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Looking for a real estate side hustle? Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles. I have done a few different real estate side gigs, and I know many people who have side hustles in this…

Looking for a real estate side hustle?

Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles.

I have done a few different real estate side gigs, and I know many people who have side hustles in this area as well. To get started in real estate, you don’t have to spend a lot of money – there are several real estate side gigs that can be started even if you are brand new or are on a budget.

Key Takeaways

  • Real estate side hustles have a range of options from income generating assets to freelance opportunities to office jobs.
  • You can supplement your income with both short-term and long-term real estate strategies.
  • Finding the right fit depends on your availability, investment capacity, and financial goals.

Best Real Estate Side Hustles

Here’s a quick summary of some of the different best real estate side hustles:

  • House hacking: Buy a property, live in one unit, and rent out the rest.
  • REIT investing: An easy way to start investing in real estate with less capital.
  • Airbnb rentals: Rent out a spare room or an entire property on a short-term basis.
  • Property management: If you’re organized and good with people, managing properties for others could be a perfect fit.
  • Long-term rentals: Becoming a landlord can generate steady cash flow.
  • Fix and flip: Buy properties that need work, renovate them, and sell them for a profit.

Below, you will read the full list and learn more about each one.

1. House flipping

Flipping houses can be a good real estate side hustle if you like real estate and enjoy fixing things up.

When you flip houses, you’re basically buying homes, making them better with repairs and upgrades, and then selling them to make more money.

The first thing to do for a successful house flip is to find a property that can be made better, such as by looking for homes in neighborhoods that are getting better or have room to grow. Think about things like where it is, what the market is like, and the condition of the property.

Before putting money into anything, it’s important to carefully look at the finances. You’ll want to figure out how much it will cost to buy, fix, and keep the property, and think about things like the cost of materials, paying workers, getting a loan, and the costs while you’re fixing things.

To flip a house well, you need to make smart changes that make the property better, without spending too much, by concentrating on important areas like the kitchen and bathrooms, and fixing any big problems with the structure or safety.

Recommended reading: 10 Best Books on Flipping Houses To Make Money

2. Investing in REITs

Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate. They are a way for you to invest in real estate without directly managing or owning properties.

An REIT is like a company that owns and takes care of real estate that makes money. They sell shares of this company to people, kind of like how stocks work.

When you invest in REITs, you can earn money from the real estate world without actually owning any property. So, if you don’t want to deal with being a landlord, this could be a good option. It’s way less work than owning property and handling it yourself.

You can even spread out your money and invest in different kinds of properties with REITs, like houses, offices, factories, and stores.

3. Getting a roommate

Getting a roommate in your home, whether that be a full-time roommate or renting out an extra room in your home short-term on Airbnb, can be a great real estate side hustle that doesn’t require very much work from you.

The earnings you can make from having a roommate depend on things like:

  • Where your home is (an expensive area? rural?)
  • The space you are renting to a roommate (for example, do they get their own bathroom? private entrance available?)

To find a roommate, you can share about it on your own Facebook page, put up an ad on sites like Craigslist, or make a rental listing on Airbnb. There are lots of places where you can let people know you’re looking for a roommate.

I have had many roommates in the past when I was younger and had a home with spare bedrooms. I would rent them out to long-term renters and people that we personally knew (such as friends and my sister).

Recommended reading: Tips For Renting A Room In Your House.

4. Airbnbs and vacation rentals

Turning your property into an Airbnb or other short-term rental can be a way to generate extra income. This is when you rent out your space, whether a full house, an apartment, or just a room, to travelers for short stays.

Before starting your Airbnb side hustle, be sure to:

  • Check local laws: Make sure short-term rentals are permitted in your area. There are many areas nowadays that are more strict when it comes to short-term rentals.
  • Understand the financials: Calculate potential earnings against expenses like mortgage, utilities, and maintenance.
  • Set up your space: Furnish and decorate to create a welcoming environment.
  • Market your rental: Use high-quality photos and create listings on rental platforms like Airbnb and Vrbo.

The amount you can earn can vary, with some hosts making around $5,000 to $10,000 a month or more, but this depends on factors such as location, rental type, and occupancy rates. Always plan for occupancy ebbs and flows – it’s part of the short-term rental business.

5. Real estate photography

If you’ve ever looked at a house listing and thought that the pictures looked awful, then this may be the real estate side hustle for you.

Real estate agents many times hire out for the photography side of selling a house, as they know and understand how important good pictures are.

Real estate photography is all about taking pictures of houses and spaces to grab the attention of people who might want to buy them. Real estate photographers might take pictures of the outside of a house, the backyard, the living room, attic, bathroom, and more.

You can start with the equipment you likely already have, like your smartphone, which can work well because phones these days have great cameras.

How you show a property can really impact a client’s chance of selling it. Your photos are not just pictures; they’re an important part of how the property gets advertised.

As you continue with this real estate side hustle, you might think about getting better equipment (like a real camera!), but for now, practice paying attention to details and getting better at taking pictures.

If you’re thinking about doing something extra to earn money in real estate, photography could be a great choice.

Recommended reading: 18 Ways You Can Get Paid To Take Pictures

6. Real estate drone photography

Drone pilots sell real estate photography services to help real estate agents showcase the properties they are selling.

When property listings include pictures from various angles and heights, it gives a different perspective compared to regular photos. This helps show aspects of real estate that traditional pictures might miss.

When you sell property photography services using your drone, you’re providing a valuable service to real estate companies that want to stand out in a crowded housing market.

Homes are increasingly being sold using drone photos, and it’s understandable because they can showcase the surroundings of a home. Also, potential home buyers can see the entire property and house through a drone picture, giving them a better understanding of what the home includes.

Recommended reading: How To Make Money With A Drone

7. Long-term rentals

A long-term rental is when you rent out a property for a long amount of time, usually six months to a year or even longer. An example would be renting out an apartment or house to a family to live in full-time.

Long-term rentals are different from short-term rentals like vacation homes or Airbnb listings. They are meant for people or families looking for a longer place to live.

A benefit of long-term rentals is the reliable and steady income they can give you. When you rent your property to tenants for an extended period, you set up a regular cash flow of rental payments. This stability can be especially nice for people who are looking for a dependable source of passive income.

Plus, it’s usually less work than a short-term rental, because you don’t have to clean the home every few days or find new people to rent out to.

Recommended reading: How This 34 Year Old Owns 7 Rental Homes

8. Buy and hold for long-term wealth

If you want to grow wealth through real estate, the buy-and-hold strategy is a way to achieve lasting growth. This means buying a property and keeping it for an extended period, benefiting from both its increasing value over time and the rental income it makes you over the years.

Some positives to think about with a buy-and-hold real estate side hustle include:

  • Appreciation: Over time, real estate often increases in value.
  • Rental income: It can provide a steady cash flow each month.
  • Tax advantages: Possible deductions can reduce your taxable income.

The buy-and-hold strategy requires patience and a willingness to handle market changes. It’s a long-term approach, not a quick one, but if you stay persistent, you can create an investment portfolio for future financial stability.

9. Notary services for real estate

If you want to get more into the real estate world without becoming an agent or broker, becoming a notary public can be a way to make extra money.

Many documents, including deeds, mortgages, and power of attorney, require notarization to be legally binding.

With a notarization license, you can provide an important service required for different real estate transactions.

Notaries are important because they help make sure that the people signing documents are who they claim to be to prevent fraud.

10. Rental arbitrage

Rental arbitrage is a way to make extra money in real estate without owning a property. You rent a place for a long time and then sublease it as a short-term rental using platforms like Airbnb.

Here’s how to get started:

  • Check local laws: You’ll want to make sure your city or state allows for short-term rentals.
  • Make sure the rental allows for you to do this: Not every rental will be okay with you renting it out. You will want to read your rental contract carefully.
  • Do market research: Understand the demand for short-term rentals in your target area, such as by looking for locations with high tourist traffic or business conferences.
Potential Benefits Considerations
+ Strong cash flow potential – Initial setup and furnishing cost
+ Low startup costs compared to buying – Dependence on short-term rental market stability

Making money in rental arbitrage comes from the difference between the cost of the long-term lease and the income from short-term rentals. The bigger the gap, the more potential for profit. But remember to factor in the expenses of running the rentals, like cleaning and maintenance costs.

11. House hacking

House hacking is a strategic approach to real estate where you purchase a property with multiple units and live in one unit while renting out the others. This is a side hustle because it can help offset your living expenses through the rental income.

