How much income do you need to buy a $250,000 home? (2024)

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MoneyWatch: Managing Your Money

How much income do you need to buy a $250,000 home? (2)

If you're in the market to buy a new home, it's important to consider how much that home costs and whether or not you can comfortably afford to purchase it. After all, the majority of people who buy a house agree toa 30-year commitmentto making their mortgage payments on time.

But if you're a first-time home buyer, it may be difficult to accurately estimate the cost of the home you can afford to buy. For example, let's say you fall in love with a $250,000 house. How much money would you need to earn per year to comfortably afford the mortgage payments on it? The answer is it depends.

Find out if you qualify for a $250,000 mortgage now.

How much income do you need to buy a $250,000 home?

There are a few different rules of thumb you'll come across online to determine how much house you can afford to buy on your current income. Two of the more common are the 28% of your income rule and the 2.5 times your income rule. Here's how those rules work and how much you would need to earn to comfortably afford a $250,000 home when using them:

The 28% of your income rule

According to the 28% of your income rule, you shouldn't spend any more than 28% of your income on mortgage payments. So, how much does a $250,000 home cost in terms of monthly payments? Here's what you can expect to pay with and without a down payment. (Payments were calculated using Bankrate's mortgage calculator. The data below assumes a 7% interest rate, a 30-year term, and that the home is located in the 32446 ZIP code):

  • With a 20% ($50,000) down payment: Your payments would be $1,561 per month or $18,732 per year with $1,330 going toward principal and interest, $165 going toward property tax and $66 going to homeowner's insurance.
  • With a 0% down payment: Your payments would be $1,894 per month, with $1,663 going to principal and interest, $165 going to property tax and $66 going to homeowner's insurance. That works out to $22,728 per year. It's also important to keep in mind that when you purchase a home with less than 20% down, you'll likely have to pay for private mortgage insurance (PMI). For example, if PMI costs $300 per month, your total mortgage payment would be about $2,194 per month or $26,328 per year.

Based on these figures and the 28% rule, you would need to earn about $66,903.57 per year to afford a $250,000 home with a 20% down payment — or about $81,171.43 per year to afford it with no down payment. When you factor in the cost of PMI, you may need to earn as much as $94,028.57 per year to purchase a $250,000 home with 0% down using the 28% rule.

Find out what your mortgage rate would be on a $250,000 home now.

The 2.5 times your income rule

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.

What do the experts say?

Although rules of thumb can give you a general idea of your payment, it's not usually wise to follow these rules without considering your unique circ*mstances. After all, one rule says you can afford a $250,000 home if you make as little as $66,903.57 per year while the other suggests you should earn at least $100,000 per year to purchase a house at this price.

Ultimately, it all boils down to your circ*mstances and personal situation.

"There are several different factors that determine how much you can afford when buying a home," says Stacey Black, BECU's financial educator. Those factors include "your income, debt, down payment and interest rates."

Moreover, Black warns that you shouldn't assume you can afford any size mortgage you get approved for.

"It's important to remember that you could get approved for more than you can afford - only you know your future goals and spending habits that may impact how much you can truly afford," Black says.

Bill Banfield, executive vice president of capital markets at Rocket Mortgage, has a similar opinion.

"There are many factors that play into figuring out how much income is needed to purchase a $250,000 home," Banfield says. "Some of these include the amount of money the buyer chooses to spend on a down payment, their monthly debt and the tax and insurance costs for the home."

Though the amount of income you need to buy a $250,000 home is unique to you, Banfield says that Rocket Mortgage clients who buy a $250,000 home using its ONE+ mortgage "have an average annual income of $65,000."

However, Banfield warns that "because of all of the complex and intricate components that go into determining what a consumer can afford, it is best to consult professionals and shop around to find the most comprehensive solution" for your unique needs.

"Every borrower has their own unique financial situation," Joe Lamberti, vice president and general sales manager of residential lending at Rockland Trust Bank, says. "It's really important for prospective buyers to work alongside a mortgage loan officer to understand their options."

Find out the mortgage rates you could qualify for today.

The bottom line

Whether or not you can afford a $250,000 home depends on more than the cost of the mortgage payments and the size of your paycheck. You should also consider your spending habits and the amount you can comfortably spend on mortgage payments each month rather than following any particular rule of thumb when making this important decision.

