How Much Income Is Needed for a $325,000 Mortgage?

By Kim Franke-Folstad · July 08, 2024 · 13 minute read

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How Much Income Is Needed for a $325,000 Mortgage?

If you earn around $100,000 to $150,000 a year, or more, you might be in a position to afford a $325,000 mortgage. But the amount you’ll actually qualify to borrow — even if you’re in that salary range — will likely depend on several variables, including how much debt you have and your credit score.

Read on for a look at how much income may be needed for a $325,000 mortgage, how a borrower’s income fits into the overall mortgage calculation, and how lenders typically decide how much mortgage a homebuyer can manage.

What Factors Do Mortgage Lenders Consider?

Homebuyers tend to think the amount they’ll be approved for when they apply for a mortgage will be based mostly on their household income. But income is just one of several factors lenders look at when deciding how much someone can borrow.

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

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


Income

Lenders will look at how much you make to help determine if you can afford the monthly payments on the amount you hope 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 will be considered high enough to afford a $325,000 loan, you may want to use an online home affordability calculator before you apply for a mortgage.

Creditworthiness

Lenders also will check your credit score and credit reports to ensure you have a history of being financially responsible and that you pay your bills on time.

Down Payment Amount

Lenders like to see a larger down payment because it can show that you’re serious about your investment. The more you put down, the lower their financial risk. But contrary to what many buyers believe, a 20% down payment isn’t always required to get a home loan. You may be able to put down less, depending on the type of mortgage you plan to get.

Debt-to-Income (DTI) Ratio

Lenders may also compare your monthly gross income to your existing monthly debts (credit cards, student loans, car payments, etc.) to assess whether you’ll be able to manage all those payments and aren’t getting in over your head. This calculation is called your debt-to-income ratio.

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 that’s the number mortgage lenders generally look for as well. 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 For?

Here are a few formulas your lender, and you, may use to determine how much mortgage you might be able to afford on your income.

The 28/36 Rule

The 28/36 rule combines two factors that lenders look at to determine home affordability: income and debt.

The first number sets a limit of 28% of gross income as a homebuyer’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 $120,000, that’s roughly $10,000 per month. So with the 28/36 rule, you could aim for a monthly mortgage payment of about $2,800, as long as your total monthly debt (including the house payment, car payments, credit cards, etc.) isn’t more than $3,600.

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 $10,000 and your after-tax income is about $8,000. In this scenario, you might spend between $3,500 and $3,600 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

If you’re nervous about making mortgage payments, this method will give you a more conservative number to keep your budget in line. 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 $8,000 a month after taxes, you might plan to spend $2,000 on your mortgage payments.

Keep in mind that these equations can only give you a rough estimate of how much you can borrow. When you want to be 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 remember when determining how much income is needed for a $325,000 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 from the lender 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 or loan servicer 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 will also go toward the property taxes you’ll need to pay your local government.

Recommended: Home Loan Help Center

$325,000 Mortgage Breakdown Examples

The monthly payment on a $325,000 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 $325,000 mortgage with a 20% down payment might break down.

30-Year Loan at 6.00% Fixed Interest Rate

Total Payment: $1,864

Principal and Interest: $1,559

Other Costs (estimated PMI, homeowners insurance, and property taxes): $305

15-Year Loan at 6.00% Fixed Interest Rate

Total Payment: $2,499

Principal and Interest: $2,194

Other Costs (estimated PMI, homeowners insurance, and property taxes): $305

30-Year Loan at 6.50% Fixed Interest Rate

Total Payment: $1,948

Principal and Interest: $1,643

Other Costs (estimated PMI, homeowners insurance, and property taxes): $305

15-Year Loan at 6.50% Fixed Interest Rate

Total Payment: $2,570

Principal and Interest: $2,265

Other Costs (estimated PMI, homeowners insurance, and property taxes): $305

30-Year Loan at 7.00% Fixed Interest Rate

Total Payment: $2,035

Principal and Interest: $1,730

Other Costs (estimated PMI, homeowners insurance, and property taxes): $305

15-Year Loan at 7.00% Fixed Interest Rate

Total Payment: $2,642

Principal and Interest: $2,337

Other Costs (estimated PMI, homeowners insurance, and property taxes): $305

Pros and Cons of a $325,000 Mortgage

Though some states are more affordable than others, with the way the housing market is going these days, it may be difficult to find a place you can purchase with a $325,000 mortgage. (According to Redfin, the median sale price in the U.S. in April 2024 was $433,558.) But if you can manage it — whether by finding a lower-cost home or by putting more money down — you may find you can benefit from lower monthly payments.