House hacking can be an easy starting point if you want to dip your toes into real estate investing with the added perk of reducing your personal living expenses.

Back when we were living in a traditional house, we house hacked for a little while and had a few different roommates live with us. The monthly rent we collected allowed us to lower our house payments and put more money in savings. 

We house hacked with our first house, and it was really great for us. Being able to set more money aside even helped me get ready to quit my job to become a full-time blogger.

If you are looking for a good book on the subject of house hacking, then I recommend reading The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom by Craig Curelop.

Recommended reading: What Is House Hacking & How To Live For Free

12. Real estate agent

A real estate agent is a person who helps people, like you and me, find real estate to buy or sell. They usually earn their income through a commission, which is a percentage of the property’s sale price.

To become a real estate agent and start this real estate career, you only need a high school diploma and a professional license. As of 2021, the median pay, according to the U.S. Bureau of Labor Statistics, is $23.45 per hour, or $48,770 per year.

And, there are tons of real estate agents who make a lot more money than this.

13. Crowdfunding and peer-to-peer lending

If you want to learn how to make extra money in real estate, then crowdfunding and peer-to-peer lending are areas to look into.

Crowdfunding platforms allow you to invest in real estate deals with a smaller amount of money compared to purchasing property outright. This can provide you with passive income through rental returns or potential property value appreciation.

Peer-to-peer lending platforms enable you to lend money directly to borrowers. You can potentially earn higher returns compared to traditional savings accounts, but there is always the risk of a borrower not repaying the loan.

Both crowdfunding and peer-to-peer lending utilize technology to connect investors with individuals seeking funding.

14. Bird dogging

Bird dogging in real estate can be a side hustle where you help find potentially profitable properties for investors. Your skill in spotting undervalued or distressed properties is important.

Here’s what you usually need to do:

  • Conduct market research to locate properties that are flying under the radar.
  • Build a network with local real estate investors who are looking for deals.
  • Learn to use the Multiple Listing Service (MLS) to spot opportunities.

Typically, you’ll be on the lookout for foreclosures, bank-owned properties, and distressed homes due for a quick sale.

As a bird dog, your compensation usually comes from a referral fee after the investor decides to move forward with your find. Importantly, to perform this role, you don’t necessarily need any initial capital, just the time and skill to identify promising investment opportunities.

15. General contractor

General contractors handle the day-to-day activities on construction sites, overseeing tasks from residential remodels to constructing new homes.

This is typically more of a full-time job, but this can sometimes be done as a real estate side hustle.

As a general contractor, you can choose projects that match your schedule and interests, providing flexibility. Despite the responsibilities, this role allows you to play a central role in turning plans into actual buildings, giving you the potential to make extra money.

16. Flip raw land

Getting involved in raw land flipping is when a person finds and buys undeveloped land to sell later at a profit.

The main benefits include a lower initial investment and less complexity compared to traditional real estate investments, as it doesn’t involve renovation or improvements. There are no buildings, instead it may be a lot or acres of land.

Here’s a step-by-step guide on how to start:

  • Find raw land – Research areas with potential growth or upcoming developments that could boost land value.
  • Due diligence – Perform thorough checks on land titles, zoning laws, and road access to avoid legal issues.
  • Pricing strategy – Your selling price should be attractive enough for buyers yet ensure you make a reasonable profit margin.
  • Sell and negotiate – Use online platforms to reach potential buyers and negotiate the best deal.

17. Rent out your storage space

If you have unused land or space in your home, renting it out for storage space can be an easy way to make passive income.

People have a lot of stuff, and they will pay you to store their stuff in your unused spaces.

You can sell storage solutions for vehicles, boats, personal belongings, and more. You can rent out your parking space, closet, basement, attic storage, and more.

A site where you can list your storage space is called Neighbor and you can earn $100 to $400+ each month. This depends on the demand in your area and the type of storage space you are renting out.

Recommended reading: Neighbor Review: Make Money Renting Your Storage Space

18. Property manager

A property manager side hustle can be a great way to make extra money.

A property manager is a real estate professional who finds and oversees tenants, collects rent, and handles repairs and maintenance activities. It’s a side hustle that property owners pay for because they may not have the time or skills to effectively manage their own property.

Property managers can manage long-term rentals like apartments, short-term rentals like Airbnbs, and even commercial spaces as well.

I have a friend who is a property manager on the side of his full-time construction job – he manages many different types of properties, from second homes to vacation rentals to someone simply being out of town. He checks on their properties to make sure that everything is running smoothly.

19. Home stager

If you’re passionate about real estate and design, starting a side hustle as a home stager could be profitable for you. As a home stager, your job is to improve the appearance of a home before it’s listed for sale.

This often results in faster sales and higher prices, making your service valuable to sellers.

You can start by staging homes for friends or family, if possible, to build a portfolio. Before and after photos are powerful tools to showcase your work.

You can even provide consultations to homeowners who prefer to do the actual staging themselves. In such cases, your design style can be a more budget-friendly option for a do-it-yourself homeowner.

20. Home inspector

We recently bought a house, and our home inspector was actually a home inspector on the side – this was his real estate side hustle! I think he was a city inspector (or something similar) full-time, so he was very knowledgeable in the area.

Home inspection as a side job can be a strategic move if you’re interested in real estate. This job allows for flexibility since you can set your hours, such as by completing home inspections on the weekends or before or after your day job.

You’ll need to invest in proper training and get licensed, which is a process that can be completed relatively quickly.

The responsibilities of a home inspector include:

  • Inspecting homes for possible problems, like a leak or bad wiring.
  • Creating and delivering reports based on what you find during the inspection.

21. Real estate appraiser

Real estate appraisers determine the fair market value of a property, and this process is important in transactions, such as home sales and refinances.

Appraisers assess property values by taking notes on unique characteristics and comparing them with similar properties that have sold recently.

They then prepare reports, detailing findings and providing a valuation that banks and other institutions depend on for loans.

22. Real estate wholesaler

Real estate wholesalers are middlemen who find properties under market value, contract them with the seller, and then sell the contract to a buyer, often an investor. Their profit comes from the difference between the contracted price with the seller and the amount the buyer pays.

Here is a quick summary of what a wholesale real estate side hustle is:

  1. Find a distressed property – Search for properties that can be bought below market value.
  2. Evaluate the property – Determine the After Repair Value (ARV) and estimate repair costs.
  3. Secure under contract – Enter into a contract with the seller, giving you the right to purchase.
  4. Find a buyer – Locate an investor interested in buying the contract.
  5. Assign the contract – Transfer your purchasing rights to the investor for a fee.

By becoming skilled at finding good deals and building connections with trustworthy investors, real estate wholesaling can become a profitable real estate side hustle.

23. Start a real estate blog

Starting a real estate blog (or even a real estate YouTube channel or social media account!) can be a good way to make extra money without having to spend a lot of money.

With a real estate blog, you can write about local market insights, home buying and home selling tips, property investment strategies, home improvement and DIY projects, and more.

I have been a blogger for years, and I really love it. I am able to create my own schedule, decide how I make money online, travel whenever I want, and more. And, it all started on the side of my day job – so I definitely think that a real estate blog can be started as a side hustle.

Learn more at How To Start A Blog FREE Course.

Frequently Asked Questions

Below are answers to common questions about real estate side hustles.

Can real estate be a side hustle? Is real estate a good side hustle?

Yes, real estate can be a lucrative side hustle. Many people do real estate activities on a part-time basis, which can include short-term rentals, getting a roommate, and more, with lower time commitments.

Is real estate worth it as a side hustle?

Real estate as a side hustle can be worth it if you are looking for more income streams and have an interest in the housing market or real estate. As you probably noticed above, there are many different kinds of side hustles, so the amount of money you can earn or the amount of time you will spend will just depend on the gig you choose.

How can realtors make extra money?

Realtors can make extra money by managing rental properties, taking part in real estate crowdfunding, selling real estate photography services, and more.

Is real estate a good side hustle for teachers?

Yes, real estate can be a good side hustle for teachers. There are many options that may work for a teacher.

For example, some teachers work as real estate agents on the side. This is possible because you can handle listing and selling homes during weekends, breaks, evenings, and over the summer. However, keep in mind that selling homes might pose challenges, as clients may require your full attention during the day, which could clash with your teaching commitments.

You can find more ideas at 36 Best Side Jobs for Teachers To Make Extra Money.

Which licenses might be required to pursue a side hustle in the real estate field?

