How Much House Can I Afford On $60K?

According to data from the Bureau of Labor Statistics, the median annual full-time salary based on weekly wages was $58,084 in 2023. The data includes anyone over the age of 16. Because your earnings tend to go up as you get older, it’s fair to round that up. But you may be looking at home prices and asking yourself, “How much house can I afford with a $60K salary?”

The Budget Range

The reality is that what you can afford is highly dependent on several factors, so there’s no universal answer to the question of even a range for your budget. But we can give you an idea based on some assumptions and invite you to put your own numbers in our Home Affordability Calculator.

Any calculator asking you about the home you can afford is going to want to know your yearly income before taxes, how much cash you have on hand and the amount you spend toward debt – car payment, student loans, personal loans, minimum credit card payments, etc. We’ve assumed $15,000 in savings and $1,400 in debt payments, buying in a suburb of Detroit.

Based on this, you could be approved for a budget range of $101,551 – $164,800 with a 6.625% interest rate for a 30-year conventional loan.¹ The payment at the top end is $1,024.50. Lenders preapprove you for the highest amount possible because they need to see the most risk they’ll take on. But you don’t have to spend that amount if it’ll stretch your budget thin.

Notwithstanding your maximum loan amount, the range comes from several affordability factors we’ll get into including your debt-to-income ratio (DTI), down payment and where you’re looking to buy. You should always look at your budget and determine your own comfort.

So How Much House Can I Afford?

How much house you can afford is based on several factors, but the two biggest are the size of your down payment and what your monthly payment ends up being. In addition to interest rates, the monthly payment you can afford is based upon your DTI, which compares the amount of money you spend on existing debt payments to your total monthly income.

The 28/36 Rule

Mortgage lenders have different standards depending on the ones you qualify for, but many recommend the 28/36 rule when it comes to determining home affordability. This guideline says the percentage of income going toward your mortgage should be no more than 28% and you spend no more than 36% of that income on all of your debts combined.

When it comes to monthly housing costs, the following equation, your housing expense ratio, applies:

Mortgage Payment

___________________________ × 100

Pretax Monthly Income

Ideally, this should be no more than 28% when you do the calculation. Once you’ve done the math here, you should be able to figure out how much you can afford by adding back in your other debts and comparing to your total income.

The following formula makes up your DTI: 

Total Monthly Debt Payments

______________________________ ×100

Pretax Monthly Income

Including your mortgage payment, you want your total DTI to be no higher than 36% under the rule.

This is just a guideline. There are other guidelines mortgage lenders apply depending on the type of home loan you get.

For FHA or VA loans where your credit score is between 580 – 619, Rocket Mortgage® requires a housing expense ratio of no more than 38% with total debts no higher than 45%, but if your credit score is 620 or higher, you may have more flexibility in terms of the amount of existing debt you have. In contrast, conventional loans require a total DTI no higher than 50%.

Mortgage Breakdown On A $60K Salary

When it comes to your mortgage payment, it’s not just the loan that you’re paying for. Let’s break down the pieces of a mortgage payment:

• Principal: The principal is the portion of your payment that goes toward your mortgage balance each month.
• Interest: Your interest rate is the cost of the loan financing. Principal and interest have a relationship. As you pay down your balance, less and less of your payment goes toward interest. As you near the end of the loan, most of your payment goes toward the balance.
• Property taxes: These are taxes based on the value of your home. They typically pay for things like public schools and city services.
• Homeowners insurance: A homeowners insurance policy protects you from things like property damage, theft and liability for what happens on your property. Mortgage lenders require you to have coverage that would rebuild your home in the event of a catastrophic loss. 

Beyond these, you may have other costs that are built into your mortgage payment depending on your situation:

• Mortgage insurance: If you have a down payment of less than 20% of your home value, private mortgage insurance (PMI) is required on conventional loans. It’s also required on all FHA loans, often for the life of the loan.
• Homeowners association (HOA): If you live in a homeowners or condo association, you’ll pay periodic dues for the upkeep of things under the association’s purview in the agreements you sign when you moved in. This could be fees for shared amenities, exterior maintenance, and trash or snow removal.

Of course, interest rates also play a huge role in what you can afford. If interest rates rise or fall, it has an effect on the payment and your buying power. Ultimately, the right time to buy is whenever you’re financially ready because you can’t predict how the market will move. But you can feel empowered to refinance into a lower rate if rates fall.