your debt-to-income ratio (DTI), interest rates, and how much you can save for a down payment.
💡 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.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Your Debt-to-Income Ratio
Another rule of thumb is the 28/36 rule. This rule holds that you should spend no more than 28 percent of your gross income on overall housing costs (including mortgage, taxes, and insurance) and no more than 36 percent on all debt combined (mortgage, credit card bills, car payment, student loan, etc.).
So, if you earn $60,000, your housing costs should be less than $16,800, or $1,400 a month, and your debt and housing costs should not exceed $21,600, or $1,800 a month. This calculation reflects your DTI ratio. To get a sense of how much you might be able to borrow and still walk away under your 28/36 maximums, try putting your numbers into a home affordability calculator.
Lenders look at how much debt you have when they determine if you qualify for a mortgage. From the lender’s point of view, the less you are paying each month in debt, the less likely you are to default on your mortgage loan, and the better the loan terms they can extend. A higher ratio means you are using more of your income to cover existing debt.
Your Down Payment
How much do you have saved up for a down payment? Your down payment directly affects how much you will have to pay each month in principal and interest. According to the National Association of Realtors®, the average first-time buyer pays about 6 percent of the home price for their down payment, while repeat buyers put down 17 percent. The more you put down, the lower your monthly housing cost. Whatever your salary, you can borrow more and buy a more costly house if your monthly payments are less.
Home Affordability
How affordability is a measure of how affordable homes are in a certain area. Some areas have a higher cost of living, higher average house prices, and higher property taxes. For example, New Jersey has high property taxes, but South Carolina and Mississippi tend to have low property taxes. It also costs more to buy necessities in New Jersey than South Carolina or Mississippi.
Your credit score is another factor to consider in the home affordability equation. A higher credit score will mean you should qualify for a lower interest rate with a lender and better loan terms. Better loan terms mean (you guessed it) lower monthly payments, which might give you the bandwidth to borrow a little more.
How to Afford More House with Down Payment Assistance
Federal, state, and local government, private entities, and charitable organizations offer down payment assistance in the form of low-rate loans, cash grants, tax credits, and interest rate reductions. Some of the programs are offered to specific professionals, such as nurses or teachers, first-time homebuyers, and some programs are neighborhood-based.
Property tax abatement and federal tax credits to first-time buyers are applied automatically. However, the U.S. Department of Housing and Urban Development (HUD) maintains a semi-complete list of programs listed by state, county, and city. Note that applying for down payment assistance can add weeks or months to the homebuying process.
Here are typical down payments for various types of mortgages. Learn more by visiting a home loan help center.
• Conventional mortgages require a down payment that can be as low as 3%.
• FHA loans backed by the Federal Housing Administration require 3.5% down.
• VA mortgages from the U.S. Department of Veterans Affairs require 0% down.
• United States Department of Agriculture (USDA) loans offer loans to people in rural areas with no down payment.
Home Affordability Examples
Below are some hypothetical examples for buyers who make $60,000 a year with different savings for a down payment and monthly debt payments. The interest rate is 7%, and property tax rates are assumed to be average.
The Saver with a Down Payment
Gross annual income: $60,000
Amount of money for a down payment: $12,000
Monthly debt: $250
Property taxes: 1.12%
SoFi estimates that you can afford a home that costs $120,000. Bear in mind that you can expect to pay closing costs of around $4,800 in addition to the monthly charges below. Here is a breakdown of the costs:
Home Loan: $108,000
Down Payment: $12,000
Total Monthly Payments $953
• Principal and Interest: $719
• Property Taxes: $113
• Private Mortgage Insurance: $90
• Homeowners Insurance: $31
The Buyer with A Bigger Down Payment and Some Debt
Gross annual income: $60,000
Amount of money for a down payment: $25,000
Monthly debt: $300
Property taxes: 1.12%
In this scenario, you might comfortably afford a home that costs $250,000 (again, closing costs would come into play). Here is a breakdown:
Home Loan: $225,000
Down Payment: $25,000
Total Monthly Payments $1,615
• Principal and Interest: $1,127
• Property Taxes: $234
• Private Mortgage Insurance: $66
• Homeowners Insurance: $71
💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.
How to Calculate How Much House You Can Afford
Keeping a budget to track your monthly expenditures is the first step to calculating how much house you can afford. Once you know how much you are spending each month on food, entertainment, your car, clothing, and utilities, you can add up these expenses and subtract them from your monthly income (don’t include rent here). What you have left is the amount you can afford to spend on housing expenses.
If you spend no more than 25 to 28% of your monthly income on housing, and your monthly income is $5,000, you can afford to spend $1,400 on mortgage and housing expenses.
You can also try putting different numbers into a mortgage calculator to see how different combinations of down payment amount or home cost affect monthly payments.
How Your Monthly Payment Affects Your Price Range
Your monthly payment is made up of principal and interest. If you can afford to pay more each month, you can afford a bigger house. That is, provided you don’t have too much debt. However, if you can, coming up with a bigger down payment in the beginning will likely reduce the interest rate offered by your lender and your monthly payments. You should feel comfortable with the cost of your monthly housing expenses going into a home purchase, but if your earnings or credit score increase notably after a few years, you can always look at a mortgage refinance.
💡 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.
Types of Home Loans Available to $60K Households
Conventional loans, FHA loans, USDA, and VA loans are the common loans available.
• Conventional loans. These are the most common. They typically require a credit score of at least 620. Some will allow a down payment as low as 3 percent, but that will mean your monthly payments will be higher because you will have to borrow more.
• FHA loans. FHA loans provide a percentage of the cost of a home depending on the buyer’s credit score. Home buyers with a credit score over 580 can borrow up to 96.5 percent of a home’s value. Home buyers whose credit scores are between 500 to 579 can qualify for a loan as long as they have a 10 percent down payment.
• USDA: These loans serve borrowers earning below a certain income level who want to buy homes in designated rural areas.
• VA: VA loans require no down payment and are offered to qualified military service members, veterans, and their spouses.
The Takeaway
The 28/36 rule holds that if you earn $60k and don’t pay too much to cover your debt each month, you can afford housing expenses of $1,400 a month. Another rule of thumb suggests you could afford a home worth $180,000, or three times your salary.
When calculating how much a lender might extend to you depends on your debt-to-income ratio, the cost of living and property taxes in the area you want to live, interest rates, and how much you have saved for a down payment.
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 $60K a good salary for a single person?
A salary of $60,000 is below the national median income which was $74,580 in 2022, according to Census data, the national median income was. On this income, you might struggle to buy a home in areas with a high cost of living unless you have a large down payment.
What is a comfortable income for a single person?
Average monthly expenses for one person in 2022 totaled $3,693, or $44,312 annually, according to the U.S. Bureau of Labor, so earning more than this amount would be a comfortable income as long as the cost of living where you live isn’t significantly above average, which varies widely among the states. But what any individual considers comfortable will depend on their spending habits.
What is a liveable wage in 2023?
A liveable wage, according to the Massachusetts Institute of Technology, was $104,07 per year before taxes in 2022. This for a family of four or two working adults with two children.
What salary is considered rich for a single person?
An income of $540,009 per year puts a person in the top 1% earnings category, according to the most recent IRS data.
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*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.
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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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