How Much House Can I Afford On $60K?

According to data from the Bureau of Labor Statistics, the median annual full-time salary based on weekly wages was $58,084 in 2023. The data includes anyone over the age of 16. Because your earnings tend to go up as you get older, it’s fair to round that up. But you may be looking at home prices and asking yourself, “How much house can I afford with a $60K salary?”

The Budget Range

The reality is that what you can afford is highly dependent on several factors, so there’s no universal answer to the question of even a range for your budget. But we can give you an idea based on some assumptions and invite you to put your own numbers in our Home Affordability Calculator.

Any calculator asking you about the home you can afford is going to want to know your yearly income before taxes, how much cash you have on hand and the amount you spend toward debt – car payment, student loans, personal loans, minimum credit card payments, etc. We’ve assumed $15,000 in savings and $1,400 in debt payments, buying in a suburb of Detroit.

Based on this, you could be approved for a budget range of $101,551 – $164,800 with a 6.625% interest rate for a 30-year conventional loan.¹ The payment at the top end is $1,024.50. Lenders preapprove you for the highest amount possible because they need to see the most risk they’ll take on. But you don’t have to spend that amount if it’ll stretch your budget thin.

Notwithstanding your maximum loan amount, the range comes from several affordability factors we’ll get into including your debt-to-income ratio (DTI), down payment and where you’re looking to buy. You should always look at your budget and determine your own comfort.

So How Much House Can I Afford?

How much house you can afford is based on several factors, but the two biggest are the size of your down payment and what your monthly payment ends up being. In addition to interest rates, the monthly payment you can afford is based upon your DTI, which compares the amount of money you spend on existing debt payments to your total monthly income.

The 28/36 Rule

Mortgage lenders have different standards depending on the ones you qualify for, but many recommend the 28/36 rule when it comes to determining home affordability. This guideline says the percentage of income going toward your mortgage should be no more than 28% and you spend no more than 36% of that income on all of your debts combined.

When it comes to monthly housing costs, the following equation, your housing expense ratio, applies:

Mortgage Payment

___________________________ × 100

Pretax Monthly Income

Ideally, this should be no more than 28% when you do the calculation. Once you’ve done the math here, you should be able to figure out how much you can afford by adding back in your other debts and comparing to your total income.

The following formula makes up your DTI: 

Total Monthly Debt Payments

______________________________ ×100

Pretax Monthly Income

Including your mortgage payment, you want your total DTI to be no higher than 36% under the rule.

This is just a guideline. There are other guidelines mortgage lenders apply depending on the type of home loan you get.

For FHA or VA loans where your credit score is between 580 – 619, Rocket Mortgage® requires a housing expense ratio of no more than 38% with total debts no higher than 45%, but if your credit score is 620 or higher, you may have more flexibility in terms of the amount of existing debt you have. In contrast, conventional loans require a total DTI no higher than 50%.

Mortgage Breakdown On A $60K Salary

When it comes to your mortgage payment, it’s not just the loan that you’re paying for. Let’s break down the pieces of a mortgage payment:

• Principal: The principal is the portion of your payment that goes toward your mortgage balance each month.
• Interest: Your interest rate is the cost of the loan financing. Principal and interest have a relationship. As you pay down your balance, less and less of your payment goes toward interest. As you near the end of the loan, most of your payment goes toward the balance.
• Property taxes: These are taxes based on the value of your home. They typically pay for things like public schools and city services.
• Homeowners insurance: A homeowners insurance policy protects you from things like property damage, theft and liability for what happens on your property. Mortgage lenders require you to have coverage that would rebuild your home in the event of a catastrophic loss. 

Beyond these, you may have other costs that are built into your mortgage payment depending on your situation:

• Mortgage insurance: If you have a down payment of less than 20% of your home value, private mortgage insurance (PMI) is required on conventional loans. It’s also required on all FHA loans, often for the life of the loan.
• Homeowners association (HOA): If you live in a homeowners or condo association, you’ll pay periodic dues for the upkeep of things under the association’s purview in the agreements you sign when you moved in. This could be fees for shared amenities, exterior maintenance, and trash or snow removal.

Of course, interest rates also play a huge role in what you can afford. If interest rates rise or fall, it has an effect on the payment and your buying power. Ultimately, the right time to buy is whenever you’re financially ready because you can’t predict how the market will move. But you can feel empowered to refinance into a lower rate if rates fall.

Factors That Impact How Much House You Can Afford

There are several factors that play a role in how much house you can afford. Let’s go over the different variables that impact affordability.

