What Income Do I Need To Afford A $300K House? | Bankrate (2024)

What Income Do I Need To Afford A $300K House? | Bankrate (1)

Marko Geber/Getty Images; Illustration by Austin Courregé/Bankrate

With the national median home price above $400,000, according to the National Association of Realtors, $300,000 is a common price point for buyers looking to make the jump from renting to owning. How much you need to make to afford a $300K purchase depends on a number of factors beyond just annual salary, though.

Bankrate’s mortgage calculator can help you figure out the income needed to afford a $300K house. Assuming a 20 percent down payment and a 6.5 percent interest rate on a 30-year loan, the monthly principal and interest payment on a purchase of this amount would be $1,516. These costs alone would total $18,192 annually. Other components of your monthly payment, such as property taxes, insurance and homeowners association fees, vary by location and add to your total bill. Let’s round the monthly payment up to an even $2,000 per month to account for those, which brings us to an annual total of $24,000.

One common financial rule of thumb recommends that you spend no more than about a third of your income on housing costs (see more on the 28/36 rule below). So, to estimate the salary you’ll need to comfortably afford a $300,000 home purchase, multiply the annual total of $24,000 by three. That leaves us with a recommended income of $72,000. (Keep in mind that this does not include a down payment or closing costs.)

Income to afford a $300K house

Every borrower’s situation is different, but many lenders adhere to the 28/36 rule when evaluating applicants. This specifies that no more than 28 percent of your gross income should be spent on your monthly housing payment, and no more than 36 percent on total debt payments, including housing.

Let’s see how the 28/36 rule applies to a $72,000 salary. Dividing by 12, this sum equates to $6,000 monthly. Multiply that by 0.28 to get 28 percent, and you get $1,680. This figure represents the maximum recommended housing payment for your income level, including principal, interest, property taxes, home insurance premiums and any applicable HOA fees.

Don’t forget about the 36 percent part of the equation. Take stock of your monthly debts besides housing costs, including car payments, credit card bills and student loans, and ensure that the sum doesn’t exceed 36 percent of your income. You want to make sure you can afford life’s basic essentials after your monthly debt obligations are paid. You should also account for the ongoing costs of homeownership, like maintenance and upkeep.

On a $300K budget, highly expensive areas like New York and San Francisco are probably out of reach. But there are plenty of cities and metro areas where $300K will give you a lot to work with: For example, per Redfin data, the median home prices in Indianapolis, Memphis, Philadelphia and San Antonio are all under $300,000.

What factors determine how much you can afford?

When figuring out how much house you can afford, your income and the home’s asking price are the biggest factors. But there are other important factors to consider as well, including the following:

  • Down payment: First and foremost is how much you can put toward your down payment, an upfront cash outlay that most mortgages require. The larger your down payment, the less you’ll have to borrow, and so the lower your monthly payment will be. This sum is expressed as a percentage of the home’s purchase price, and 20 percent is traditional. On a $300,000 property, that would be $60K — an intimidating sum for many, but help is often available.
  • Financing options: Many types of loans can actually be had with much less than a 20 percent down payment. If you qualify, a conventional loan may require only 3 percent down, which is a much more manageable $9,000, and if you’re a military service member or veteran, you may be eligible for a zero-down VA loan. Shop around to find the mortgage loan that best suits your needs.
  • Credit score: No matter which type of mortgage you choose, your credit score is a crucial factor in determining how expensive of a home you can afford. The higher your score, the lower interest rates you’ll qualify for, which can result in significant savings.
  • Debt-to-income ratio: DTI is the sum of your monthly debt payments divided by your gross monthly income. Lenders use it to determine how much you can afford to borrow. The lower your DTI, the easier it will be for you to get approved for a loan.
  • Loan-to-value ratio: Your loan-to-value ratio is the amount you’re borrowing in relation to the value of your property, another key factor that lenders consider when evaluating your mortgage application.

Stay the course until you actually close

After you go into contract on your home purchase, closing can take several more weeks, or even longer. During that time, stay vigilant about the factors above. It’s especially important not to do anything that could lower your credit score — avoid big-ticket purchases that require financing (like a car), and don’t apply for new credit cards. If you’re planning big life changes, like switching jobs or getting married, hold off until you’ve closed on the deal if possible.

To ensure a smooth homebuying experience, seek out a local real estate agent who knows the ins and outs of your area. An agent can help you find properties that meet both your needs and your budget, and can guide you through the entire process with professional expertise.