Depending on the side hustle, certain licenses like a real estate license may be required. For example, to become a real estate agent or home inspector, you’ll need a specific license. However, if you’re looking into just getting a roommate, then you may not need a license. It all just depends on the real estate side gig you are interested in.

How to make money in real estate without ever buying any property?

As you learned above, you don’t need to personally buy or own real estate in order to make money in real estate. You can invest in REITs, become a notary for real estate transactions, include affiliate marketing for real estate products on a blog, and more.

Real Estate Side Hustles – Summary

I hope you enjoyed this article about real estate side hustles.

Picking the right side hustle gig in real estate might feel overwhelming because there are many choices.

Some people might like jobs where you have to do more, like fixing up houses or taking care of Airbnb rentals. Others might prefer making money without doing much, like through REITs or renting out a spare room.

Whatever you’re into or however much money you have to invest, there are probably real estate side business ideas that fit with what you have and what you want to achieve.

What do you think is the best real estate side hustle?

Recommended reading:

Source: makingsenseofcents.com

Apache is functioning normally

On a salary of $50,000 per year, you can afford a house priced at around $128,000 with a monthly payment of $1,200 — that is, as long as you have relatively little debt already on your plate. However, not everyone earning $50,000 will see this number in response to a loan application. There are many more factors besides income and debt to take into account, such as:

•   Your down payment

•   The cost of taxes and insurance for the home you want

•   The interest rate

•   The type of loan you’re applying for

•   Your lender’s tolerance for debt levels

Each of these factors affects how much home you can afford on any salary, including one at $50,000.

What Kind of House Can I Afford With $50K a Year?

$50,000 is a solid salary, but there’s no denying today’s real estate market is tough. You’ll need to know the full picture of home affordability to get you into the house you want, starting with your debt-to-income (DTI) ratio.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Understanding Debt-to-income Ratio

Your DTI ratio may be one of your biggest challenges to home affordability. Each debt that you have a monthly payment for takes away from what you could be paying on a mortgage, lowering the mortgage amount that you can qualify for.

To calculate your DTI ratio, combine your monthly debt payments such as credit card debts, student loan payments, and car payments and then divide the total by your monthly income. This will give you a percentage (or ratio) of how much you’re spending on debt each month. Lenders look for 36% or less for most home mortgage loans.

For example, on a $50,000 annual salary and a $4,166 monthly income, your maximum DTI ratio of 36% would be $1,500. This is the maximum amount of debt lenders want to see on a $50,000 salary.
💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

How to Factor in Your Down Payment

A down payment increases how much home you’ll be able to qualify for. The more you’re able to put down, the more home you’ll be able to afford. Borrowers who put down more than 20% also avoid having to buy mortgage insurance. When you don’t have to pay mortgage insurance every month, you can qualify for a higher mortgage — but you do need to consider if putting down 20% is worth it to you. A mortgage calculator can help you see how much your down payment affects the mortgage you can qualify for.

Factors That Affect Home Affordability

In addition to the debt-to-income ratio and down payment, there are a handful of other variables that affect home affordability. These are:

•   Interest rates When your interest rate is lower, you’ll either have a lower monthly mortgage payment or qualify for a higher mortgage. With higher interest rates, you’ll have a higher monthly mortgage payment and/or qualify for a lower home purchase amount.

•   Credit history and score Your credit score affects what interest rate you’ll be able to get, which is a huge factor in determining your monthly mortgage payment and home affordability.

•   Taxes and insurance Higher taxes, insurance, or homeowners association dues can bite into your house budget. Each of these factors has to be accounted for by your lender.

•   Loan type Different loan types have varying interest rates, down payments, credit requirements, and mortgage insurance requirements which can affect how much house you can afford.

•   Lender You may be able to find a lender that allows for a DTI ratio that is higher than the standard 36%. (Some lenders allow a DTI as high as 50%.)

•   Location Where you buy affects how much house you can afford. This is one area that you can’t control, unless you move. If you are considering this option, take a look at the best affordable places to live in the U.S.

Recommended: The Cost of Living by State

How to Afford More House With Down Payment Assistance

If you want to be able to afford a more costly house, you may want to look into a down payment assistance (DPA) program. These programs can help you with funding for a down payment on a mortgage. You can look for DPA programs with your state or local housing authority. Preference may be given to first-time homebuyers or lower-income families, but there are programs available for a wide variety of situations and incomes.

How to Calculate How Much House You Can Afford

If you want to know how much mortgage you’ll likely be able to qualify for, you’ll want to take a look at these guidelines.

The 28/36 Rule: Lenders look for home payments to be at or below 28% of your income. Total debt payments should be less than 36% of your income. These are the front-end and back-end ratios you may hear your mortgage lender talking about.

Front-end ratio (28%): At 28% or your income, a monthly housing payment from a monthly income of $4,166 should be no more than $1,166.

Back-end ratio (36%): To calculate the back-end, or debt-to-income ratio, add your debt together and divide it by your income. This includes the new mortgage payment. With monthly income at $4,166, your debts should be no more than $1,500 ($4,166*.36).

The 35/45 Rule: The 35/45 rule is a higher debt level your lender can elect to follow. It’s riskier for them and may come at a higher interest rate for you. This rule allows you housing payment to be 35% of your monthly income and 45% of your total debt-to-income ratio. With a monthly income of $4,166, the housing allowance (35% of your income) increases to $1,458 and the total monthly debt (45% of your income) increases to $1,875.

An easier way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

Making $50,000 a year gives you around $4,166 to work with each month. Using the 36% debt-to-income ratio, you can have a maximum debt payments of $1,500 ($4,166 * .36). In the examples below, taxes ($2,500), insurance ($1,000), and interest rate (6%) remain the same for a 30-year loan term.

Example #1: High-debt Borrower
Monthly credit card debt: $200
Monthly car payment: $400
Student loan payment: $200
Total debt = $800

Down payment = $20,000

Maximum DTI ratio = $4,166 * .36 = $1,500
Maximum mortgage payment = $700 ($1,500 – $800)

Home budget = $88,107

Example #2: The Super Saver
Monthly credit card debt: $0
Monthly car payment: $200
Student loan payment: $0
Total debt = $200

Down payment: $20,000

Maximum DTI ratio = $4,166 * .36 = $1,500
Maximum mortgage payment = $1,300 ($1,500 – $200)

Home budget = $171,925

Recommended: Tips to Qualify for a Mortgage

How Your Monthly Payment Affects Your Price Range

Your monthly payment directly affects the mortgage you’re able to qualify for. The more monthly debts you have, the lower the mortgage you’ll be able to qualify for. That’s why it’s so important to take care of debts as soon as you can.

That’s also why it’s important to get the best interest rate you can. Shopping around for lenders and improving your credit score can both save you money and improve home affordability. A home loan help center is a good place to start the process of looking for a mortgage.

Types of Home Loans Available to $50K Households

How much home you can afford also comes down to the different types of mortgage loans. Here are some common options:

•   FHA loans If your credit isn’t ideal, you may be able to secure a Federal Housing Administration mortgage. Though FHA loans are costlier, you can still be considered with a credit score as low as 500. FHA mortgage insurance, however, makes them more expensive than their alternatives.

•   USDA loans If you’re in a rural area that is covered by United States Department of Agriculture loans, you’ll want to consider whether the low interest, no-down-loan will make sense for you.

•   Conventional loans Conventional financing offers the most competitive interest rates and terms for mortgage applicants who qualify.

•   VA loans If you have the option of financing with a U.S. Department of Veterans Affairs loan, with few exceptions, you’ll generally want to take it. It offers some of the most competitive rates, even for zero-down-payment loans. It also comes with no minimum credit score requirement, though the final say on whether or not you can get a loan with a low credit score is up to the individual lender.
💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

The Takeaway

Your $50,000 salary is the first step in qualifying for the home mortgage loan you need to buy a house. To position yourself for the best possible borrowing scenario, consider paying down debt, working on your credit score, applying for down payment assistance, adding a co-borrower, or some combination of the above. With these moves, home affordability improves a great deal.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $50K a good salary for a single person?

A $50,000 salary is good in terms of covering the cost of living in many parts of the U.S. and with proper budgeting it can even put you on the path to affording to purchase your own home.

What is a comfortable income for a single person?

A comfortable income for a single person could be at or above the median income for a single person, which is $56,929 according to data from the U.S. Census.

What is a liveable wage in 2024?