Credit Score

The credit score is important because it can impact not only the home loan you qualify for which determines the minimum down payment, but also the amount of existing debt you can carry into the mortgage transaction. For example, you may be able to qualify with slightly higher debt levels on an FHA loan if your credit score is 620 or higher. 

We’ll go over the requirements for numerous loan options, but you should be aware that VA loans are only available to eligible active-duty service members, National Guard personnel, reservists, veterans and eligible surviving spouses. Also, Rocket Mortgage doesn’t offer USDA loans at this time. Here are the minimum credit scores for various loan options:

*Rocket Mortgage minimum. FHA allows you to qualify with a 500 credit score with 10% down.

**Rocket Mortgage minimum. The VA doesn’t specify a minimum credit score.

Down Payment

A down payment is the percentage of the purchase price paid upfront for the loan. In addition to your credit score qualifying you for better mortgage rates, a higher down payment also means a lower rate because the lender has to take less risk. Higher down payments also mean lower monthly payments because you paid more at the start of the loan.

Substantial down payments can also mean avoiding mortgage insurance on conventional loans and limiting the time you have to pay it on FHA loans. Mortgage insurance comes off conventional loans when you reach 20% equity, but if you come in with that, you don’t have to worry about it.

With FHA loans, you can’t avoid an upfront mortgage insurance premium of 1.75% paid at closing or built into the loan. But monthly mortgage insurance payments come off after 11 years if you make a down payment of at least 10%. Otherwise, they stick around for as long as you have the loan. Many people refinance into a conventional option when they reach 20% equity.

The following table represents minimum down payments for the loan types we’ve covered here:

*Rocket Mortgage minimum. FHA allows credit scores from 500 – 579 with 10% down.

**Depending on first-time home buyer status and/or income

Closing Costs

Closing costs represent the fees associated with buying or refinancing a home that can cover the lender’s costs to originate the loan surges processing and underwriting, but also appraisals and paying the closing agent or real estate attorney. Another thing often negotiated between buyers and sellers is who pays real estate agents.

You’ll likely also pay to set up and fund your escrow account and the county or parish gets a fee for deed recording. Total closing costs range from 3% – 6% of the purchase price.

Debt-To-Income Ratio

Your debt-to-income ratio before getting a mortgage is important in determining your affordability. Lower DTIs allow you to be able to fit a higher monthly payment in the budget which can have a tremendous impact on the loan amount you’re approved for.

From a loan qualification perspective, it’s easiest to qualify for a conventional loan if you keep your DTI at 43% or less. Going with an FHA or VA loan may give you more flexibility to qualify with a higher DTI if your score is 620 or better, but each loan is evaluated based on a number of other factors before a final determination is made.

Current Interest Rates

Along with down payments, interest rates probably have the single biggest impact on affordability because they’re directly related to your monthly payment. Higher interest rates have a negative impact on your housing budget, while lower interest rates mean you can afford more.

If you’re looking to lower your mortgage payment, you can buy mortgage points, which function as prepaid interest. This means you’ll have to pay more in closing costs, but if you plan to stay in the home long enough to recoup the savings on your monthly payment, the trade makes sense.

Mortgage Terms

A mortgage term is how long you have to pay off your home loan. Shorter terms mean paying less interest over the term. However, longer terms offer cheaper payments because there’s more time to pay off the loan.

Location And Amenities

Big cities like New York and San Francisco are going to have higher house prices than most of middle America. But prices can also vary widely even from neighborhood to neighborhood. You’ll pay more for a two-story house then you will a moderately sized ranch as well. Then there are the features of the house. If it has a pool or granite countertops, expect to pay more.

Beyond the city and the house itself, other factors that impact price within a neighborhood include distance to business hubs, school ratings, medical facilities, entertainment and shopping. 

Maintenance And Repairs

When you buy a home, you have to consider what kind of shape the house is in. If it’s a safety issue, the home may not pass an appraisal and you’ll have to negotiate with the seller as to who pays for these repairs. If there are real problems and you have a home inspection clause, you might choose to walk away from the deal.

Of course, things break over time after you move in. It’s generally recommended that you budget 1% – 3% of the purchase price per year for repairs and maintenance, depending on the age and condition of the house.

Taxes And Insurance

Taxes and insurance vary quite widely depending on the property value, your level of insurance coverage and where you’re looking to buy. These are usually included in an escrow account as part of your mortgage payment. 

If you don’t have to pay mortgage insurance, some lenders will let you opt out of an escrow account, but even if you don’t have one, this is part of your housing expense and needs to be accounted for.

What If I Can’t Afford A House On $60K A Year?

