How Much Income Is Needed for a $150,000 Mortgage?

By Kim Franke-Folstad · June 03, 2024 · 13 minute read

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How Much Income Is Needed for a $150,000 Mortgage?

If you earn around $50,000 to $60,000 a year or more, you may be in a good position to afford a $150,000 mortgage. But the exact amount you’ll be able to borrow — even if you are in that salary range — will likely depend on several other variables as well, including how much debt you have and your credit score.

Read on for a look at how much income may be needed for a $150,000 mortgage, how a borrower’s income fits into the overall mortgage equation, and how lenders typically decide how much mortgage a homebuyer can manage.

What Income Is Needed to Get a $150,000 Mortgage?

Homebuyers tend to think that when they apply for a mortgage, the amount they’re approved for will be based mostly, or only, on their household income. But income is typically just one of several factors a lender will consider when deciding how much someone can borrow.

The home mortgage loan you can qualify for generally depends on how much the lender believes you can reliably pay back. And you can expect the loan company to run your financials through a few different checks and calculations to come up with that number. Here are several things lenders may look at:

Income

Lenders will ask about your salary to help determine if you can make the monthly payments on the amount you want to borrow. They’ll also want to know how reliable that income is — so you may be asked how long you’ve had your job (or your business if you’re self-employed). If you’re wondering if your income is high enough to afford a $150,000 loan, you may want to use a home affordability calculator before you apply for a mortgage.

Creditworthiness

Lenders will also check your credit score and credit reports to ensure that you’re financially responsible and pay your bills on time.

Down Payment Amount

A larger down payment can indicate to lenders that you’re serious about your investment, and it can lower their financial risk. But contrary to what many people believe, a 20% down payment isn’t required to get a home loan. You may be able to put much less down, depending on the type of mortgage you get.

Debt-to-Income (DTI) Ratio

Lenders also may compare your monthly gross income to your existing monthly debts (credit cards, student loans, car payments, etc.) to help assess if you’ll be able to manage all your payments. This is called your debt-to-income (DTI) ratio, and it’s easy to compute: DTI = monthly debts ÷ gross monthly income.

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


What Is a Good Debt-to-Income Ratio?

The Consumer Financial Protection Bureau recommends that homeowners work toward maintaining a DTI ratio of 36% or less. And in general, that’s the number mortgage lenders are looking for, too. But some lenders may accept a DTI ratio of up to 43% — or even higher if the borrower can meet other criteria on certain types of loans.

What Other Factors Are Mortgage Lenders Looking At?

Here are a few formulas your lender — and you — may use to determine how much house you can afford on your income.

The 28/36 Rule

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

For example: If your gross annual income is $50,000, that’s $4,167 per month. So with the 28/36 rule, you could aim for a monthly mortgage payment of about $1,167 — as long as your total monthly debt (including car payments, credit cards, etc.) isn’t more than $1,500.

The 35/45 Model

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

For example: Let’s say your gross monthly income is $4,167 and your after-tax income is about $3,552. In this scenario, you might spend between $1,458 and $1,598 per month on your debt payments and mortgage combined. This calculation offers a bit more breathing room with your mortgage payment — as long as you aren’t carrying a lot of debt.

The 25% After-Tax Rule

This method will give you a more conservative number to work with. With this calculation, your target is to spend no more than 25% of your after-tax income on your mortgage. So, for example, if you make $3,552 a month after taxes, you might plan to spend $888 on your mortgage payments.

Keep in mind that these equations can only give you an estimate of how much you can borrow. When you want to be more certain about the overall price tag and monthly payments you can afford, it helps to go through the mortgage preapproval process.

What Determines How Much House You Can Afford?

Here’s something else to consider when assessing how much income is needed for a $150,000 mortgage: A house payment generally isn’t limited to just principal and interest. And the extra costs that may be tacked on every month can add up fast. Some of the costs covered by a monthly loan payment can include:

Principal

Principal is the original amount borrowed to buy the home, minus the down payment. Each month, a portion of your payment will go toward paying down this amount.

Interest

Interest is the money you pay to the lender each month for giving you the loan. The interest rate you pay can be influenced by personal factors (such as the loan length you choose, your credit score, and your income) as well as general economic and market factors.

Homeowners Insurance

The cost of homeowners insurance also may be rolled into your monthly mortgage payment, and your lender will pay the premium when it’s due.

