How Much House Can I Afford with a $70K Salary?

I make $70,000 a year; how much house can I afford?

If you’re an aspiring American homeowner, you may be wondering, “How much house can I afford with a $70K salary?”

If you make $70K a year, you can likely afford a new home between $290,000 and $310,000*. That translates to a monthly house payment between $2,000 and $2,500, which includes your monthly mortgage payment, taxes, and home insurance.

However, your home-buying budget depends on several factors, not just your household income. Depending on factors like your mortgage rate, credit history, and down payment, you might afford more house than the average borrower. Here’s how.

In this article (Skip to...)

• Examples
• Budgeting
• Calculating affordability
• Other factors
• Home affordability tips

*Home price example assumes a 30-year fixed rate of 7.0% on a home purchase with a 0.97% annual property tax rate, $30,000 down payment, and a $600 annual homeowners insurance premium. Your own interest rate and budget will be different. All examples generated using The Mortgage Reports mortgage calculator.

How much house can I afford on $70K a year?

The house you can afford on a $70K income will likely be between $290,000 to $310,000. Aside from your gross monthly income, lenders look at your credit report, down payment, monthly debt payments (including car payments and personal loans), and your estimated mortgage rate, among other things. The local housing market conditions and cost of living where you’re buying are also important considerations.

Maximum home purchase price by down payment

A larger down payment makes homeownership more affordable by reducing the loan amount and the size of monthly payments.

Maximum home purchase price by total debt

While a debt-to-income (DTI) ratio of 36% or less is ideal, it’s not always feasible. Lowering your DTI from 40% to 25% can increase your buying power significantly, by about $130,000 on a $75,000 salary.

Maximum home purchase price by mortgage rate

Interest rates greatly influence the maximum price you can afford for a new home. Lower interest rates make it a good time to buy a house or refinance.

All examples assume a credit score of 740, a 0.97% annual property tax rate, and a $600 per year homeowners insurance premium. All calculations were made using The Mortgage Reports home affordability calculator. See our full list of rate assumptions here.

Budgeting for monthly housing costs

As a rule of thumb, personal finance experts often recommend adhering to the 28/36 rule, which suggests spending no more than 28% of your gross household income on housing. For someone earning $70,000 a year, or about $5,800 a month, this means a housing expense of up to $1,624.

However, your specific situation may allow you to comfortably spend more or require you to spend less. Generally, allocating 25% to 40% of your income on housing is a reasonable range. The cost of living in your area will also impact how much you can realistically afford.

• 28/36 Rule: Spend 28% of your gross income on housing, which is around $1,624 monthly.
• One-Fourth Rule: Allocate 25% of your monthly income ($5,800) to housing for a total of about $1,450 per month.
• One-Third Rule: Dedicate 33% of your monthly income to housing, which is a mortgage payment just under $2,000.
• 40% Rule: If feasible, spending 40% of your income on housing would lead to a $2,300 monthly mortgage payment.

Of course, your house payment is only part of your monthly expenses. You’ll also need to budget for utilities, maintenance, and other costs of homeownership. Plus, you’ll want to make sure you’re saving for retirement and maintaining an emergency fund. Work with a financial advisor to determine a housing budget that works for your entire financial picture.

How to calculate how much house you can afford

Your mortgage lender ultimately determines your purchasing power. However, online mortgage calculators are excellent tools for estimating your housing expenses.

Before using a mortgage calculator, check the latest mortgage rates for a better estimate. Review your credit history and look up rates based on your credit score. Enter your annual income and the mortgage rate into the calculator to find out the maximum house price you can afford and your potential monthly payment.

Consider your total monthly payment

Your monthly mortgage payment consists of four parts: principal, interest, taxes, and insurance (also known as PITI):

• Principal and interest: Monthly payments split between loan repayment (principal) and the cost of borrowing (interest).
• Property taxes: Calculated annually based on home value; included in monthly payments and held in escrow for when taxes are due.
• Insurance: Required homeowners insurance covers damages (e.g., theft, fire, natural disasters). Private mortgage insurance (PMI) may apply with less than 20% down, protecting the lender against default.
• HOA fees / Other: If your home is part of a homeowners association (HOA), you’ll have to pay monthly dues. And don’t forget to budget for ongoing maintenance and repairs.

How your monthly payment affects your price range

Some mortgage calculators do not include all costs that make up your monthly payment, which can lead to an overestimation of what you can afford based on your income. To get a more realistic figure, use a calculator that considers taxes, home insurance, and PMI. You’ll also want to account for any other monthly expenses that lenders don’t factor in, like daycare, car payments, or student loans.

