How Much Income Is Needed for a $300,000 Mortgage?

By Kevin Brouillard · July 10, 2024 · 9 minute read

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How Much Income Is Needed for a $300,000 Mortgage?

An annual income of about $90,000 could allow you to afford a $300,000 mortgage, assuming you don’t have other significant debt, such as student loans. But how much house you can afford will depend on multiple factors, including credit history and how much you have saved for a down payment, to name a couple. Here’s a closer look at how much income may be needed for a $300,000 mortgage.

Income Needed for a $300,000 Mortgage

Income is one of several variables that lenders consider for mortgage approval — it’s a key indicator of a borrower’s ability to pay back the mortgage loan. So how much income is needed for a $300K mortgage? You’ll need to demonstrate that you can afford the down payment, closing costs (typically 2% to 6% of the home sale price), and monthly mortgage payment.

Lenders consider multiple forms of income, including dividends, investment, and child support toward a borrower’s gross income.

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


Recommended: Tips to Qualify for a Mortgage

How Much Do You Need to Make to Get a $300K Mortgage?

What income is needed for a $300K mortgage? Running the numbers with a home affordability calculator shows that an income of $86,000 – $94,000 is needed for a $300,000 mortgage. This assumes an interest rate of 7.00% and a 30-year loan term.

A mortgage calculator shows that the monthly payment would be $1,995 if you put 20%, or $75,000, toward a down payment on a property that costs $375,000. Of course, having $75,000 saved up for a down payment is a tall order, and many homebuyers will put down less.

Borrowers can use the 28/36 rule to ensure they can afford their mortgage and debt payments. This dictates that a home payment should be at or below 28% of income, while total debt payments should not exceed 36% of your income. In the example above, you’d need to make $7,166 a month ($86,000 a year) to afford a $1,995 mortgage payment per the 28/36 rule. But to make the mortgage payment with property taxes and home insurance, you’ll need to earn more like $94,000, as monthly payments would top $2,600.

Different types of mortgage loans may require private mortgage insurance (PMI), an additional expense that’s lumped into a monthly payment. If you make a down payment that is less than 20%, you will likely need to pay for PMI in addition to other monthly housing costs. Putting down 20% will help you avoid PMI and help secure a more competitive rate for a lower monthly mortgage payment.

Having proof of income, such as W-2s and tax returns, will help potential homebuyers be prepared for the mortgage preapproval process and application.

What Is a Good Debt-to-Income Ratio?

Your debt-to-income (DTI) ratio represents how much you owe in debt each month compared to how much you earn. The U.S. government’s Consumer Financial Protection Bureau recommends that homeowners have a DTI ratio of 36% or less. However, lenders may accept a DTI ratio of up to 43%, depending on the loan type and other borrower criteria.

Borrowers earning $90,000 a year (or $7,500 a month) can have up to $2,700 in total monthly debt to maintain a DTI ratio of 36% or less.

What Determines How Much House You Can Afford?

Figuring out the income needed for a $300K mortgage is an important first step to understanding how much house you can afford. But there are other factors, including your credit score and savings for a down payment, that will determine your home-buying budget if you plan on financing a home purchase.

Calculating your other existing debts, such as car loans and student loans, is also essential. Using the 28/36 rule, if you earn $90,000 a year, your total debt, including a future mortgage payment, should not exceed $2,700. With a $1,995 mortgage payment, this would leave $705 for other recurring debts.

Where you plan on buying a home also affects home affordability. Home prices and the cost of living by state can differ substantially. A $300,000 mortgage could give you a range of options in some places, but it may be limiting, unless you have a large down payment, in pricier locations.

Recommended: Most Affordable Places to Live

What Mortgage Lenders Look For

Lenders look at a range of factors when evaluating a borrower’s ability to repay a mortgage loan. Besides income, they’ll consider a borrower’s credit history, existing debt, employment, assets, and money saved for a down payment.

$300,000 Mortgage Breakdown Examples

How much you’ll pay for a $300,000 mortgage can vary based on the interest rate, loan term, taxes, and insurance. Crunching the numbers with a mortgage calculator with taxes and insurance included can give a more accurate estimate of your expected monthly mortgage payment.

Let’s suppose you buy a $375,000 house with $75,000 down. You secure a 30-year fixed mortgage with a 7.00% interest rate. Your monthly payment, including the principal, interest, insurance, and taxes would amount to about $2,600 (the exact number will depend on your property tax and insurance rates).

In another example, reducing the loan term to 15 years with the same interest rate would up the monthly payment to $3,300, but save thousands in interest payments. Meanwhile, locking in a lower rate of 6.50% on the 30-year fixed mortgage would lower the monthly payment to around $2,500.

Pros and Cons of a $300,000 Mortgage

Given that buying a home is often the largest purchase made in one’s lifetime, it’s worth weighing the pros and cons of a $300,000 mortgage. The average home listing price was $442,500 in May 2024, according to Realtor.com®. So unless you have a sizable down payment or look in a cheaper market, your homebuying options may be somewhat limited with a $300,000 mortgage.

