Mortgage Refinancing

How Much Mortgage Can I Qualify For?

How much mortgage do I qualify for? It’s a question all aspiring homeowners want to answer. With the median home listing price in the U.S. right around $280,000, you may wonder if it’s possible for you to become a homeowner. To find out, let’s take a look at how lenders determine a person’s maximum loan amount, and how you can find the best deal!

Mortgage qualification requirements

When figuring out how much house a person can afford, lenders consider the following factors:

  • Annual income.
  • Debt-to-income ratio.
  • Down payment.
  • Interest rate.
  • Loan term.
  • Property tax.
  • Homeowners insurance.
  • HOA fees.

Here’s what you need to know about each of these factors.

Annual income

First, mortgage lenders will assess your annual income, since that’s the source of most of your mortgage payments. The median annual income of homeowners in the U.S. sits at $61,372.

So what’s the maximum percentage of your income that you can borrow on a mortgage?

To give you a ballpark range of what you might afford, you can look to the 28/36 rule. This rule dictates that you spend 28% or less of your income on total housing expenses, and no more than 36% on all your combined debt payments.

Your mortgage payment includes the loan principal, interest, property tax, and insurance (PITI). That means that each month, all these costs combined should not cost you more than 28% of your monthly income.

For example, if you make around the national average of $5,114 per month, your mortgage payment should be $1,432 or less. Here’s a look at the maximum payments for monthly income amounts ranging from $3,000 to $10,000.

Pre-tax Monthly IncomeMax. Mortgage Payment (28%)Estimated Mortgage Amount (30-year)
$3,000$840$302,400
$4,000$1,120$403,200
$5,000$1,400$504,000
$6,000$1,680$604,800
$7,000$1,960$705,600
$8,000$2,240$806,400
$9,000$2,520$907,200
$10,000$2,800$1,008,000

Debt-to-income ratio

Next, lenders will consider how much debt you carry — the second half of the 28/36 rule.

The rule says that your total amount of debt should be equal to or less than 36% of your income before taxes. Your total debt includes the monthly payments towards your mortgage, car loan, student loans, credit cards, and any other outstanding balances. So if you make $5,114 per month before taxes, your total monthly payments toward debt should be $1,841 or less.

Here’s a look at the maximum debt amounts for monthly income amounts ranging from $3,000 to $10,000.

Pre-tax Monthly IncomeMax. Total Debt (36%)
$3,000$1,080
$4,000$1,440
$5,000$1,800
$6,000$2,160
$7,000$2,520
$8,000$2,880
$9,000$3,240
$10,000$3,600

While this is a helpful guideline, each lender will have its own unique underwriting rules, so approval will vary from one to the next. Further, some programs, such as the Federal Housing Administration (FHA), are designed for individuals with higher amounts of debt. This allows for up to 43% debt-to-income. Accordingly, you’ll have to shop around to find a lender that suits your present debt situation.

Down payment amount

Your down payment also strongly affects the size of the loan you can qualify for. This is partially because a large down payment reduces the amount you’re financing, reducing risk for the lender. But it also demonstrates to lenders that you’re able to save up large amounts of money, thus indicating your financial reliability.

Traditional mortgage loans require 20% down. However, loan programs with more lenient down payment requirements have become more common. For example, the FHA loan program requires only 3.5% down, and the Home Ready Mortgage by Fannie Mae only asks for 3% down.

On average, U.S. homeowners put down 11% of the loan amount, according to the National Association of Realtors. And if you need help with your down payment, assistance programs do exist.

Interest rate

A mortgage rate, also known as an interest rate or annual percentage rate (APR), is the percentage of your loan that you will pay each year. Rates vary from one lender to the next, and even from one loan program to the next with the same lender.

Further, the rate you get depends on:

  • The mortgage type you choose.
  • Your loan amount.
  • Whether your interest rate is fixed or adjustable.
  • Points paid.
  • Credit history and score.
  • Annual income.
  • Debt-to-income ratio.
  • And more.

Here’s a look at how your interest rate will impact the cost of your mortgage monthly and overall. For this example, we used the median cost of a home in the U.S. ($200,000), the average down payment amount (11%), and a 30-year fixed interest mortgage.

Fixed APRLoan AmountLoan TermDown PaymentMonthly Payment AmountTotal Finance Charge% of Amount Borrowed Paid for Financing
3.50%$200,0003011%$799.30$109,747.9054.87%
4%$200,0003011%$849.80$127,927.4663.96%
4.50%$200,0003011%$901.90$146,684.0273.34%
5%$200,0003011%$955.54$165,996.5883.00%
5.50%$200,0003011%$1,010.66$185,841.8592.92%
6%$200,0003011%$1,067.20$206,191.48103.10%
6.50%$200,0003011%$1,125.08$227,030.30113.52%
7%$200,0003011%$1,184.24$248,324.50124.16%
7.50%$200,0003011%$1,244.60$270,058.18135.03%
8%$200,0003011%$1,306.10$292,197.27146.10%

Even half of a percentage point can result in a $20k increase in your overall borrowing costs. The more you shop around, the better your chance of getting the lowest rate available to you.

Compare today’s mortgage rates below.

Loan term

Your loan term is the length of your loan. Most lenders offer 15 and 30-year terms. The longer the loan, the lower your monthly payment, but the more you pay in interest overall.