A good loan officer will walk you through all the numbers and help you determine a monthly payment you’re comfortable with, factoring in your total debt. They can also provide a more precise home price range based on current rates and your specific financial situation.

Factors affecting home affordability

Salary is a significant factor in determining how much home you can afford, but other variables also influence your price range. For instance, two applicants each earning $70,000 a year might qualify for a very different amount of money due to varying credit scores, down payments, or monthly debt payments.

Down payment

It’s possible to buy with no money down using a USDA loan or VA loan, though most home loans require a down payment of 3% to 5%.

A larger down payment means smaller mortgage loan amounts and lower monthly payments. Additionally, putting down at least 20% eliminates the need for PMI, making your payments even more manageable. Remember to factor in closing costs, which are typically between 2% and 5% of the loan amount, into your upfront expenses.

Credit score

Your credit score impacts how much house you can afford by influencing the mortgage rate you receive. A higher credit score generally get you lower interest rates, which can significantly reduce the total cost of your loan and the monthly payments.

Mortgage interest rates

Mortgage rates fluctuate daily and vary by lender, so it pays to shop around. Just a half point difference in interest rate can add up to thousands in interest over time and affect the loan amount you qualify for. Look for a competitive fixed rate to lock in your costs.

Debt-to-income ratio (DTI)

When calculating how much home you can afford, lenders look at your debt-to-income ratio, which is the percentage of your monthly income that goes towards total debt payments, including your mortgage. The lower your DTI, the better.

For example, a borrower earning $70,000 a year but also paying for student loans, a car, and credit card debt may qualify for a significantly smaller mortgage compared to someone with the same salary but no consumer debt.

Ideally, your DTI should be 36% or less, though some FHA loan programs allow up to 50% in certain cases. Keep in mind, a high DTI reduces your home buying budget.

Employment history

Lenders value not only the amount but also the stability of your income. Typically, you’ll need to demonstrate two years of consistent employment to qualify for a mortgage. Exceptions exist for first-time home buyers and those without traditional employment records, like self-employed individuals. Consistent income over the past two years is essential, particularly if it comes from commissions.

Loan term

Choosing a longer loan term, such as 30 years instead of 15, results in lower monthly payments. Longer mortgage terms allow you to purchase a more expensive home for the same monthly payment, although it increases the total amount of interest paid over the life of the loan.

Type of loan

The type of loan you choose (conventional, FHA, VA, USDA) can also affect your home buying budget. For example, VA and USDA loans allow zero down payment for eligible borrowers, while FHA loans have more lenient credit requirements than conventional loans.

Understanding these factors will help you better determine how much mortgage you might qualify for and the price range you should target. But everyone’s situation is different. Connect with a lender to review your finances and get personalized home buying advice.

Tips to afford more house on a $70,000 salary

Wondering “how much house can I afford with a 70k salary?” You’re not alone. With careful planning, it’s possible to stretch your buying power on a $70,000 salary. Here are some strategies:

1. Increase your down payment with savings and assistance programs

The bigger your down payment, the more you’ll be able to borrow. Look into down payment assistance programs in your area that provide grants or low-interest loans to help with your upfront costs. We’ve compiled a guide to these DPA programs across every state.

2. Boost your credit score

A better credit score typically translates into lower mortgage rates. Examine your credit report for errors, pay down debts, and make all future payments on time to boost your score.

3. Pay off other debts

Lowering or eliminating monthly payments on things like credit cards, car loans, and student loans will reduce your total debt and allow you to afford a higher mortgage payment. Additionally, avoid taking on new debts, as these can significantly reduce your purchasing power.

4. Consider mortgage insurance

Putting 20% down lets you avoid paying for private mortgage insurance (PMI), but it’s not mandatory. If a large down payment would deplete your savings, it might be better to put down less and pay for PMI. That way, you can buy sooner and start building equity, which may outweigh the cost of PMI. Plus, PMI drops off once you reach 20% equity through your payments.

5. Explore different loan options

Depending on your situation, certain types of loans, like FHA, VA, or USDA loans, might offer more favorable terms or allow a lower down payment than a conventional loan. Comparing different loan programs can help you find the most affordable type of loan for your needs.

FAQ: How much house can I afford with a $70K salary?

Bottom line: How much house can you afford on $70K?

While your household income is important, it’s not the only factor that determines your house budget. The size of your down payment, your other monthly debts, and your mortgage rate all play a role.

Before house hunting with your real estate agent or Realtor, figure out how much you can comfortably spend on a mortgage each month. Then, get preapproved for a home loan to find out how much you can borrow and lock in your interest rate. Knowing your numbers will help you and your real estate agent target the right homes for your budget.