What Income Do I Need To Afford A $550K House? | Bankrate (2024)

With a budget of $550,000, you’re in pretty comfortable homebuying territory. The median national home price in September was well below that at $394,300, according to the National Association of Realtors. But determining whether you can afford a $550,000 purchase is another matter. The answer depends on your income, the amount of your down payment, the interest rate on your mortgage loan and more.

Bankrate’s mortgage calculator can help you determine how much income is needed for a $550K home purchase. With a 20 percent down payment on a 30-year loan, assuming a 7 percent interest rate, your monthly principal and interest payment will be $2,927. That figure doesn’t account for such expenses as property taxes and home insurance premiums, though — to factor in these additional costs, which will vary depending on your location, let’s round it up to $3,500 per month. Annually, that amounts to $42,000 in mortgage payments.

As a general guideline, it’s often recommended to limit your housing expenditure to no more than about one-third of your income. And so, to determine approximately how much income you would need to afford a $550K home purchase, triple $42,000: You’d need an annual income of at least $126,000.

Keep in mind that these calculations do not include the large amount of savings you’d need first, to cover upfront closing costs and the down payment — 20 percent of $550,000 is $110,000, a significant amount to pay all at once.

Income to afford a $550K house

When it comes to buying a home and assessing how much of a mortgage payment you can comfortably afford, experts generally advise following a guideline called the 28/36 rule. It states that you should spend no more than 28 percent of your income on housing costs (a little less than a full third) and no more than 36 percent of your income on all of your debt payments, including housing.

Now, let’s apply that rule to an annual income of $126,000.

  • A $126,000 salary breaks down to $10,500 per month.
  • Limiting housing costs to 28 percent of your monthly income would cap your mortgage payments at $2,940.
  • Limiting your total debt to 36 percent of your monthly income would cap your debt payments at $3,780 — giving you a $840 cushion to cover not just your full housing payment but also your credit card bills, car payments and any other debt you carry.

Bear in mind that this does not account for the ongoing costs of homeownership, such as utilities, property maintenance and the unexpected repairs that pop up from time to time. In addition, don’t forget to account for your location, which plays a significant role in home affordability. Your $550,000 will go a lot further in some markets than others, and there are a number of desirable areas across the country where median home prices are right on target for you. For example, September’s median home price in Salt Lake City, Utah, was $547,500, according to Redfin data, and in Austin, Texas, it was $548,800.

What factors determine how much you can afford?

Salary is merely one of many variables to consider when determining how much house you can afford. You’ll also want to keep the following factors in mind as you crunch the numbers:

  • Down payment: The larger the down payment you have available, the more affordable your monthly mortgage bill will ultimately be. That’s because when you bring more money to the transaction upfront, you don’t need to borrow as much from a lender, thus reducing your monthly payments.
  • Type of mortgage: You don’t necessarily need to pay a steep 20 percent down payment — there are plenty of loan options that require much less if you qualify, which lets you avoid having to bring such a significant amount of money to the table. However, putting down less means a bigger loan and more interest to be paid, so if you can swing the $110,000 for a 20 percent down payment, you’ll be better off long-term.
  • Credit score: Your credit score is one of the most impactful aspects of your mortgage application. The higher your score, the lower the interest rate you’ll pay, which allows your homebuying dollars to go further and can save you thousands over the life of the loan.
  • Loan-to-value and debt-to-income ratios: Lenders will look closely at your LTV, a measurement of the loan amount you’re seeking as compared to the value of the home you want to buy. Your DTI, which measures your total monthly debt against your gross monthly income — essentially the 36 of the 28/36 rule — will also be carefully scrutinized.
  • Assistance programs: Across the country, there are down payment assistance programs that can help make a home purchase more affordable for those who qualify. Your high income may make you ineligible, but it varies by market so it’s worth checking. These types of programs, typically offered at the local, state and federal level, as well as by some banks, provide funding to help cover down payment and closing costs. And if you’re a first-time homebuyer, there are specific programs tailored to your needs as well.

Stay the course until you close

Once you begin the mortgage-application process, you’ll have to wait several weeks or longer for closing day to arrive. During this time, it’s important to remain financially disciplined and not make any major purchases or changes that could impact or decrease your credit profile. Lenders are looking for stability — if you switch jobs or apply for a bunch of new credit cards, for example, they could very well change their mind about approving your loan.

Having a trusted real estate agent by your side to help you navigate the homebuying process can make the experience far less stressful. An agent will help you negotiate the most competitive deal possible, ensure that the paperwork is in order and make sure there are no hiccups as you proceed through closing.


  • According to Bankrate’s mortgage calculator, assuming you bring a 20 percent down payment to the table and take out a 30-year loan at a 7 percent interest rate, your monthly principal and interest payments on a $550K home will be $2,927. But once you include such expenses as property taxes and home insurance, which vary widely depending on where you’re located, the total monthly payment might be closer to $3,500.

  • Following the commonly used 28/36 rule, which states that your housing costs should not exceed about a third, or 28 percent, of your income, you’d need to earn at least $126,000 a year to comfortably afford a $550,000 home. But don’t forget that there are also upfront costs to consider, like closing costs and a down payment — a 20 percent down payment on a $550K purchase is a significant $110,000.

