How much income do I need to buy a house?

Between the upfront costs of home buying and the ongoing costs of homeownership, it can seem like you’d need to make an impossible amount of money to buy a home these days. While it’s true that you’ll need to come up with enough money to make a down payment and cover your closing costs, your income isn’t the only factor that affects your ability to get a mortgage.

If you make sure you can afford your mortgage payment and the cost of maintenance and repairs, homeownership may be more attainable than it seems.

How much you need to make to afford a home

The amount of income you need to have to afford a home will depend on the home you’re trying to buy, how much you have in savings, and how much debt you’re carrying. As of February 2025, the median sales price for a new home sold in the U.S. was $414,500.

If you want to avoid paying for private mortgage insurance, you’ll need a down payment of at least 20% – which would be $82,900 for a $414,500 home. Don’t worry, you don’t have to make a down payment that large. Conventional loans are available for down payment as low as 3% – which would be $12,435.

The other big upfront expense in buying a home is covering your closing costs. You can expect your closing costs to range anywhere from 2% to 5% of the purchase price. For that same $414,500 home, the closing costs can come out to $8,290 – $20,725.

Once you’ve closed on the home it’s important that you have enough income to keep up with your monthly mortgage payment. How much you owe each month will depend on your interest rate, loan term, loan type, and down payment size. For example, let’s say you buy a $414,500 home with a 30-year fixed-rate loan, 10% down payment. If your interest rate is 5%, then your monthly payment would be $2,618. If your interest rate were 7%, then you’d owe $3,097 per month.

You can estimate your monthly payment using our free mortgage calculator.

Don’t forget about the recurring costs of owning a home, which include maintenance and repairs. It’s often recommended that homeowners set aside 1% – 2% of the home purchase price each year for routine maintenance.

What percentage of your income should you put toward your mortgage?

To comfortably afford your mortgage, it’s important to ensure that you aren’t allocating too much of your income to housing expenses. Otherwise, you run the risk of becoming what is known as house poor, where there isn’t enough money left to cover the rest of the budget.

It’s often advised that homeowners follow the 28/36 rule. This means that you should avoid spending more than 28% of your monthly income on housing costs, and no more than 36% of your income on all debts, which includes your mortgage payment.

Which factors determine your housing budget?

Your income is just one of several different factors that influence how much house you can afford. Here’s a rundown of some of the other factors that affect your housing budget:

• Home price: If you’re planning to buy a more expensive home and will need a larger loan, you’ll need a higher income to cover your payments.
• Debt-to-income ratio: Lenders typically require that your DTI ratio not exceed 50%.
• Interest rate: If you’re able to score a lower interest rate on your mortgage, you may be able to buy a more expensive home with more affordable monthly payments.
• Credit score: A higher credit score can help you get a lower interest rate and buy a more expensive home.
• Loan term: A longer loan term can help keep your monthly payments more affordable.

One way to get a rough idea of how much home you can afford is by getting a preapproval letter. A preapproval letter from a lender tells you how much they’re tentatively willing to lend you up to a certain amount based on your income and other factors. Rocket Mortgage® offers a Verified Approval Letter that will tell you how much you’re able to borrow based on information you give us about your income and credit. You can use our Verified Approval Letter to show sellers that you’re able to get financing for your home purchase.

Monthly income

Are you struggling to figure out your housing budget? Start by checking your monthly income.

If you’re on payroll, you’ll likely just need to provide recent pay stubs and W-2s. If you’re self-employed, you’ll need to submit your 1099 forms, tax returns, and any other documents the lender requests.

The point of supplying this documentation is to show the lender that you have stable income and can comfortably afford your mortgage. Lenders want to see proof that you will likely be able to keep up with your monthly payments.

Lenders don’t just look at your salary when they calculate income. Different lenders may choose to include different income sources. Some other sources of income they might consider include:

• Commissions
• Overtime
• Military benefits and allowances
• Alimony payments
• Investment income
• Social Security income
• Child-support payments

Your lender will examine the history of your received income and consider how likely it is to continue. For example, if your alimony agreement says you’ll only receive payments for 1 year, your lender probably won’t consider it.

Debt-to-income ratio

Your DTI ratio is another figure lenders use to determine how much they’re willing to lend you. Your DTI ratio reflects how much of your income is needed to cover the different debts you owe. You can calculate your DTI by adding up all your monthly debt payments, dividing that number by your total monthly income, and then converting the result into a percentage.