Mortgage Insurance

Depending on the type of loan you have and the amount you put down on your home, you may be required to carry private mortgage insurance (PMI) or some other type of mortgage insurance policy. This insurance is designed to protect the mortgage lender if a borrower can’t make the agreed upon loan payments.

Property Taxes

A portion of your monthly mortgage payment may also go toward the property taxes you’ll need to pay your local government.

Recommended: Home Loan Help Center

$150,000 Mortgage Breakdown Examples

The monthly payment on a $150,000 mortgage can vary based on several factors, including the length of the loan (usually 15, 20, or 30 years) and the interest rate. A mortgage calculator can help you get an idea of what your payments might look like. Here are some examples of how the payments for a $150,000 mortgage might break down.

30-Year Loan at 6% Fixed Interest Rate

Total Payment: $1,302

Principal and Interest: $899

Other Costs (estimated PMI, homeowners insurance, and property taxes): $403

15-Year Loan at 6% Fixed Interest Rate

Total Payment: $1,669

Principal and Interest: $1,266

Other Costs (estimated PMI, homeowners insurance, and property taxes): $403

30-Year Loan at 6.5% Fixed Interest Rate

Total Payment: $1,365

Principal and Interest: $948

Other Costs (estimated PMI, homeowners insurance, and property taxes): $403

15-Year Loan at 6.5% Fixed Interest Rate

Total Payment: $1,709

Principal and Interest: $1,307

Other Costs (estimated PMI, homeowners insurance, and property taxes): $403

30-Year Loan at 7% Fixed Interest Rate

Total Payment: $1,401

Principal and Interest: $998

Other Costs (estimated PMI, homeowners insurance, and property taxes): $403

15-Year Loan at 7% Fixed Interest Rate

Total Payment: $1,751

Principal and Interest: $1,348

Other Costs (estimated PMI, homeowners insurance, and property taxes): $403

Pros and Cons of a $150,000 Mortgage

The way home prices are going these days, it may be difficult to find a home you can purchase with just a $150,000 mortgage. (According to Redfin, the median sale price in the U.S. in April 2024 was $433,558.) But if you can manage it — by finding a lower-cost home or by putting more money down — you could benefit from lower monthly payments. And, depending on your income and other factors, it may be easier to qualify for a mortgage in this amount than for a larger loan.

The downside to a $150,000 mortgage is that your choice of homes may be limited. Still, if you can afford a starter home, you’d be getting your foot in the door of homeownership, and that can mean building equity for the future.

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

How Much Will You Need for a Down Payment?

A down payment is typically between 3% and 20% of the purchase price. The amount you’ll need for a down payment can vary depending on the type of mortgage loan you get.

Can You Buy a $150,000 Home with No Money Down?

You may be able to get a mortgage with a 0% down payment if you can qualify for a government-backed loan from the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA). These loans are insured by the federal government — which means the government will help pay back the lender if the borrower defaults on the loan.

Borrowers must meet specific requirements to qualify for both VA and USDA no-down-payment loans — and not all lenders offer these programs. But if you think you may be eligible, this could be an option that’s worth looking into.

Can You Buy a $150,000 Home with a Small Down Payment?

If you don’t meet the qualifications for a VA or USDA mortgage program, you might want to check out the requirements for a government-backed FHA loan (from the Federal Housing Administration) that allows you to make a small down payment. You also may be able to find a state or local program that offers down payment assistance.

Some private lenders will accept as little as 3% down on a conventional loan — so don’t feel as though you have to come up with 20% down before you can pursue homeownership.

Is a $150,000 Mortgage with No Down Payment a Good Idea?

There’s no question that coming up with a down payment can be an obstacle to homeownership — especially for first-time homebuyers — and skipping that step can be appealing. It may help you get into a home faster or allow you to hold onto your savings for renovations, an emergency fund, or other financial goals.

It’s important to remember, though, that without a down payment it can take longer to build up equity in your home. And though you won’t have to pay for mortgage insurance with a no-down-payment government-backed loan, you can expect to pay an upfront funding fee for a VA loan and an upfront and annual guarantee fee for a USDA mortgage. A mortgage professional can help you weigh the pros and cons of different types of mortgage loans and determine the best move for your individual circumstances.

What If You Can’t Afford a $150,000 Mortgage Even with No Down Payment?