What Income Do I Need To Afford A $550K House? | Bankrate (2024)


What Income Do I Need To Afford A $550K House? | Bankrate? ›

What salary do I need to afford a $550K house? Following the commonly used 28/36 rule, which states that your housing costs should not exceed about a third, or 28 percent, of your income, you'd need to earn at least $126,000 a year to comfortably afford a $550,000 home.

Can you afford a house making $50,000 a year? ›

The 28% of your income rule

If you earn $50,000 per year, you earn about $4,166.67 per month. At 28% of your income, your mortgage payment should be no more than $1,166.67 per month. Considering a 20% down payment, a 6.89% mortgage rate and a 30-year term, that's about what you can expect to pay on a $185,900 home.

How much should I make to afford a 500K home? ›

In today's climate, the income required to purchase a $500,000 home varies greatly based on personal finances, down payment amount, and interest rate. However, assuming a market rate of 7% and a 10% down payment, your household income would need to be about $128,000 to afford a $500,000 home.

How much down payment for a 550K house? ›

Putting down the standard 20% can help you avoid paying mortgage insurance and interest and could save you thousands of dollars. So you can expect to pay between $16,500 and $110,000 as a down payment on a $550,000 purchase. Keep in mind, besides the down payment amount, you will also have to factor in closing costs.

How much is a downpayment on a 500K house? ›

So, if your mortgage requires that you put down, say, 3%, the down payment needed for a $500K house would be $500,000 x 3% = $15,000. And a 20% down payment would require $100,000 ($500,000 x 20% = $100,000). You may be able to do those calculations in your head or using a calculator.

How much house can I afford if I make $36,000 a year? ›

If you make $3,000 a month ($36,000 a year), your DTI with an FHA loan should be no more than $1,290 ($3,000 x 0.43) — which means you can afford a house with a monthly payment that is no more than $900 ($3,000 x 0.31). FHA loans typically allow for a lower down payment and credit score if certain requirements are met.

Can I afford a house on 40K a year? ›

If you have minimal or no existing monthly debt payments, between $103,800 and $236,100 is about how much house you can afford on $40K a year. Exactly how much you spend on a house within that range depends on your financial situation and how much down payment you can afford to invest.

How much do you need to make to afford a 550K mortgage? ›

As a general guideline, it's often recommended to limit your housing expenditure to no more than about one-third of your income. And so, to determine approximately how much income you would need to afford a $550K home purchase, triple $42,000: You'd need an annual income of at least $126,000.

What credit score is needed for a $500,000 house? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.

How much salary to afford a 600k house? ›

The principal, interest and property mortgage insurance on $600,000 house with a 15% down payment and a 30-year, fixed-rate mortgage with 7% rate would cost $3,662. To afford this, you would need a monthly income of about $13,079 or an annual income of about $157,000.

Is $2000 a good down payment on a car? ›

If you're considering a car that costs $25,000, putting down between $2,000 and $4,000 would be wise. However, the true answer to this question depends on your negotiation strategy. If you can negotiate a lower price or better terms, putting more money down may not save you much interest.

How much house can I afford with a $1500 monthly payment? ›

If you bring the national average down payment of 6% to closing and have a 7.69% rate on a 30-year fixed mortgage, that's just shy of $1,700 a month in principal and interest. What does $1,500 buy with those same terms? About $225,000 worth of house, give or take.

Is 50 down payment good for a house? ›

Putting 50% down on a home could minimize the amount of interest you pay throughout the life of your loan. But a 50% down payment may be a lot of cash to tie up in a home, and you might risk having to borrow more expensively down the line.

How much money should you have saved to buy a 500K house? ›

A 20% down payment option is a common benchmark for homebuyers. A 20% down payment option gets recommended often because it avoids the need for private mortgage insurance (PMI). For a $500,000 home, a 20% down payment would be $100,000.

How much is the monthly payment for a 500K mortgage? ›

Estimated Monthly Payments on a $500K Mortgage

As noted above, your estimated monthly payment for a $500K mortgage will be $3,360.16, assuming a 30-year loan term and an interest rate of 7.1%. But this payment could range between $2,600 and $4,900 depending on your term and interest rate.

How much money should you have before buying a house? ›

A good number to shoot for when saving for a house is 25% of the sale price to cover your down payment, closing costs and moving expenses. (This amount is separate from saving up 3–6 months of your typical living expenses in a fully-funded emergency fund—which I recommend you do first, before saving up for a home.)

Can you live off 50k a year? ›

What Can I Afford With $50,000 a Year? The answer depends on where you live. For the top 30 most populated cities in the U.S., you need between $20K and $35K a year to cover basic expenses, including food, medical costs, housing, transportation, taxes, and other expenses.

Can I afford a 300k house on a 60k salary? ›

An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.

What car can I afford with a 50k salary? ›

If you make a $50,000 gross salary, after taxes (depending on where you live) your monthly take-home pay is roughly $3,230. Based on the 10% rule, you could afford, at most, a $323 monthly car payment. If you take out a 60 month (5 year) auto loan at 8% interest, you can afford a $17,000 car.

How much house can I afford if I make $45000 a year? ›

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.

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