Your living wage depends on your local region, number of working household members, and children. For a single person living in Arizona, the average living wage is about $37,000. If the same person moved to California, an average of more than $44,000 would be needed, according to the Massachusetts Institute of Technology’s Living Wage Calculator.

What salary is considered rich for a single person?

A salary of $234,342 would put you in the top 5% of wage earners in the United States.

Photo credit: iStock/Tirachard

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SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Source: sofi.com

Apache is functioning normally

On a salary of $40,000 per year, you can afford a house priced at around $100,000-$110,000, assuming you have some money — say, $10,000 or $15,000 — for a down payment and are not already carrying debt, such as a car loan or student loan. The number can change quite a bit when you factor in your specific numbers:

•   Your debt

•   Your down payment

•   Your taxes, insurance (and homeowners association dues, if applicable)

•   Your interest rate

•   Your loan type

•   Your lender

Understanding how these factors play into home affordability can get you closer to finding a home you can afford on your $40,000 salary.

What Kind of House Can I Afford With $40K a Year?

On a $40,000 salary, you want to get the nicest home you can. But what amount of home mortgage loan you qualify for depends on a number of factors, including your debt, income, interest rate, down payment, type of loan, and lender.

Understanding Debt-to-income Ratio

You may have heard that debt can seriously derail your plan to buy a house, but you might not know exactly how it does that. Here’s the scoop: A potential lender will calculate your debt-to-income (DTI) ratio by adding all your monthly debts and dividing that number by your monthly income.

Your DTI ratio determines how much home you can afford. If you have more debt, you can’t afford a bigger monthly housing payment, which means you’ll qualify for a smaller home loan. For example, if your total debt amounts are $3,000 each month and your income is $6,000 per month, your debt-to-income ratio would be 50%. This is well above the 36% guideline many mortgage lenders want to see.
💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

How to Factor in Your Down Payment

A down payment can also drastically impact home affordability. If you have a larger down payment, you’ll be able to afford a higher-priced home. With a down payment of 20% or more, you’ll be able to avoid the added expense of private mortgage insurance (PMI), which will in turn increase the loan amount you’ll be able to qualify for.

Try using a mortgage calculator to see how different down payment amount can affect how much home you’ll be able to qualify for.

Factors That Affect Home Affordability

To complete the picture of home affordability, you’ll also need to consider these factors:

•   Interest rates A higher interest rate means you’ll qualify for a smaller home purchase price. A lower interest rate increases how much home you’ll be able to afford.

•   Credit history and score You’ll also see that your credit score directly affects home affordability. With a good credit score, you’ll qualify for a better rate, which means you’ll qualify for a higher mortgage.

•   Taxes and insurance Higher taxes and insurance can also affect home affordability. Your lender has to take into account how much you’ll be paying in taxes and insurance and include it as part of your monthly payment.

•   Loan type Different loan types have different interest rates, down payment options, and credit requirements, which can affect home affordability.

•   Lender Your lender may be able to approve you at a higher DTI ratio — some lenders will allow the DTI to be as much as 50%.

•   Area The cost of living in your state is a top factor in determining home affordability. Price varies greatly around the country, so you may want to consider the best affordable places to live in the U.S. if you’re open to moving.

How to Afford More House With Down Payment Assistance

If you make $40,000, how much house you can afford also depends on what programs you’re able to qualify for. Down payment assistance programs can help with home affordability. These programs offer a grant or a second mortgage to cover a down payment. These programs are often offered by the state or city you live in. They may be restricted to first-time homebuyers or low-income borrowers, but these programs are worth looking into. Examples include Washington state’s Home Advantage DPA and Virginia’s HOMEownership DPA. Look for programs in your state, county, and city. You may also want to read tips to qualify for a mortgage.
💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.1

How to Calculate How Much House You Can Afford

There are some guidelines lenders use to qualify borrowers for a mortgage. Knowing how home affordability is calculated can help you understand what income you need to make and what debts you need to pay off to qualify for a mortgage. Lenders often follow the 28/36 rule, looking for a housing payment less than 28% of a borrower’s income and total debt payments less than 36% of your income. Here’s how to calculate it.

Back-end ratio (36%): The back-end ratio is your debt-to-income ratio. Add together all of your debts (including the new mortgage payment) to make sure all debts are under 36% of your income. If your monthly income is $3,333 ($40,000/12 = $3,333), your debts (including the mortgage payment) should be no more than $1,200 ($3,333*.36).

Front-end ratio (28%): With a monthly income of $3,333, this number works out to $933.

The 35/45 Rule: It’s possible to qualify for a larger mortgage based on the 35/45 guideline, which is used at the discretion of your lender. With a monthly income of $3,333, the housing allowance (35% of your income) increases to $1,167 and the total monthly debts (45% of your income) increases to $1,500.

An easy way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

For homebuyers with a $40,000 annual income (a $3,333 monthly income), traditional guidelines of a 36% debt-to-income ratio give a maximum house payment of $1,200 ($3,333 * .36). Each example has the same amount for taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term.

Example #1: Too much debt

Monthly credit card debt: $100
Monthly car payment: $300
Student loan payment: $300
Total debt = $700 total debt payments

Down payment = $20,000
Maximum DTI ratio = $3,333 * .36 = $1,200
Maximum mortgage payment = $500 ($1,200 – $700)

Home budget = $54,748

Example #2: Low-debt borrower

Monthly credit card debt: $0
Monthly car payment: $100
Student loan payment: $0
Total debt = $100

Down payment: $20,000
Maximum DTI ratio = $3,333 * .36 = $1,200
Maximum mortgage payment = $1,100 ($1,200 – $100)

Home budget = $141,791

How Your Monthly Payment Affects Your Price Range

As shown above, your monthly debt obligations affect how much house you can afford. With a lot of debt, it’s hard to make a mortgage payment that qualifies you for the home you want.

It’s also important to keep in mind how interest rates affect your monthly payment. By paying so much interest over the course of 30 years, even small fluctuations in interest rates will affect your monthly payment. That’s why you see your neighbors scrambling to refinance their mortgages when interest rates drop.

Recommended: Home Loan Help Center

Types of Home Loans Available to $40K Households

There are different types of mortgage loans available for households in the $40K range:

•   FHA loans: With Federal Housing Administration loans, you don’t have to have perfect credit or a large down payment to qualify. In fact, you can apply for a FHA loan with a credit score as low as 500.

•   USDA loans: If you live in a rural area, you’ll definitely want to look at United States Department of Agriculture loans. You may be able to qualify for a USDA mortgage with no down payment and competitive interest rates.

•   Conventional loans: For borrowers with stronger financials, conventional loans are some of the least expensive mortgages in terms of interest rates, mortgage insurance premiums, and property requirements. They’re backed by the federal government, and if you’re able to qualify for a conventional mortgage, it could save you some money.

•   VA loans: For qualified veterans and servicemembers, the U.S. Department of Veterans Affairs loan is quite possibly the best out there. There are zero down payment options with great interest rates. If your credit is hurting, you still might be able to get a loan since the VA doesn’t have minimum credit score requirements (though the individual lender may).

The Takeaway

With proper planning, a salary of $40K should be able to get you into a home in many U.S. markets. However, you’ll want to make sure you keep a close eye on your credit score and save up for a down payment or find programs to help with one. Over time, the small, determined steps you take will lead you to your goals.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $40K a good salary for a single person?

You work hard for your salary, and a $40,000 salary for a single person is a good start, though it is below the median income for a single person, which is $56,929, according to data from the U.S. Census.

What is a comfortable income for a single person?

Comfortable depends on the cost of living where you live and your personal needs, but it can range from around $45,000 per year in Mississippi to $112,000 in Hawaii.

What is a liveable wage in 2024?

Your liveable wage depends on your area, working household members, and children. For example, it can range from $15.89 per hour for a single living in Beaumont, Texas, to $44.99 per hour for a household with three children in St. George, Utah.

What salary is considered rich for a single person?

A salary of $234,342 would put you in the top 5% of all earners in the U.S.

Photo credit: iStock/stevecoleimages

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

Apache is functioning normally

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.

These numbers change—sometimes dramatically—depending on a few factors, including:

•   How much debt you have

•   What your down payment is

•   How much you’re paying for taxes, insurance, and homeowners association dues, if anything

•   What interest rate is available to you

•   What type of loan you get

With the median home price in the U.S. topping $400,000, you might be wondering how everyone else affords a home in your neighborhood. We’ll cover every aspect of home affordability for a $45,000 salary to help you work toward getting the home you’ve always wanted.
💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

What Kind of House Can I Afford With $45K a Year?