Here are a few steps to consider if it turns out you can’t afford the payments on a $150,000 mortgage:

Wait Until You’re Earning More

If you’re just starting out in your career, and you expect your salary to increase as you move up the ladder, you may want to put homeownership on hold until you’re earning more. You’ll also have a longer work history for lenders to look at when they’re considering what interest rate to offer.

Wait Until You Can Save More

You may also choose to press pause on your home purchase while you save up more money. Creating a budget and trimming other expenses could help you reach your savings goal. If you can come up with a bigger down payment, you may be able to borrow less and keep your monthly payments to a more reasonable amount.

Look for a Less Expensive Home to Buy

If you’re determined to get into a home sooner rather than later, but you can’t find something that fits your budget, you may want to widen your search area. Or maybe you could trim down your list of “must-haves” to get a home you still like but can also afford.

Consider Sharing the Cost with a Roommate

Buying a home with a non-spouse (whether it’s a friend, sibling, or significant other) can make the purchase — and mortgage payments — more manageable. (Before you sign, though, it’s important to be clear about your expectations and all aspects of this financial agreement.)

Alternatives to Conventional Mortgage Loans

If you can’t qualify for a conventional mortgage loan, you may have some alternatives to consider. Here are a few potential options:

Homebuyer Assistance Programs

As mentioned above, you may qualify for a federal, state, or local first-time homebuyer program that can help lower your down payment, closing costs, and other expenses. There may be limits on the type of home you can buy or the home’s cost. But it may be worth doing some research, or asking a mortgage professional, to see if you’re eligible and could benefit.

Rent-to-Own

Another option might be to enter into a rent-to-own home agreement. With this type of arrangement, you start out renting, but the landlord agrees to credit a portion of your monthly payment toward purchasing the home.

This can be a good way to start working toward homeownership even if you don’t have enough money put away to qualify for a mortgage. But it’s important to understand the downsides of the deal — including that you might lose money if you change your mind about buying the home, or if the landlord has second thoughts about selling.

Owner Financing

With owner financing, the person who’s selling the home serves as the lender for all or part of the amount the buyer borrows to make the purchase. Just as with a rent-to-own home, there are risks to this kind of agreement. But it can make homeownership possible if a traditional loan isn’t available.

Mortgage Tips

No matter how much you plan to borrow, buying a home is a big step. Here are a few things you may want to do to prepare:

Check Your Credit

If you aren’t sure where your credit stands these days, you can get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and Transunion). Checking your reports can give you an idea of what lenders might see when they evaluate your credit. If there are any errors on the report, you can take steps to get them fixed. And if you see something negative (but alas true) in your reports, you can work on doing better. If you use a credit-score monitoring service, you may already know what your credit score is and if it needs a boost. Conventional lenders typically look for a minimum score of 620 to 640.

Work Out Your Housing Budget

Remember, your housing costs won’t be limited to principal and interest. It’s important to determine how much you might pay for insurance, taxes, HOA dues, general upkeep, and other expenses before you make the leap to homeownership.

Find the Mortgage and Terms that Best Suit Your Needs

When you start mortgage shopping, you can decide whether you want a:

•   fixed vs variable interest rate

•   conventional vs government-backed loan

•   shorter vs longer term loan

Consider Getting Preapproved

Even if you’ve crunched the numbers yourself, going through the mortgage preapproval process with a lender may provide an even better estimate of how much you can afford to spend on a home. And having preapproval may give you an edge over other house hunters in a tight market.

The Takeaway

Securing a mortgage is just one of many steps in the homebuying process, but it’s important to get it right. Taking the time to do some research and/or ask for help from a professional could keep you from getting locked into a loan — or a home — that isn’t a good fit.

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 is a $150,000 mortgage over 10 years?

If you borrow $150,000 at an interest rate of 6.5% and repay the loan, plus interest, over 10 years, the total amount you will pay is $204,386. Your monthly payment would be around $1,700.

How much would I pay a month for a $150,000 mortgage?

How much you end up paying per month for a $150,000 mortgage depends on several factors, including the interest rate and length of the mortgage, along with other costs, like mortgage insurance, homeowners insurance, and property taxes.

How much house can I afford if I make $36,000 a year?

If you have no other debts, you could afford a $140,000 mortgage on a $36,000 annual income. But you may have to stretch your household budget every month to make those payments.


Photo credit: iStock/Georgijevic

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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.

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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