Joshua Rodriguez

Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he's not working, he enjoys time with his wife, two kids, two dogs and two ducks.

How much income do you need to buy a $250,000 home? (2024)


How much income do you need to buy a $250,000 home? ›

Based on these figures and the 28% rule, you would need to earn about $66,903.57 per year to afford a $250,000 home with a 20% down payment — or about $81,171.43 per year to afford it with no down payment.

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 income do you need to buy a $200 000 house? ›

Assuming you have enough in savings to cover the down payment, closing costs and cost of regular upkeep, yes, you probably could afford a $200K home on a $50K annual salary. Using our example above, the monthly mortgage payment on a $200K home, including taxes and insurance, would be about $1,300.

How much is the monthly payment for a 250k house? ›

Monthly payments for a $250,000 mortgage

Your monthly payment will depend on your interest rate and loan term — or how long your loan lasts. On a $250,000 fixed-rate mortgage with an annual percentage rate (APR) of 6%, you'd pay $1,498.88 per month for a 30-year term or $2,109.64 for a 15-year one.

How much house can I afford if I make $45000 a year? ›

On a salary of $45,000 per year, you can afford a house priced at around $120,000 with a monthly payment of $1,050 for a conventional home loan — that is, if you have no debt and can make a down payment. This number assumes a 6% interest rate.

Can I afford a 200k house on a 70K salary? ›

The 28/36 rule

This guideline states that you should spend no more than 28 percent of your income on housing costs, and no more than 36 percent on your total debt payments, including housing costs. (So that would also include credit card bills, car payments and any other debt you may carry.)

Can I afford a 350k house making 50k a year? ›

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.

Can I afford a 250k house on 50k salary? ›

The rule of 2.5 times your income stipulates that you shouldn't purchase a house that costs more than two and a half times your annual income. So, if you have a $50,000 annual salary, you should be able to afford a $125,000 home. Explore what your mortgage payment might be with today's rates.

How much FHA loan do I qualify for? ›

Credit Score, Maximum Amounts And Down Payments For FHA Loans
Credit ScoreMaximum Loan AmountMinimum Down Payment
580+96.5% of home value3.5% of purchase price
500 – 57990% of home value10% of purchase price

What credit score is needed to buy a house? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).

How to pay off a $250,000 mortgage in 5 years? ›

Increasing your monthly payments, making bi-weekly payments, and making extra principal payments can help accelerate mortgage payoff. Cutting expenses, increasing income, and using windfalls to make lump sum payments can help pay off the mortgage faster.

Is 250k house expensive? ›

That's actually quite cheap at least in the US it is though if you're still quite young and you've never bought a house before it might be considered expensive. Wait till you decide to build your own house, then you'll almost wish for the 250k house, but there are advantages to getting a house at that price.

How to get a 250k personal loan? ›

To borrow a large sum of money, you'll need an excellent credit score, a stable employment history, and proof that you have enough income to make your payments. Having a relationship with the bank or credit union you're seeking a loan from may help.

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 someone who makes 40K a year afford a house? ›

How much house can I afford with 40,000 a year? With a $40,000 annual salary, you should be able to afford a home that is between $100,000 and $160,000. The final amount that a bank is willing to offer will depend on your financial history and current credit score.

Can I afford a house making 40K a year? ›

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.

How much house can I get with 60k salary? ›

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.

How much house can I afford on a 60k salary? ›

If I make $60,000 a year, how much house can I afford?
Annual Salary$60,000$60,000
Home Purchase Budget (36% of Monthly Income)$212,600$235,500
Home Purchase Budget (40% of Monthly Income)$236,300$260,900
Home Purchase Budget (50% of monthly income)$295,700$305,100
5 more rows
May 1, 2023

How much mortgage can I get with a 60,000 salary? › Mortgage

And according to Reyes, the ideal mortgage size should be no more than three times your annual salary. If you make $60,000 per year, you should think twice before taking out a mortgage that's more than $180,000.

What car can I afford with a 60k salary? ›

How much should I spend on a car if I make $60,000? If your take-home pay is $60,000 per year, you should pay no more than $750 per month for a car, which totals 15% of your monthly take-home pay.

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