For example, let’s say you have three bills you pay every month:

• $800: Rent
• $150: Credit card payment
• $200: Student loan payment

Let’s also say that your total monthly pretax income is $3,000. Your DTI is equal to your debts divided by income. In this case, it’s $1,150 / $3,000. That makes your ratio about .3833, or 38.33%.

This gives you your current DTI ratio. Note that lenders won’t look at your current rent payment when calculating your DTI ratio unless you plan on staying in your rental after you buy your new home. Instead, they’ll look at your recurring debt payments and your new mortgage payment to determine your actual debt-to-income ratio.

Your DTI ratio tells lenders whether you can afford to take on another debt. Lenders generally like to see a DTI ratio of 50% or less. If your DTI ratio is higher than 50%, you may have trouble getting a loan. If your DTI ratio is lower, you can borrow more money.

How other financial considerations influence how much income you need to buy a house

Your monthly income and DTI ratio are just two factors that lenders look at when you apply for a mortgage. Your credit score and the size of your down payment are also important factors.

How credit score impacts how much income you need

Your credit score is a numerical rating that ranges from 300 – 850 and tells lenders how responsible you are when you borrow money.

Here are the credit score ranges lenders typically use:

• 300-579: Poor
• 580-669: Fair
• 670-739: Good
• 740-799: Very good
• 800-850: Exceptional

If you have a high credit score, it shows lenders that you have been responsible managing your debts and pose less risk as a borrower. As a result, a high credit score will give you access to lower interest rates and more lender choices.

If you have a low credit score, it can indicate to lenders that you have a lot of debt or have fallen behind on debt payments. This can make it harder for you to get approved for a loan with a competitive interest rate. A higher income can help mitigate a poor credit score as it reassures lenders you can still reliably make your payments.

Lenders look for a credit score of about 620 and up when you apply for a conventional loan. If your score is below 620, you may want to consider applying for government-backed mortgages like FHA loans and VA loans.

If your credit score isn’t where you’d like it to be, you can take steps to improve your score. Paying your bills on time and paying down your balances can help boost your credit score over time.

How down payment amount affects how much income you need

Your down payment is the amount of money you put down upfront for your mortgage. It’s a figure that’s expressed as a percentage of your total loan amount. In many cases, your down payment is the most expensive cost you need to plan for.

For example, a 20% down payment on a $400,000 home is $80,000, while a 10% down payment on that same home would be $40,000.

Making a larger down payment can help you get a lower interest rate, which can help you get a more affordable monthly payment. As a result, you wouldn’t need as high of an income to afford your mortgage.

What are the other costs associated with buying a house?

Your monthly payment and down payment aren’t the only costs associated with buying a home.

You also need to pay closing costs when you finalize your loan. Closing costs are extra fees that go to your lender for the services it provides. As a rule, expect to pay 3% – 6% of your home’s purchase price in closing costs. These costs include:

• Appraisal fee: Your appraisal fee covers the cost of a professional appraiser’s report on the home’s worth. Mortgage lenders require appraisals to ensure that the house is worth the amount they’re lending. You can pay this upfront or at closing.
• Title insurance: Title insurance protects you and your lender against third-party claims to your home’s title. Unlike other types of insurance, you only pay title insurance once – during closing – and you’re protected as long as you own the home.
• Origination fee: The origination fee covers the cost of processing your loan.
• Attorney fees: In some states, you need a real estate attorney to finalize your title transfer. Attorney fees can vary significantly from state to state.

Aside from closing costs, there are other fees you’ll need to factor in.

• Property taxes: During the closing, you pay the property taxes due from the date of closing until the end of the tax year. Assuming the seller has already paid for the entire year in advance, you’ll simply pay your prorated share.
• Homeowners insurance: A homeowners insurance policy protects your home mainly from catastrophic damage. Many lenders require it. While the cost varies, the national average is currently $2,377 annually.
• Homeowners association fees: A homeowners association charges fees to maintain community amenities and buildings. The U.S. Census Bureau’s American Housing Survey shows the national average monthly HOA fees are around $243.

The bottom line: You don’t need a certain income to buy a home

Even though a lender looks at your income stream when you buy a home, there’s no set income requirement to buy a home. What’s important is that you’re making enough money to comfortably afford your mortgage payments.

Income isn’t the only factor that lenders consider when deciding whether you qualify for a loan. Your DTI, down payment, and credit score will also affect your ability to get a loan and how much you’ll be able to borrow. A mortgage preapproval is a good first step to learn how much you can afford to spend on a home. If you’re ready to take the next step toward homeownership, start the mortgage application process with Rocket Mortgage.