How much income do I need to afford a $250K house?

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So you're considering buying a home. And when punching in some numbers, you've mulled over the question of whether a property with a price tag of $250,000 is within your range. While $250,000 is below the current median home price in the U.S. of $440,387, there are homes available for that price – depending on the location, property type, size, condition, and features.

So how much income do you need to buy a house? Well, it depends. The minimum income needed to afford a $250,000 home depends on the lender and factors related to the loan and borrower.

Here, we'll walk you through the estimated income required to afford a $250,000 home loan's mortgage payment and understand what makes it feasible.

Quick answer: Between $62,000 and $80,000 per year

Calculating the income required for a $250,000 home can be complex. That's because it involves considering factors such as the loan type, interest rate, and down payment amount.

While the exact borrowing requirements depend on the lender, a common guideline is not spending over 28% of gross income on housing. This includes the PITI: principal, interest, property taxes, homeowners insurance, and homeowner association (HOA) fees.

So what's the income needed for a $250K mortgage? A ballpark income range for affording $250,000 is anywhere from $62,000 to $80,000 a year. Remember: The exact income you need to afford your mortgage hinges on your debt, credit score, and the location of the property you'd like to buy. This takes average interest rates, a standard loan term, and a down payment on the modest side.

What factors determine your home affordability?

When you're trying to determine how much home you can afford, you'll want to consider things such as your annual income before taxes, cash you have to buy, your monthly debt, and your credit profile. You can use the Rocket Mortgage home affordability calculator to figure out your monthly home loan payments your budget based on their unique situation.

Here are the key parts that can impact your home affordability:

• Down payment: The higher the down payment, the lower the loan amount and the monthly payment. Plus, when you put down at least 20%, you can avoid the conventional private mortgage insurance (PMI).
• Closing costs: Closing costs are usually 3% – 6% of the purchase price, and can include an application fee, appraisal costs, attorney fees, courier costs, and credit reporting fees. If you're considering buying a $250,000 home, they may range from $7,500 to $15,000.
• Mortgage type: The type of mortgage (for example, conventional versus Federal Housing Administration [FHA]) and the term (30 years versus 15) can impact your monthly payments.
• Mortgage rate: The higher the interest rate of your mortgage, the more expensive your monthly payment on a $250,000 home will be.
• Credit score: While the common minimum credit score to get a conventional mortgage is 620, having a higher score can lead to better mortgage rates and lower payments.
• Homeowners insurance: The cost of your homeowners insurance policy is based on factors like your location, home materials, age and condition of your home, disaster risk, coverage amounts, and policy options. The national average premium for homeowners insurance is $2,377 annually.
• Property taxes: Your property taxes depend on two main factors: your assessed home value and the property tax rate of the location. The average in the U.S. hovers at $1,889.
• Location: The location of your property will impact the price of your home and the value for your budget. You can look at states where it's cheapest to buy a house to find properties that fall below the median U.S. price.
• HOA fees: These come with living in a community, and can be used to pay for community upkeep, security, insurance premiums, toward the building's reserves, or special events. The median HOA fee, per Census Bureau data, is $135.
• Maintenance and repairs: While the percentage depends, expect to spend at least 1% of your home's purchase price on maintenance and repairs each year. So for a $250,000 home, the total would be $2,500 each year.
• Available assistance: Home buyer assistance programs might provide grants to help cover the down payment and/or the closing costs, which could impact affordability for a $250,000 home.

An income breakdown: What salary do I need to afford a $250K home?

You'll want to tune it to your different preferences with your budgets. Depending on your comfort level, you might feel at greater ease stretching your budgets than others. On the flip side, you might veer toward the conservative side.

To gauge how much home you can reasonably afford, you can put in different factors for calculating the income on a $250,000 home. Plus, you can explore mortgage payments based on different scenarios.

What percentage of my income should go to my mortgage?

Generally speaking, the 28/36 rule comes into play. This states that no more than 28% of your gross monthly income should go toward the "front end" or housing costs. And no more than 36% should go toward the "back end," or total debt, which includes housing.

If you're earning $70,000 per year gross, let's look at the relative percentages:

• Monthly income: $70,000/12 = $5,833 (rounded)
• Front-end ratio: $5,833 x .28 = $1,633 for total housing costs
• Back-end ratio: $5,833 x .36 = $2,100 for total monthly debts, including housing costs

Lenders and loan programs vary in the maximum front- and back-end expense ratios they accept, but assessing long-term affordability is key. For example, a conventional loan may be approved with a higher back-end ratio up to 50%, while FHA loans allow up to 57%.

$250K mortgage examples

You can calculate your target annual income for a $250,000 home’s mortgage by using the following formula:

[payment ÷ (maximum DTI + other monthly debts)] x 12

Let's take a look at how different loan types (conventional vs. FHA), down payment amounts, DTIs, and mortgage rates can affect your mortgage payments and income requirements for a $250,000 house. These are for a 30-year loan term.

The first table shows mortgage payment amounts and income targets for a $250,000 home with a 6% mortgage rate:

This table shows mortgage payment amounts and income targets for a $250,000 home with a higher (7%) mortgage rate:

You'll want to consider additional costs such as property taxes, homeowners insurance premiums, and HOA fees when looking at your total housing expenses. Plus, be sure to factor in your nonhousing expenses when deciding which mortgage payment you'd be most comfortable with – that also fits your budget.

You can use the Rocket Mortgage payment calculator to figure out how your monthly housing payments will shake out.

What down payment is required for a $250K house?

The down payment amount required for a $250,000 house varies by loan type. However, 20% – or $50,000 for a $250,000 home – is the minimum percentage required to avoid paying PMI for a conventional mortgage.

Plus, larger down payments will reduce the loan amount and lead to a better interest rate and less interest paid over time. While some home loans feature no money down, that also means your mortgage payments will be higher.

You can explore the Rocket Mortgage down payment calculator to calculate what you need.

Tips for affording a $250K home

Here are a few pointers on how to make buying a $250,000 home a possibility:

• Review your budget: You'll want to have a budget that includes your income and expenses. It's important to leave no stone unturned. This can help you figure out how much you can realistically afford for a mortgage payment.
• Improve your credit score: Remember: A higher credit score pays off with a better mortgage rate and usually means lower mortgage payment. You'll want to take steps to improve your credit, such as staying on top of your payments and keeping your credit usage low.
• Pay down your existing debt: This will bring down your debt-to-income ratio, which is important for mortgage approval. Plus, it'll provide breathing room in your budget for your ongoing, monthly mortgage payments.
• Save for your down payment: You'll want to prep early, explore grants and other assistance options. Plus, look for ways to lower expenses or boost your income – or both. That way, you can save for a house more quickly. As it goes, a larger down payment means a smaller loan amount and a more manageable mortgage payment.
• Get preapproved: Getting preapproved shows you how big a mortgage you would qualify for and at what mortgage rate. It also can help you stand out to sellers in competitive markets.

The bottom line: Your income is just one factor for affording a $250K home

While your income is one part of being able to afford a $250,000 home, it is a major one. Figuring out how much income you need with different types of home loans, interest rates, and down payments can help you gauge the best option for you.

Doing the math and looking at your overall financial situation can help you assess whether you can realistically afford a $250,000 home – and leave you a bit of padding for other important housing expenses.

If you're ready to buy, apply for a mortgage today!

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An interest rate of 6.5% (6.791% APR) is for the cost of 2.00 point(s) ($7,000.00) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,212.24. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%.

The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.