The kind of home you can afford depends on more than your $45,000 salary. It’s also based on your debt-to-income (DTI) ratio, interest rate, down payment, type of home loan, and lender.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Understanding Debt-to-income Ratio

Your DTI ratio is a key factor in determining how much home you can afford. The more debt you have, the lower your housing payment needs to be. This directly translates into a lower priced home. So, what exactly is a DTI ratio? It is the proportion of monthly debt you need to repay in relation to your gross monthly income.

For example, if your total debt amounts are $2,000 each month and your income is $6,000 per month, your debt-to-income ratio would be 33%. This falls under the 36% threshold mortgage lenders look for with conventional home mortgage loans.

However, keep in mind that the $2,000 has to include your new mortgage payment. If your debts cost $500 each month, your monthly mortgage payment cannot be more than $1,500.

How to Factor in Your Down Payment

Your down payment also plays a significant factor in home affordability. Generally, the higher down payment you have, the more home you can afford. If you purchase a home far below what you can afford, your monthly payment will be much lower.

If you make a down payment of 20% or more, you’ll also be able to save on mortgage insurance premiums, which are typically required on most loan types for homes purchased with a down payment lower than 20%.

If you play around with a mortgage calculator, you can see how a larger down payment can affect your monthly payment and home price.

Factors That Affect Home Affordability

Beyond your debt, income, and down payment, there are a number of other factors that go into home affordability. These include:

•   Interest rates The interest rate you have on your home dramatically impacts how much home you can afford. When interest rates are high, your monthly payment is higher. When interest rates are down, you pay less interest on your loan, which means you can afford a more costly home. Remember that if rates drop significantly a mortgage refinance is always an option.

•   Credit history and score The interest rate that you’ll qualify for is dependent on your credit score and history. A better credit score will qualify you for the best interest rates, which means your monthly payment will be lower, which can increase your buying power.

•   Taxes and insurance Taxes and insurance factor into your home’s monthly payment. They will be calculated into the home’s PITI (payment, interest, taxes, insurance) and included as part of your monthly debts.

•   Loan type The type of loan you get affects home affordability. This is due to the different interest rates and down payment options available to specific loan types. VA loans from the U.S. Department of Veterans Affairs, for example, come with a lower interest rate and don’t require a down payment.

•   Lender Lenders may have discretion to increase the allowable debt-to-income ratio. Some can go as high as 50%.

•   Location Some areas are more affordable than others. Thinking about moving? Take a look at a list of the best affordable places to live in the U.S.

Recommended: The Cost of Living By State

How to Afford More House With Down Payment Assistance

One of the best tools for increasing home affordability is with down payment assistance programs. These programs provide funds for the down payment (and sometimes closing costs) to help make homes more affordable for buyers.

Some programs offer down payment assistance in the form of a grant that does not need to be repaid, while others finance a second mortgage which may need to be paid when the home is sold (but sometimes is forgiven earlier). In Colorado, for example, there’s the CHFA Colorado Down Payment Assistance Grant. Virginia offers the Virginia HOMEownership Down Payment and Closing Cost Assistance program (DPA)

Search your state, county, and city to see what programs are offered for your area. You may also want to read tips to qualify for a mortgage.

How to Calculate How Much House You Can Afford

Calculating how much house you can afford is smart, especially if you’re a first-time homebuyer and making early plans to buy a home. There are some guidelines lenders use to qualify borrowers for a mortgage, including:

The 28/36 Rule: This guideline states that no more than 28% of your income should go to your monthly housing payment and your debt-to-income ratio should be no more than 36% of your income

When calculating DTI (also known as the back-end ratio), your lender will add all of your debts (including the new mortgage payment) to make sure all debts will fall under 36% of your income amount. If your monthly income is $3,750 ($45,000/12 = $3,750), your debts (including the mortgage payment) should be no more than $1,350 ($3,750*.36).

Lenders will also calculate the front-end ratio, which should be no more than 28% or your income. With a monthly income of $3,750, this number works out to $1,050.

The 35/45 Rule: Some lenders may go by the 35/45 guideline, which allows for a housing payment up to 35% of income and 45% of total DTI ratio. This expanded allowance is up to the lender, but may allow for qualification of higher purchase amount and payment.

With a monthly income of $3,750, the housing allowance (35% of your income) increases to $1,312.50 and the total monthly debts (45% of your income) increases to $1,687.50. An easier way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

Let’s take a look at two examples of homebuyers with $45,000 incomes in differing scenarios. All assume the same taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term (just for illustrative purposes).

The $45,000 annual salary is divided by 12 to get a $3,750 monthly income and the maximum DTI ratio works out to be $1,350 ($3,750 * .36).

Example #1: $45,000 income but lots of debt
Monthly credit card debt: $300
Monthly car payment: $350
Student loan payment: $300
Total debt = $950 total debt payments

Down payment = $20,000
Maximum DTI ratio = $3,750 * .36 = $1,350
Maximum mortgage payment = $400 ($1,350 – $950)

Home budget = $38,069

Even with a $20,000 down payment, it could be hard to buy a home in this scenario.

Example #2: $45,000 income with little debt
Monthly credit card debt: $50
Monthly car payment: $0
Student loan payment: $0
Total debt = $50

Down payment: $20,000
Maximum DTI ratio = $3,750 * .36 = $1,350
Maximum mortgage payment = $1,300 ($1,350 – $50)

Home budget = $171,925

💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

How Your Monthly Payment Affects Your Price Range

The monthly payment you qualify for affects the total price you can pay for a home. If monthly debts are too high, for example, you’ll likely qualify for a lower-priced home. The monthly payment is also affected by interest rates. Because interest is amortized over 30 years (on a 30-year mortgage), the amount of interest you pay is significant, even if you manage to score a lower rate.

Recommended: Home Loan Help Center

Types of Home Loans Available to $45K Households

When you’re looking for home loans, you’ll see these different types of mortgage loans available:

•   FHA loans Loans backed by the Federal Housing Administration are geared toward buyers with low down payments, low credit scores, and other situations that require a lender to be more flexible.

•   USDA loans United States Department of Agriculture loans are for those who live in rural areas. They offer zero down payment options and low interest rates.

•   Conventional loans Conventional loans are loans that are not part of a government program, but they are backed by government-sponsored enterprises, Fannie Mae and Freddie Mac. They’re usually less expensive than FHA loans, but your application does need to meet certain guidelines to qualify for conventional financing.

•   VA loans VA loans offer zero down payment options, the lowest interest rates on the market, and flexible credit requirements. If you qualify for a VA loan, you’ll likely want to go with this option.

The Takeaway

There’s no way around it — affording a home in today’s housing market is tough. If your $45,000 salary is all you have access to, you’ll need to save, improve your credit, research down payment assistance programs, enlist a partner, move to a less expensive area, or find other creative ways to afford a home. But don’t give up. It can be done. Your hard work will pay off with a mortgage for a home of your own soon.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $45K a good salary for a single person?

A $45,000 salary for a single person is a good start. How good it feels to earn $45,000 will depend on the cost of living where you live and the friends and neighbors you’re surrounded by.

What is a comfortable income for a single person?

A comfortable income for a single person depends on your lifestyle and habits. The median income for a single person is $56,929, according to data from the U.S. Census. A single person in Cobb County, Georgia, would be able to cover their expenses for about $40,000 per year while the same person in New York City would need $53,342.

What is a liveable wage in 2023?

The Massachusetts Institute of Technology’s Living Wage Calculator takes into account your area, working household members, and number of children. For example, a single living in San Francisco has a living wage of $26.63. A household with three children where only one spouse works in St. George, Utah has a living wage of $44.99 per hour.

What salary is considered rich for a single person?

To be in the top 5% of earners, you would need a salary north of $234,342.

Photo credit: iStock/500

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

Apache is functioning normally

On a salary of $65,000 per year, as long as you have very little debt, you can afford a house priced at around $175,000 with a monthly payment of $1,517 with no down payment. This number assumes a 6% interest rate and a standard debt-to-income (DTI) ratio of 36%. Your homeowner’s insurance, property taxes, and private mortgage insurance would be included in your monthly payment.

But there are many factors that go into home affordability beyond your $65,000 salary. Let’s take a look at how they play in concert with one another.

What Kind of House Can I Afford With $65K a Year?

