How Much House Can I Afford On A $70K Salary?

Many home buyers are curious about how much they can afford on a $70K salary. It's important to understand that buying a home isn’t only about your income. There are several other factors that come into play when determining how much home you might be able to afford. Additionally, there are assistance programs that are available for people trying to become homeowners, especially for first-time home buyers.

The Quick Answer: Present the Budget Range

Estimating How Much House You Can Afford With $70K A Year

Home affordability is primarily determined by your annual or monthly income as compared to your potential house payment. When trying to determine how much house you can afford, the most important factor is how much money you make. Your annual income is a key part of deciding your home buying budget and how much house you can afford.

Here are a few steps that first-time home buyers can take to determine how much they can spend:

• Find your monthly income
• Identify your budget
• Determine your price range

You can explore different scenarios in our Home Affordability Calculator to learn more.

The 28% Rule

Many people wonder what percentage of their income should go to a mortgage? Most mortgage lenders recommend using no more than 28% of your monthly gross income on a mortgage payment. In addition to that, many lenders also recommend that you spend no more than 36% of your monthly gross income on all your debt payments combined, including your monthly mortgage payment and other house costs.

Mortgage Breakdown On A $70K Salary

If you're looking for examples of what a housing budget looks like on a $70K salary, here are three different scenarios. In each scenario, we assume a 30-year fixed mortgage, an additional $250 a month for property taxes and insurance, and the maximum amount of mortgage that you can afford and still comply with the 28% rule.

Scenario 1:

• 6.5% interest rate
• $25,000 down payment
• Maximum monthly payment on a $70K salary: $1,633.33
• Property taxes and insurance: $250 / month
• Monthly principal and interest payment: $1,383.33
• Maximum mortgage amount: $219,000
• Maximum house value you can afford: $244,000

Scenario 2:

• 7.5% interest rate
• $20,000 down payment
• Maximum monthly payment on a $70K salary: $1,633.33
• Property taxes and insurance: $250 / month
• Monthly principal and interest payment: $1,383.33
• Maximum mortgage amount: $198,000
• Maximum house value you can afford: $218,000

Scenario 3:

• 7.25% interest rate
• $50,000 down payment
• Maximum monthly payment on a $70K salary: $1,633.33
• Property taxes and insurance: $250 / month
• Monthly principal and interest payment: $1,383.33
• Maximum mortgage amount: $203,000
• Maximum house value you can afford: $253,000

Factors That Impact How Much House You Can Afford

While your annual income is an important factor, there are also other factors that contribute to home affordability. Each of the factors below impacts how much house you can afford. Being aware of these factors can help you lower your mortgage payment.

Credit Score

If you're wondering how your credit score affects your getting a mortgage, it primarily impacts your ability to get a mortgage and the interest rate you'll qualify for. While you'll typically need a credit score of 580 to 620, the higher your score is, the lower the interest rate you'll qualify for. That in turn will lower your monthly mortgage payment and allow you to afford a higher-priced house.

Down Payment

Many lenders require a certain percentage of the home's value to be put down as a down payment. Lenders will typically only lend a maximum amount of money to borrowers, based on their income and other factors. So a down payment can impact your mortgage since the higher the down payment that you have, the more house you can afford.

Closing Costs

It's important to understand that your down payment isn't the only money that you may need to bring to closing. There are also closing costs including title insurance, recording fees and other fees that you may be responsible for. Make sure you have enough money for these closing costs in addition to your down payment.

Debt-To-Income Ratio

In addition to the 28% rule, many lenders also have a 36% rule, which says that your total monthly debt payments (including your new mortgage) can't exceed 36% of your monthly income. So while there isn't a set limit on how much debt you can have when buying a home, your debt-to-income ratio (DTI) can affect how much home you're able to afford.

Current Interest Rates

If you're wondering how interest rates impact your home costs, the answer is quite a bit. The higher current interest rates are, the lower the value of a home that you can afford. Check today’s mortgage interest rates.

Mortgage Terms

Different lenders and mortgages have different terms that affect your overall monthly payment. This is one reason why it's a good idea to shop around and compare different lenders and mortgage types to find the one that's best for you.

Location And Amenities

As the old maxim says, the three most important words in real estate are "location, location, location". While $200,000 is likely to buy you a lot of house in the Midwest, it’s unlikely to get you much of anything in San Francisco or New York City. Even within regions and cities, the amount of house you can buy with a set amount of money can vary widely depending on the neighborhood and local amenities.

Maintenance And Repairs

Owning a home can be expensive. In addition to your monthly mortgage payment, it is a good idea to make sure your budget has enough money for regular home maintenance and repairs. It’s suggested that you set an annual budget of 1% - 3% of your home’s price to account for these unexpected events. This is one reason lenders have instituted the 28% rule — to make sure that borrowers have enough money left in their budget for these ancillary costs.

Taxes And Insurance

Mortgage Options For Your $70K Salary

Depending on your situation, there may be several different loan types and mortgage options that may be available to you.

Loan Types

There are several different types of mortgages available to borrowers who make $70K a year. Here are a few of the most common:

• FHA: FHA loans are insured by the Federal Housing Administration (FHA), and often allow borrowers to buy a home with a lower credit score and/or lower down payment amount. You can get an FHA loan making $70K a year.
• USDA: USDA loans are insured by the United States Department of Agriculture. With a USDA loan, you may be able to buy a home with no money down. You must meet specific income requirements and your home must be in an eligible suburban or rural area in order to qualify for a USDA loan. Rocket Mortgage ^® does not offer USDA loans.
• VA: VA loans are insured by the Department of Veterans Affairs. To qualify for a VA loan, you typically must meet service requirements in either the Armed Forces or National Guard to qualify for a VA loan. VA loans can allow you to buy a home with $0 down and lower interest rates than most other types of loans.
• Conventional: Conventional mortgages are the most common type of mortgage. Generally, you can qualify for a conventional mortgage with a minimum credit score of 620 and a debt-to-income ratio of up to 50%.

First-Time Home Buyer Programs

The Bottom Line

Buying a home on a $70K salary is possible, but it may be difficult, depending on other factors like your credit score, the amount of money you've saved for a down payment, your debt-to-income ratio and the housing market where you live. While your annual income is one of the most important factors in determining how much house you can afford, it isn’t the only thing to consider when starting the home buying process.