On the other hand, a $300K mortgage might mean taking on less debt than the average homebuyer in 2024. Lower monthly payments could mean more funds for renovations or achieving other financial goals.

How Much Will You Need for a Down Payment?

The down payment will depend on the loan type. Most borrowers can expect to put between 3% (for qualifying first-time homebuyers) and 20% of a home’s purchase price toward a down payment.

Can You Buy a $300K Home With No Money Down?

You could get a mortgage with no down payment with either a government-backed loan from the U.S. Department of Veterans Affairs (VA) or from the U.S. Department of Agriculture (USDA). Both loan types are insured by the federal government and allow eligible homebuyers to purchase a home with no money down.

Borrowers must meet income and location eligibility requirements to qualify for a USDA loan, whereas VA loans are intended for eligible active-duty servicemembers, veterans, National Guard and Reserves members, and surviving spouses.

Can You Buy a $300K Home With a Small Down Payment?

If you don’t meet the requirements for a USDA or VA loan, you could still get a $300K mortgage with a small down payment. With an FHA loan from the Federal Housing Administration, first-time homebuyers could put just 3.5% down on a house if their credit score is 580 or higher. Qualified first-time home buyers with a credit score of 500 to 579 will need to put at least 10% toward a down payment on a FHA loan.

Alternatively, some homebuyers could qualify for a conventional mortgage loan that requires a down payment as low as 3% – 5%.

Is a $300K Mortgage with No Down Payment a Good Idea?

Saving up for a down payment can be challenging, and homebuyers may want to reserve cash for renovations or other financial goals. However, putting less money down means taking out more debt and paying more interest over the life of the loan. Also, keep in mind that it will take longer to build equity in your home without a down payment.

Can’t Afford a $300K Mortgage With No Down Payment?

If you can’t afford the monthly payment on a $300K mortgage with no down payment, here are a few steps that could improve your qualifications as a borrower.

Pay Off Debt

Paying off debts can improve your DTI ratio and increase your home-buying budget. Focusing on recurring debts that you can pay off in full in the short-term can provide the quickest results, as your monthly debt burden will immediately go down. It may also be a good idea to prioritize high-interest debt to avoid paying more in interest.

Look into First-Time Homebuyer Programs

If you’re a first-time homebuyer, you may qualify for more flexible loan terms and programs to make homeownership more accessible. Besides offering a minimum down payment of 3.5%, FHA loans allow first-time buyers to finance their closing costs. Additionally, down payment assistance programs can provide funding to help cover the down payment cost.

Build Up Credit

Improving your credit score could help secure a lower interest rate and increase your homebuying budget. Making minimum monthly payments and keeping your credit utilization — the percentage of credit you’re using on credit cards and other lines of credit — below 30% are two useful strategies.

Start Budgeting

Building a budget can help with paying off debt, saving up for a down payment, and other financial goals. Once implemented, your budget can help determine how much you can afford to pay for a monthly mortgage payment.

Alternatives to Conventional Mortgage Loans

If you can’t qualify for a conventional mortgage or government-backed loan, there are some other options to look into.

•   Balloon mortgage: Involves low monthly payments for a short period of time before the entire loan balance comes due at the end of the term.

•   Interest-only mortgages: Allows borrowers to make interest-only payments for a set term before having to pay principal and interest or consider a mortgage refinance.

•   Rent-to-own: Lets renters put a portion of their monthly payment toward purchasing the home from a landlord based on an agreement between both parties.

Mortgage Tips

Particularly if you are a first-time homebuyer, there is a lot to learn about applying for a mortgage and purchasing a home. For example, you can put in a few basic facts about your finances and prequalify for a mortgage loan. But this is different from being preapproved for a loan, and it’s important to understand mortgage prequalification vs. preapproval before you move forward.

Consulting a home loan help center can help you learn other mortgage tips.

The Takeaway

The income needed for a $300K mortgage depends on several variables, including credit history, down payment, and existing debt. If you earn around $90,000 a year, you can likely afford the mortgage payment on a home loan this size, unless you have significant debt. Putting more toward a down payment, paying off debt, and keeping up good credit habits could help you increase your home-buying budget.

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 should you make to afford a $300K house?

To afford a $300,000 house, you’ll need to make more than $83,000 a year, assuming you don’t have any significant recurring debt.

What is the monthly payment on a $300K mortgage?

The monthly payment on a $300,000 mortgage can range from $1,950 to $2,600 based on the loan term, interest rate, taxes, and insurance.

Can I afford a $300K house on a $70K salary?

It would be challenging to afford a $300,000 house on a $70,000 salary, unless you have saved up for a very large down payment or have other sources of income in addition to your salary. A $250,000 house may be more affordable for borrowers making $70,000.


Photo credit: iStock/Fabio Camandona

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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.

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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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