Not everyone who earns $65,000 will have the same housing budget. You may qualify for a larger (or smaller) home mortgage loan, depending on a number of qualifications. These include:

•   Your DTI ratio

•   How much your down payment is

•   The cost of taxes and insurance where you live

•   What interest rate you qualify for

•   What type of loan you’re getting

•   If your lender is willing to underwrite a higher DTI level

When all is said and done, earning $65,000 may qualify some people for a home priced as high as $250,000. And if you’re buying with a partner who also has income, that changes the picture as well. You’ll need to understand how the factors on the list above affect what kind of loan you qualify for.

💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Understanding Debt-to-income Ratio

Your DTI ratio, quite simply, is all your monthly debt payments added together and then divided by your monthly income. If you have a lot of debt, the ratio is high. If you don’t carry a lot of debt, the ratio is low. When you’re trying to get a loan, the lower, the better.

What lenders look for is your ability to repay a mortgage. Every debt that you carry and need to repay each month takes away from what you could be putting toward a mortgage. That’s why they aim for a DTI less than 36%. It is conservative, but it ensures the borrower can meet their obligations.

For a $65,000 annual income with a monthly income of $5,416, a DTI of 36% works out to be $1,950. Your mortgage payment and all of your monthly debts, such as credit card payments, student loans, and car payments should fit within the $1,950 budget.

How to Factor in Your Down Payment

A down payment can increase home affordability in a big way. The more you’re able to put down, the higher purchase price you can qualify for. This is true especially for down payments over 20%. If you have the ability to put down that much on a home, you don’t have to pay for mortgage insurance each month, which qualifies you for a higher-priced home.

SoFi’s mortgage calculator is helpful for seeing how a down payment can affect your monthly payment and how much house you can afford.

Factors That Affect Home Affordability

A number of factors beyond your down payment and DTI ratio affect how much home you’ll be able to afford. You’ll want to take a close look at:

•   Interest rates Lower interest rates qualify you for a higher purchase price on a home. This is why borrowers seek out a mortgage refinance when rates are low. This is also why you’ll want to take great care of your credit score.

•   Credit score When your credit score is stellar, you’ll qualify for the lowest interest rates your lender can offer. This will save you a significant amount of money over the life of a loan, not to mention help you qualify for a higher mortgage. Paying less in interest means you can pay more for a home.

•   Taxes, insurance and homeowners association dues Your lender will take these numbers into account when determining how much they can lend you.

•   Loan type How much house you can afford can depend on the loan type.

•   Lender Your lender can help with home affordability. Some lenders make it possible to qualify for a higher mortgage by increasing the allowable DTI ratio — in certain cases it can be as high as as 50%.

•   Location If you’re really looking for home affordability, you might want to consider a more affordable area. Check out a list of the best affordable places to live in the U.S.

Recommended: The Cost of Living by State

How to Afford More House With Down Payment Assistance

Another of the tips to help you qualify for a mortgage: A down payment assistance (DPA) program could help you afford more house. DPAs assist with the down payment or closing costs associated with buying a home. Sometimes they come as a grant you don’t have to ever repay, and sometimes they’re underwritten as a second mortgage that may or may not need to be repaid (depending on the program).

You’ll see DPAs offered by housing authorities, either at the state or local level. You may need to be a first-time homebuyer or qualify with lower income to take advantage of these programs.

How to Calculate How Much House You Can Afford

There are some generally accepted guidelines that can help you get an idea of the amount of mortgage you’ll be able to qualify for.

The 28/36 Rule: This rule states that your home payment should not be more than 28% of your income and your total debts should not exceed 36% of your income. It’s also known as the front-end (28%) and back-end ratio (36%).

Front-end ratio (28%): At 28% of your income, a monthly housing payment from a monthly income of $5,416 should be no more than $1,517 ($5,416*.28).

Back-end ratio (36%): At 36% of your income, your debt-to-income ratio on a monthly income at $5,416, should be no more than $1,950 ($5,416*.36).

The 35/45 Rule: If your lender is more flexible, they may instead follow the 35/45 ratio, which allows for a higher mortgage payment. It’s just like the 28/36 rule, but this one allows your housing payment to be 35% of your monthly income. Your debt-to-income ratio can be as high as 45%. With a monthly income of $5,416, the housing allowance (35% of your income) increases to $1,895 and the total monthly debts (45% of your income) increases to $2,437.

If you want to skip the manual calculations, you can always use a home affordability calculator.

💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.1

Home Affordability Examples

Making $65,000 a year gives you around $5,416 of monthly income, but there’s a lot of varying situations. Some people have car loans, student loans, or credit card debt. Each of these affect home affordability. Your lender’s job is to help you afford a mortgage and still meet all your monthly debt obligations.

In these examples, we use the 36% debt-to-income ratio to determine payments and home affordability. (Keep in mind that your lender may be able to qualify you for a higher amount if they’re willing to accept a higher debt load.) For each example, taxes ($2,500), insurance ($1,000), and APR (6%) remain the same for a 30-year loan term.

Example #1: Some Debt, High Down Payment

Monthly credit card debt: $50
Monthly car payment: $300
Student loan payment: $200
Total debt = $550

Down payment = $20,000

Maximum DTI ratio = $5,416 * .36 = $1,950
Maximum mortgage payment = $1,400 ($1,950 – $550)

Home affordability = $180,000

Example #2: Thrifty Saver

Monthly credit card debt: $0
Monthly car payment: $0
Student loan payment: $200
Total debt = $200

Down payment: $20,000

Maximum DTI ratio = $5,416 * .36 = $1,950
Maximum mortgage payment = $1,750 ($1,950 – $200)

Home budget = $197,000

How Your Monthly Payment Affects Your Price Range

The monthly payment you’re able to qualify for directly affects how big a mortgage you can get. With a lot of monthly debt payments, it might be tough to qualify for the home you want. Interest rates also play a huge role in what your monthly payment is going to be. Even after you’ve bought a home, you’ll want to take care of your credit so you can refinance into a lower rate when interest rates drop.

Recommended: Home Loan Help Center

Types of Home Loans Available to $65K Households

Different types of mortgage loans can affect home affordability. This is due to the fact that they have different interest rates and different requirements for down payments, mortgage insurance, and creditworthiness.

•   FHA loans Federal Housing Administration loans come with required mortgage insurance, but if you have a situation where you need credit flexibility, FHA is the way to go. FHA loans allow for credit scores as low as 500, though you’ll still need to find a lender that’s willing to work with you.

•   USDA loans United States Department of Agriculture loans offer no-down-payment options and competitive APRs—but only for those who live in the right areas. They’re specifically for rural communities, but there may be some areas near you that qualify.

•   Conventional loans Conventional financing is usually one of the least expensive in terms of financing costs, but your finances need to be in order to qualify.

•   VA loans Like USDA loans, U.S. Department of Veterans Affairs loans have no-down-payment options, flexible credit requirements, and the lowest interest rates out there. If you’re a qualified servicemember or veteran, you’ll generally want to go with a VA loan because they’re so much better than the other options.

The Takeaway

Affording a home in this market is tough no matter what salary you make. If you make $65,000 a year, you’re earning more than the average single. Yet you may still have a few steps to take before you can afford a home: Think about paying down debt as this makes a big impact on how much home you can afford. Also think about making moves to improve your credit score, find down payment assistance programs, or locate a lender who can work with your situation. With the right moves, a home is within reach on a $65,000 salary.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $65K a good salary for a single person?

A $65,000 salary is above the median income of $56,929 for a single person, according to data from the U.S. Census. While you might be doing better than most singles in terms of salary, whether you feel comfortable will depend on your lifestyle and spending habits.

What is a comfortable income for a single person?

A comfortable income for a single person is determined by your lifestyle. For some, $40,000 is plenty. For others, $200,000 is not enough.

What is a liveable wage in 2024?

For a single person in San Francisco, a living wage works out to be $26.63 per hour, according to the Massachusetts Institute of Technology Living Wage Calculator. In Pennsylvania, a single person could get by on $16.41. However, for a family with three kids that depends on a single earner in Dallas, Texas, the living wage is $43.65 per hour.

What salary is considered rich for a single person?

According to the IRS, an income of $540,009 puts you in the top 1% of all earners.

Photo credit: iStock/PeopleImages

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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Source: sofi.com

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Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

Nearly 215 million U.S. drivers carry car insurance, and many may ask themselves, “Why is my car insurance so high?” If you’re one of those Americans, know that there are ways you can take control of the situation and reduce your insurance premiums. 

