How much income do you need to buy a $300,000 house? You might be trying to get a ballpark estimate before seeking a lender pre-approval. Lenders look at a number of different factors when determining loan sizes.
Your down payment and income are the two biggest factors. However, credit score and debt to income (DTI) ratio also matter. Let’s break down what the average person needs to make to afford a $300K house.
Income Needed on a 300k Conventional Loan
Here’s a scenario for a $300,000 house at 6% interest on a 30-year term. We’re also factoring in the 28/36 rule- at 28% monthly home debt. (see below)
- Standard 20% down: $60,000 for a $300,000 house
- This brings us to an “average” payment of $1,750, including taxes & insurance.
Here’s what affordability looks like on a $300,000 home with different debt factors:
- $0 monthly debts: you could afford this on a $75k salary.
- $500 in monthly debts: you could afford this on a $95k salary.
- $1,000 in monthly debts: you could afford this on a $120k salary.
Our mortgage calculator lets you plug in specific property taxes, insurance rates, and any applicable HOA fees if you want a more personalized estimate.
A conventional loan requires a down payment between 3-5% and 20%. Of course 20% is the preferred amount with most lenders. You’ll pay private mortgage insurance (PMI) if you put down less than 20%. The rate you’re given by your mortgage company also affects your monthly housing payment.
- On a 300K home, closing costs averaging 5% of your $240,000 loan total $12,000.
- As part of our full guide on income needed to buy a home, you’ll learn that lenders determine loan amount and interest rate based on credit score, employment type, and income type.
- Generally, higher income in a stable role will increase the chances of being approved vs a freelance or commission-based role.
- One perk to know is that putting down 20% like you see in the example above gives you the option to lower monthly payments by not putting home insurance and property taxes into escrow. This may lower your DTI.
- Your interest rate and loan term (years of repayment) also impact your monthly payment.
Income Needed on a 300K FHA Loan
If you pick an FHA loan, you can put down as little as 3.5% at closing. For a $300,000 house at 6% interest on a 30-year term. In this example, we’re also keeping the 28% home debt rule.
- Standard 3.5% down: $10,500 for a $300,000 house
- This brings us to an “average” payment of $2,300 with taxes, insurance, and MIPs.
Here’s what you’ll need to make to afford this:
- $0 monthly debts: you could afford this on a $100k salary.
- $500 in monthly debts: you could afford this on a $120k salary.
- $1,000 in monthly debts: you could afford this on a $140k salary.
The 28/36 Rule of Debt
Lenders reference something called the 28/36 rule when using DTI to evaluate a borrower’s creditworthiness. This means they want to see no more than 28% of your income going to your house. The other 36% can go to all other debts with housing included.