FAQs

  • According to Bankrate’s mortgage calculator, the monthly principal and interest payment on a $300,000 purchase would be $1,516, assuming a 20 percent down payment and a 6.5 percent interest rate on a 30-year loan. Round that up to around $2,000 a month to account for variables like home insurance premiums and property taxes, and that comes to $24,000 per year. Following the 28/36 rule, you should make roughly triple that amount to comfortably afford the home, which is $72,000 annually. Keep in mind that these calculations do not include the cash you’ll need for a down payment and closing costs. So a $300K home on a $70K salary might be possible, but would likely be a bit of a stretch.

  • Your monthly payment is determined by several factors, including your down payment and your interest rate. If we assume a 20 percent down payment and a 6.5 percent interest rate on a 30-year loan, the monthly principal and interest payments on a $300,000 purchase would be $1,516. But that amount will go up if you put down less of a down payment or get a less favorable interest rate, and you’ll need to include fees like property taxes and home insurance premiums as well, which vary based on location and home size.

What Income Do I Need To Afford A $300K House? | Bankrate (2024)

FAQs

What should my income be for a 300K house? ›

Following the 28/36 rule, you should make roughly triple that amount to comfortably afford the home, which is $72,000 annually. Keep in mind that these calculations do not include the cash you'll need for a down payment and closing costs.

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

If you make $70K a year, you can likely afford a home between $290,000 and $310,000*. Depending on your personal finances, that's a monthly house payment between $2,000 and $2,500. Keep in mind that figure will include your monthly mortgage payment, taxes, and insurance.

Can I afford a 300K house on a 60k salary? ›

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

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

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

Can I buy a house with 40K salary? ›

If you have minimal or no existing monthly debt payments, between $103,800 and $236,100 is about how much house you can afford on $40K a year. Exactly how much you spend on a house within that range depends on your financial situation and how much down payment you can afford to invest.

Can I afford a 300K house on a 50k salary? ›

A person who makes $50,000 a year might be able to afford a house worth anywhere from $180,000 to nearly $300,000. That's because your annual salary isn't the only variable that determines your home buying budget. You also have to consider your credit score, current debts, mortgage rates, and many other factors.

What is the 20% down payment on a $300 000 house? ›

A 20% down payment on a $300,000 mortgage is $60,000. The $60,000 down payment is what most lenders look for especially commercial lenders, because it helps mitigate the risk of default.

How much is a monthly payment on a 300K house? ›

How much is a monthly payment on a 300K house? The monthly payment on a $300K house will range from $1,850 to $2,585. Your monthly payment depends on what state you're buying in, your interest rate, your down payment, homeowner's insurance, and other factors.

What credit score is needed to buy a house? ›

You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.

How much is a $300 000 mortgage at 7? ›

Monthly payments for a $300,000 mortgage
Annual Percentage Rate (APR)Monthly payment (15-year)Monthly payment (30-year)
7.00%$2,696.48$1,995.91
7.25%$2,738.59$2,046.53
7.50%$2,781.04$2,097.64
7.75%$2,823.83$2,149.24
5 more rows

What is $60 000 a year hourly? ›

How much is $60,000 a year per hour? A $60,000 annual salary is equivalent to earning a $28.85 hourly wage, or $230.80 each day. This is based on the employee working for eight hours a day, 52 weeks a year.

How much is 30 dollars an hour annually? ›

If you make $30 an hour, your yearly salary would be $62,400.

Can a single person live on $36,000 a year? ›

In some regions with a lower cost of living, a $36,000 salary can provide a comfortable lifestyle and the ability to save for the future, making it a good income for your age. However, in high-cost-of-living areas, this salary might require careful budgeting to maintain the same standard of living.

How much should you make a year to afford a 400 000 house? ›

That means you'd need to earn about $10,839 a month, or $130,068 per year, in order to afford a $400,000 home.

How much house can I afford on a given salary? ›

How much house can I afford based on my salary? Take account of your financial readiness to buy a house by applying the 28/36 rule. Lenders generally want to see that when you add up your principal, interest, taxes and insurance, it totals less than 28% of your gross monthly income.

How much should you make a month to afford a 300k house? ›

Your budget: Following the 28/36 rule
rule
Home cost$300,000$300,000
Down payment$0$15,000
Monthly payment$2,584$2,318
Required salary$110,743$99,343
May 18, 2023

How much income to afford a 250k house? ›

If you follow the 2.5 times your income rule, you divide the cost of the home by 2.5 to determine how much money you need to earn annually to afford it. Based on this rule, you would need to earn $100,000 per year to comfortably purchase a $250,000 home.

Can I buy a 300k house with 100K salary? ›

With a 100K salary you can afford a $300,000 to $480,000 house at current interest rates. This would mean you would spend around $2,300 per month and you stick with the 28% rule that most experts recommend. You would also need to put down a down payment of 5% to 20%.

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