We’ll guide you through why your car insurance may be higher than normal and ways you can proactively work to lower the costs. 

1. Credit Score

Most insurance providers consider your credit score when determining insurance rates. Maintaining a good credit score can help individuals maintain a lower insurance premium. However, those with poor credit scores often need to pay more since they are seen as being higher risk. 

Factors that impact your FICO® credit score include:

  • Length of credit history
  • Payment history
  • Credit mix
  • Amount owed
  • New credit 

Keep in mind that credit score is only one factor used by insurers to set premiums. 

2. Driving Record 

Your driving record can significantly impact your insurance premium costs. Those with clean driving records without any traffic violations or accidents tend to pay lower insurance premiums. However, policyholders who have been in vehicle accidents and accrued traffic violations may pay for higher insurance premiums. Your insurance provider can increase your premium for:

  • Speeding tickets
  • DUIs and DWIs
  • Parking tickets

Your insurance may provide safe driver discounts to those with good driving records and who are accident-free for a required period. These discounts can decrease your insurance premiums. 

3. Coverage Levels and Types

Your insurance rates can be significantly affected by the coverage type and insurance level you opt for. Depending on where you reside, your state has regulations and criteria for minimum policy coverage. 

For example, Washington requires drivers to have the following minimum coverage:

  • $25,000 per person for bodily injury or death in an accident
  • $50,000 per person for bodily injury or death of any two people in an accident
  • $10,000 of injury to or destruction of property of others in an accident

Depending on other factors, like your vehicle type and whether it’s leased, you may require additional coverage on top of the minimum state requirements. 

4. Claim History

Similar to your driving record, you want to keep your claim history as unscathed as possible. However, accidents happen, whether they result from your actions or those of another driver. Multiple filed claims can impact premium costs, especially if they are large claims, like a totaled vehicle. Plus, claims have a long-lasting impact—an at-fault accident can increase your rates for at least three years following the claim.

5. Location 

Insurance premiums can greatly vary by location, especially if you live in a city versus a more rural area. Insurance premiums in each state are affected by various factors, including:

  • Rate of uninsured motorists
  • Frequency of filed claims
  • Minimum insurance limits

Things like road conditions and crime rates can also impact your auto insurance. For example, If you live in an area with high auto theft rates and poorly planned roads that are prone to cause accidents, you’ll likely be paying higher insurance rates. 

6. Type of Vehicle

When insurers determine insurance premiums, they consider vehicle types. Certain car models have a lower likelihood of ensuring the safety of passengers or cost more to repair in the case of an accident, leading to higher insurance rates. 

Vehicles that typically have higher rates are:

  • Smaller cars: Compact vehicles sustain more extensive damage in a crash, so they’ll usually have higher coverage rates. 
  • Leased cars: Leasing companies typically require full coverage for leased vehicles, including comprehensive and collision coverage, to cover damage in a potential accident. 
  • Cars with premium features: Trim levels and technological features, such as touch screens, can be expensive to repair when damaged. Providers keep this in mind when providing a premium. However, a vehicle with advanced safety features is at lower risk, resulting in a lower premium. 

Vehicles that typically have lower rates are:

  • Small SUVs and minivans: Safer and bigger cars tend to have the most reasonable insurance rates. 
  • Older cars: Most car values depreciate over time. In the case of an accident, your provider will need to pay out less than a newer vehicle. The exception is collector and classic vehicles. 

Overall, newer, luxurious, smaller vehicles tend to have more expensive premiums.

7. Gender or Age

Gender can impact your insurance premiums in the majority of states. However, there are states that have banned gender in insurance rating, including:

  • California
  • Michigan
  • Massachusetts
  • Pennsylvania 
  • North Carolina
  • Montana
  • Hawaii

Your age is another uncontrollable factor that impacts your insurance rates. Your insurer will likely charge you more if you have young drivers under 25 on your insurance policy. This is because they’re viewed as less experienced drivers with a higher risk of filing a claim. 

8. Insurance Company

Rates vary across insurance providers. It’s easy to stick to renewing the same policy every year, but you could be losing out on savings by switching insurance companies. Among the leading auto insurance companies across the country, the average annual car insurance rate stands at $1,547 per year. Yet, a driver with identical coverage may pay as little as $1,022 with one company or as much as $2,135. 

9. Driving Patterns

When you apply for insurance, expect your insurance provider to inquire about your occupation and residence. How often you drive and how much time you spend behind the wheel can increase your insurance premiums. 

Those with longer work commutes increase their risk of being in an accident while they’re on the road. If you work in an expensive city and live in the suburbs outside the city to save on housing costs, you could, unfortunately, be paying a higher insurance rate. 

10. Deductibles

Your deductible is the amount you would need to pay if your car is damaged and you file a claim. Your insurance provider pays the remaining total cost to fix your vehicle. For example, if you have a $500 deductible and file a claim for $2,500 in damages, you’ll need to pay the $500 and your insurance will cover the final $2,000. 

If you pay for a lower deductible on your policy, there’s more risk for your insurance provider. Therefore, you’ll likely have to pay for higher insurance premiums. 

11. Policy Add-ons 

Take a look at your policy add-ons. You may be paying for additional coverage you don’t currently need. Evaluate whether it’s necessary to cover items like:

  • Car rental coverage
  • Roadside assistance
  • Comprehensive and collision coverage

While some of these additional coverage items can be beneficial, they aren’t essential expenses. 

12. Car Insurance History

Your car insurance history can impact your insurance premium costs. If you have lapses in your insurance history, periods where you didn’t hold insurance, you can be penalized with higher premiums. Reasons for having gaps in your insurance history include:

  • Being dropped from your insurance provider
  • Your insurance expires and you can’t review your policy
  • You don’t have a vehicle and therefore don’t require auto insurance

You should always have auto insurance when you own a vehicle. Consider acquiring nonowner car insurance if you don’t own a vehicle—it provides coverage when driving cars you don’t own and prevents future premium increases when you do own one.

5 Ways to Lower Your Car Insurance Premium 

As noted above, various factors can skyrocket your car insurance costs. Luckily, there are steps you can take to help lower your premiums and keep more money in your pocket.

1. Maintain a Good Credit Score

Your credit score can greatly impact how expensive your premium is. Improving your credit can help you find lower premiums in the future. Actions that can potentially improve a credit score is:

  • Reviewing your credit report for inaccuracies and errors and correcting them
  • Paying off any outstanding revolving debt
  • Opening a secured credit card if you don’t qualify for a traditional card 
  • Completing payments on time

Improving your credit takes time, especially if you have multiple derogatory marks on your report. Be patient and smart while building your credit back up. 

2. Get Rid of Unnecessary Coverage 

Review your current coverage and evaluate whether you’re paying for add-on coverage you don’t need. For example, if you aren’t frequently renting cars, you likely don’t need car rental coverage. If you do rent a car for occasions like a business trip or vacation, your insurance should cover any damage caused to the rented vehicle.

3. Bundle Your Policies

For homeowners, bundling your home and auto policies can help lower your premiums. We recommend comparing bundling quotes from both of the providers before deciding which provider policy to cancel. Not only can you potentially save on both your premiums, but you will also be able to manage these expenses with one provider.

4. Raise Your Deductible  

Opting for a higher deductible on your car insurance can help lower your premium rate. Your deductible is what you would pay “out of pocket” in a claim. However, you should be able to pay your deductible in case of an accident. If you increase your deductible too much, your insurance won’t cover smaller damages and repairs. 

5. Compare Multiple Quotes

Has it been a while since your insurance premium was set? Shopping around at different insurance providers is the easiest way to get a lower insurance premium. If it’s time to renew your policy and you have a clean driving record, it may be a good time to compare quotes and see if other providers can provide a lower premium. 

FAQ

Below are frequently asked questions about car insurance expenses and factors. 

Does My Credit Score Affect My Car Insurance Rates?  

Your credit score is factored in when your provider calculates your insurance premiums. Those with poorer credit scores (below 580 on the FICO scale and below 601 on the VantageScore® scale) tend to pay higher rates than those with good credit scores. Improving your credit score will help you secure favorable insurance rates and in other financial situations, like when you’re applying for a loan. 

How Can I Lower My Auto Insurance Premiums? 

There are a few actions you can take to potentially lower your insurance premiums, including:

  • Purchase a smaller, older vehicle
  • Remove unnecessary policy add-ons
  • Improve your credit 
  • Raise your deductible 
  • Bundle your home and auto policies
  • Shop around for rates 

Why Does It Cost More to Insure an Expensive Vehicle? 