Even if you can only afford a starter home or fixer-upper — depending on home prices where you live — you’d be getting your foot in the door of homeownership, and that could mean building equity for the future.

Recommended: Tips to Qualify for a Mortgage

How Much Will You Need for a Down Payment?

A down payment typically ranges from 3% to 20% of the purchase price. The amount you’ll need for a down payment will depend on the price of the home you plan to buy and the type of mortgage loan you get.

Can You Buy a $325,000 Home with No Money Down?

You may be able to get a $325,000 mortgage with a 0% down payment if you can qualify for a government-backed VA or USDA loan. 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 worth looking into.

Can You Buy a $325,000 Home With a Small Down Payment?

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

You might want to check out the requirements for a government-backed FHA loan, which also allows borrowers to make a small down payment. Or you may be able to find a state or local program that offers down payment assistance.

Is a $325,000 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 home buyers. And the thought of skipping that step can be appealing. Avoiding a down payment may help you get into a home faster or allow you to hold onto your savings for other purposes, such as renovations, an emergency fund, or other financial goals.

It’s important to keep in mind, though, that without a down payment, it can take longer to build up equity in your home. You may also pay more interest over the life of the loan because you’re borrowing more money. Additionally, although 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 $325,000 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 $325,000 mortgage:

Wait Until You’re Earning More

If you’re just starting out in your career, and you expect your salary to steadily 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.

Focus on Saving More

You may choose to press pause on your home purchase while you save more money. Creating a budget and trimming other expenses could help you reach your savings goal. And 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 but can’t find something that fits your budget, you may want to widen your search area. If you’re willing to relocate, for instance, you may want to look into the cost of living by state to find an affordable place to settle down. Or maybe you could trim your list of “must-haves” to help keep the cost down.

Consider Sharing the Cost with a Roommate

Whether it’s with a friend, sibling, or significant other, buying a home with a non-spouse 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 a cap on 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 an agreement to rent-to-own a home. 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 if you can’t 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 may serve as the lender for all or part of the purchase price. 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 on Your Credit

If you aren’t sure what your credit looks like these days, you can visit AnnualCreditReport.com to 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 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, maintenance, and other expenses before you make the leap to homeownership.

Find the Mortgage and Terms that Best Suits Your Needs

This may include deciding whether you want a:

•   fixed vs. variable interest rate

•   conventional vs. government-backed loan

•   shorter vs. longer loan length

Consider Getting Preapproved

Going through the mortgage preapproval process with a lender can provide a reliable estimate of how much you can afford to spend on a home. And having loan preapproval might give you an edge over other house hunters in a tight market.

The Takeaway

Obtaining 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 asking for help from a professional could keep you from getting locked into a loan 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 income do you need to qualify for a $325,000 mortgage?

If you make at least $100,000 to $150,000 a year, you may be able to comfortably afford the payments on a $325,000 mortgage, depending on how much debt you’re carrying and other variables.

Can I afford a $325,000 house on a $70,000 salary?

You may be able to afford a $325,000 house on a $70,000 salary if you have enough saved for a large down payment, have a good credit score, and/or are carrying little or no debt.

Can I afford a $325,000 house on a $60,000 salary?

If you can make a large down payment, you may be able to afford a $325,000 house on a $60,000 salary. Otherwise, it could be a challenge to qualify for a loan or keep up with your monthly payments.


Photo credit: iStock/Nuttawan Jayawan

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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.
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