You might find it’s difficult to afford a house at a salary of $60,000 per year. Let’s confront the challenge and then go over what you can do about it.

The Challenges With Buying A House

We’ve spent time talking about the amount you can realistically afford in the current market on a $60,000 salary, but it’s time to look the truth in the face: According to data collected by the St. Louis branch of the Federal Reserve, the median house price for the third quarter of this year was $420,400. If that seems like a big number, historically, it is.

So that’s the challenge, but we don’t back down in the face of the odds. You shouldn’t either. There are things you can do to help yourself get approved for higher loan amounts.

Ways To Afford A House With $60K A Year

If you’re looking to up your chances in the eyes of lenders, here’s a brief rundown of several actions you should take:

• Improve your credit score. Higher credit scores lead to lower rates. Monitor your credit for errors. You can dispute anything you don’t recognize. Make payments on time and utilize no more than 30% of your credit card limits. Don’t apply for any credit you don’t need because lenders may view this as a sign that you’re overextending yourself.
• Pay down current debt. If you’re applying for a mortgage soon, the best thing to do is pay out the balances with the highest monthly payments first to get them off your books. This will clear room in your budget for a higher mortgage payment and a higher loan amount.
• Search in more affordable areas. Just because the median U.S. house price is high doesn’t mean home prices are high everywhere. Higher cost areas drive that number way up, but there are other areas that are much more affordable. Even on a neighborhood level, prices can vary quite substantially. Look on different blocks.
• Look into down payment assistance. Down payment assistance can come in the form of grants, deferred loans or forgivable loans. Lenders may also have their own programs. Rocket Mortgage offers ONE+, a 1% down conventional loan option with a 2% grant for those making 80% or less of the area median income where they’re looking to buy.²
• Consider an FHA or VA loan. As long as your credit score is 620 or better, the qualifying DTI on FHA and VA loans is determined on a case-by-case basis. While you have to otherwise be well-qualified, you may be able to get a loan with a slightly higher DTI ratio, meaning you would have more room in the budget to offer more for a house.
• Get preapproved. Preapproval involves sharing your income and assets with a lender and letting them run a credit check. By getting a full picture of your resources as well as your debts, your lender can tell you what you can afford. This is different from a prequalification where everything is a verbal or written estimate. At Rocket Mortgage, we call this Verified Approval³ to avoid confusion. Sellers and their real estate agents can have confidence knowing that you have the documentation to back up the offer you’re making.

The Bottom Line: Homeownership With A $60K Salary Is A Possibility

If you’re trying to find a home in your price range on a $60,000 salary and feel like it’s an uphill battle, that’s understandable. But mountains are meant to be conquered. There are things you can do to help set yourself up for success. Getting your credit in tip-top shape and paying down your existing debt to make room in your budget will help.

The down payment can also be a challenge, but there are down payment assistance options available if you search out the ones in your area. You can also consider something like an FHA or VA loan that allow well-qualified buyers to carry a slightly higher DTI ratio so there’s more room in the budget. Finally, preapproval will make your budget real in the eyes of lenders.

The last thing we’ll say is that it doesn’t have to be your dream house to be your sanctuary from the world, your space to make your own. You may find you live in many places over your lifetime. You may even remodel this home down the line. Nothing is final, but you can always take the leap. If you feel ready, start your approval with Rocket Mortgage.

¹ 30-year Fixed-Rate Loan: An interest rate of 6.625% (7.374% APR) is for the cost of 2.00 point(s) ($3,200.00) paid at closing. On a $160,000 mortgage, you would make monthly payments of $1,024.50. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 97.00%.

² Client will be required to pay a 1% down payment, with the ability to pay a maximum of 3%, and Rocket Mortgage will cover an additional 2% of the client’s purchase price as a down payment, or $2,000. Maximum grant amount is $7,000. Offer valid on primary residence, conventional loan products only. Maximum loan amount of $350,000. Cost of mortgage insurance premium passed through to client effective January 2, 2024. Offer valid only for home buyers when qualifying income is less than or equal to 80% area median income based on county where property is located. Not available with any other discounts or promotions and cannot be retroactively applied to previously closed loans or loans that have a locked rate. This is not a commitment to lend. Rocket Mortgage reserves the right to cancel/modify this offer at any time. Additional restrictions/conditions may apply.

³ Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, assets and debt. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage’s control, including, but not limited to satisfactory insurance, appraisal and title report/search, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close due to a Rocket Mortgage error, you will receive the $1,000. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Rocket Mortgage. Additional conditions or exclusions may apply.