There are several reasons why auto insurance costs are higher for an expensive vehicle. Luxury cars have more expensive parts, such as high-tech and advanced safety features. Also, if your vehicle is severely damaged and declared totaled, your insurance provider will need to cover the value of your car. 

View New Car Loan Rates With Credit.com

Now that you know why your car insurance is so high, it’s time to take steps to reduce your premiums. Credit.com can provide you with a free credit score and credit report so you can see where you need to start working on your credit and lowering your premium rates. 

If you’re shopping for a new auto loan, Credit.com offers custom  that won’t impact your credit. Get prequalified and see your rates today.

Source: credit.com

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One rule of thumb when buying a home is to not spend more than three times your annual salary. If you earn $60K a year, that means you can afford to spend around $180,000 on a house, maybe a bit more if you have little or no other debts. However, depending on where you want to live, interest rates, and how much debt you’re carrying, that figure could change significantly.

This article looks at the factors you should consider when deciding how much house you can afford. Following this guide is the best way to get a realistic idea of how much house you really can get on a salary of $60,000.

What Kind of House Can I Afford With $60K a Year?

A salary of $60,000 is below the national median income of $74,580, according to Census data. While you will probably qualify for a mortgage in most states with that salary, it won’t buy you much of a home in areas with a high cost of living, such as New York or California.

How much house you can afford on $60,000 a year depends on how affordable your city is, your debt-to-income ratio (DTI), interest rates, and how much you can save for a down payment.
💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Your Debt-to-Income Ratio

Another rule of thumb is the 28/36 rule. This rule holds that you should spend no more than 28 percent of your gross income on overall housing costs (including mortgage, taxes, and insurance) and no more than 36 percent on all debt combined (mortgage, credit card bills, car payment, student loan, etc.).

So, if you earn $60,000, your housing costs should be less than $16,800, or $1,400 a month, and your debt and housing costs should not exceed $21,600, or $1,800 a month. This calculation reflects your DTI ratio. To get a sense of how much you might be able to borrow and still walk away under your 28/36 maximums, try putting your numbers into a home affordability calculator.

Lenders look at how much debt you have when they determine if you qualify for a mortgage. From the lender’s point of view, the less you are paying each month in debt, the less likely you are to default on your mortgage loan, and the better the loan terms they can extend. A higher ratio means you are using more of your income to cover existing debt.

Your Down Payment

How much do you have saved up for a down payment? Your down payment directly affects how much you will have to pay each month in principal and interest. According to the National Association of Realtors®, the average first-time buyer pays about 6 percent of the home price for their down payment, while repeat buyers put down 17 percent. The more you put down, the lower your monthly housing cost. Whatever your salary, you can borrow more and buy a more costly house if your monthly payments are less.

Home Affordability

How affordability is a measure of how affordable homes are in a certain area. Some areas have a higher cost of living, higher average house prices, and higher property taxes. For example, New Jersey has high property taxes, but South Carolina and Mississippi tend to have low property taxes. It also costs more to buy necessities in New Jersey than South Carolina or Mississippi.

Your credit score is another factor to consider in the home affordability equation. A higher credit score will mean you should qualify for a lower interest rate with a lender and better loan terms. Better loan terms mean (you guessed it) lower monthly payments, which might give you the bandwidth to borrow a little more.

How to Afford More House with Down Payment Assistance

Federal, state, and local government, private entities, and charitable organizations offer down payment assistance in the form of low-rate loans, cash grants, tax credits, and interest rate reductions. Some of the programs are offered to specific professionals, such as nurses or teachers, first-time homebuyers, and some programs are neighborhood-based.

Property tax abatement and federal tax credits to first-time buyers are applied automatically. However, the U.S. Department of Housing and Urban Development (HUD) maintains a semi-complete list of programs listed by state, county, and city. Note that applying for down payment assistance can add weeks or months to the homebuying process.

Here are typical down payments for various types of mortgages. Learn more by visiting a home loan help center.

•   Conventional mortgages require a down payment that can be as low as 3%.

•   FHA loans backed by the Federal Housing Administration require 3.5% down.

•   VA mortgages from the U.S. Department of Veterans Affairs require 0% down.

•   United States Department of Agriculture (USDA) loans offer loans to people in rural areas with no down payment.

Home Affordability Examples

Below are some hypothetical examples for buyers who make $60,000 a year with different savings for a down payment and monthly debt payments. The interest rate is 7%, and property tax rates are assumed to be average.

The Saver with a Down Payment

Gross annual income: $60,000
Amount of money for a down payment: $12,000
Monthly debt: $250
Property taxes: 1.12%

SoFi estimates that you can afford a home that costs $120,000. Bear in mind that you can expect to pay closing costs of around $4,800 in addition to the monthly charges below. Here is a breakdown of the costs:

Home Loan: $108,000
Down Payment: $12,000
Total Monthly Payments $953

•   Principal and Interest: $719

•   Property Taxes: $113

•   Private Mortgage Insurance: $90

•   Homeowners Insurance: $31

The Buyer with A Bigger Down Payment and Some Debt

Gross annual income: $60,000
Amount of money for a down payment: $25,000
Monthly debt: $300
Property taxes: 1.12%

In this scenario, you might comfortably afford a home that costs $250,000 (again, closing costs would come into play). Here is a breakdown:

Home Loan: $225,000
Down Payment: $25,000
Total Monthly Payments $1,615

•   Principal and Interest: $1,127

•   Property Taxes: $234

•   Private Mortgage Insurance: $66

•   Homeowners Insurance: $71
💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.

How to Calculate How Much House You Can Afford

Keeping a budget to track your monthly expenditures is the first step to calculating how much house you can afford. Once you know how much you are spending each month on food, entertainment, your car, clothing, and utilities, you can add up these expenses and subtract them from your monthly income (don’t include rent here). What you have left is the amount you can afford to spend on housing expenses.

If you spend no more than 25 to 28% of your monthly income on housing, and your monthly income is $5,000, you can afford to spend $1,400 on mortgage and housing expenses.

You can also try putting different numbers into a mortgage calculator to see how different combinations of down payment amount or home cost affect monthly payments.

How Your Monthly Payment Affects Your Price Range

Your monthly payment is made up of principal and interest. If you can afford to pay more each month, you can afford a bigger house. That is, provided you don’t have too much debt. However, if you can, coming up with a bigger down payment in the beginning will likely reduce the interest rate offered by your lender and your monthly payments. You should feel comfortable with the cost of your monthly housing expenses going into a home purchase, but if your earnings or credit score increase notably after a few years, you can always look at a mortgage refinance.
💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.

Types of Home Loans Available to $60K Households

Conventional loans, FHA loans, USDA, and VA loans are the common loans available.

•   Conventional loans. These are the most common. They typically require a credit score of at least 620. Some will allow a down payment as low as 3 percent, but that will mean your monthly payments will be higher because you will have to borrow more.

•   FHA loans. FHA loans provide a percentage of the cost of a home depending on the buyer’s credit score. Home buyers with a credit score over 580 can borrow up to 96.5 percent of a home’s value. Home buyers whose credit scores are between 500 to 579 can qualify for a loan as long as they have a 10 percent down payment.

•   USDA: These loans serve borrowers earning below a certain income level who want to buy homes in designated rural areas.

•   VA: VA loans require no down payment and are offered to qualified military service members, veterans, and their spouses.

The Takeaway

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.

When calculating how much a lender might extend to you depends on your debt-to-income ratio, the cost of living and property taxes in the area you want to live, interest rates, and how much you have saved for a down payment.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $60K a good salary for a single person?

A salary of $60,000 is below the national median income which was $74,580 in 2022, according to Census data, the national median income was. On this income, you might struggle to buy a home in areas with a high cost of living unless you have a large down payment.

What is a comfortable income for a single person?

Average monthly expenses for one person in 2022 totaled $3,693, or $44,312 annually, according to the U.S. Bureau of Labor, so earning more than this amount would be a comfortable income as long as the cost of living where you live isn’t significantly above average, which varies widely among the states. But what any individual considers comfortable will depend on their spending habits.

What is a liveable wage in 2023?

A liveable wage, according to the Massachusetts Institute of Technology, was $104,07 per year before taxes in 2022. This for a family of four or two working adults with two children.

What salary is considered rich for a single person?

An income of $540,009 per year puts a person in the top 1% earnings category, according to the most recent IRS data.

Photo credit: iStock/Sundry Photography

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com