Loan AmountDown PaymentInterest RateLoan Term (years)Monthly PaymentTotal Financing Cost
$200,00011%5%15$1,407.61$75,370.46
$200,00011%5%30$955.54$165,996.58

The loan term you choose will be used to calculate your monthly payment amount and total cost. It’s an essential part of determining the loan amount for which you qualify.

Property tax

Every homeowner has to pay property taxes, so lenders consider them when deciding how much you can afford. In 2016, the average owner of a single-family home in the U.S. paid $3,296 in property taxes. That breaks down to about $275 per month.

Below, you can find the median property tax for each state expressed as a percentage of home value. The states are ranked from the highest property tax to the lowest.

RankStateAverageRankStateAverage
1Louisiana$1,967.0027Kentucky$1,085.00
2Texas$1,937.0028Illinois$1,042.00
3Florida$1,918.0029Hawaii$1,026.00
4Oklahoma$1,875.0030Maryland$1,022.00
5Kansas$1,548.0031Indiana$1,003.00
6Mississippi$1,525.0032California$1,000.00
7Rhode Island$1,496.0033New Mexico$996.00
8Connecticut$1,455.0034Alaska$974.00
9Massachusetts$1,451.0035Virginia$966.00
10Colorado$1,446.0036New Hampshire$965.00
11Nebraska$1,402.0037Michigan$952.00
12Alabama$1,386.0038Iowa$945.00
13Arkansas$1,348.0039Pennsylvania$927.00
14Minnesota$1,340.0040West Virginia$917.00
15New York$1,309.0041Vermont$898.00
16South Carolina$1,285.0042Maine$866.00
17Missouri$1,280.0043Ohio$850.00
18North Dakota$1,239.0044Washington$822.00
19D.C.$1,225.0045Delaware$816.00
20Georgia$1,200.0046Arizona$803.00
21Tennessee$1,185.0047Wisconsin$762.00
22New Jersey$1,174.0048Nevada$742.00
23Montana$1,130.0049Idaho$703.00
24South Dakota$1,125.0050Utah$664.00
25Wyoming$1,120.0051Oregon$659.00
26North Carolina$1,098.00TotalUnited States$1,192.00

But remember, property tax varies by county. For a more exact estimate, ask your realtor about property taxes in your area.

Home insurance

Mortgage lenders require homeowners insurance, so this cost will be factored into how much you can afford. The most recently reported average premium of homeowners insurance in the U.S. was $1,192 in 2016, which breaks down to about $99 per month.

Below find the cost of homeowners insurance in each state, ranked from most to least expensive.

RankStateAverageRankStateAverage
1Louisiana$1,967.0027Kentucky$1,085.00
2Texas$1,937.0028Illinois$1,042.00
3Florida$1,918.0029Hawaii$1,026.00
4Oklahoma$1,875.0030Maryland$1,022.00
5Kansas$1,548.0031Indiana$1,003.00
6Mississippi$1,525.0032California$1,000.00
7Rhode Island$1,496.0033New Mexico$996.00
8Connecticut$1,455.0034Alaska$974.00
9Massachusetts$1,451.0035Virginia$966.00
10Colorado$1,446.0036New Hampshire$965.00
11Nebraska$1,402.0037Michigan$952.00
12Alabama$1,386.0038Iowa$945.00
13Arkansas$1,348.0039Pennsylvania$927.00
14Minnesota$1,340.0040West Virginia$917.00
15New York$1,309.0041Vermont$898.00
16South Carolina$1,285.0042Maine$866.00
17Missouri$1,280.0043Ohio$850.00
18North Dakota$1,239.0044Washington$822.00
19D.C.$1,225.0045Delaware$816.00
20Georgia$1,200.0046Arizona$803.00
21Tennessee$1,185.0047Wisconsin$762.00
22New Jersey$1,174.0048Nevada$742.00
23Montana$1,130.0049Idaho$703.00
24South Dakota$1,125.0050Utah$664.00
25Wyoming$1,120.0051Oregon$659.00
26North Carolina$1,098.00TotalUnited States$1,192.00

Again, these will give you only a ballpark idea of your potential costs. The actual cost will vary depending on multiple factors.

Homeowners association (HOA) fees

Some residential properties require owners to pay monthly HOA fees to help with the costs of maintenance. Often, these fees apply when a property is part of a larger gated community or shared building (like a condo). The fees cover costs such as maintaining shared swimming pools, sidewalks, security gates, gardens, etc.

If you are subject to homeowner’s association fees, they will affect a lender’s appraisal of how much you can afford. While HOA fees usually average $200 to $300, luxury condos in high ticket areas like Hollywood have been known to charge up to $4,000 per month!

Lenders consider all of these factors when you apply for a mortgage.

How much do you qualify for with your annual income?

Income levels in the U.S. vary widely. According to the Current Population Survey (CPS) from 2017, annual income is broken up as follows:

Based on the data above, the majority of American households earn between $10,000 and $100,000 each year. Below, you’ll find the maximum amount that a mortgage can cost per month and overall for each income level.

Annual IncomeMax Monthly Payment (28%) (interest, loan, homeowners insurance, property taxes, fees, etc.)Max Total Loan Cost (interest, loan, homeowners insurance, property taxes, fees, etc.)
$10,000$233$84,000
$20,000$467$168,000
$30,000$700$252,000
$40,000$933$336,000
$50,000$1,167$420,000
$60,000$1,400$504,000
$80,000$1,867$672,000
$90,000$2,100$756,000
$100,000$2,333$840,000

Keep in mind, the maximum total cost includes all costs involved with the mortgage, not just the amount you borrow. The lower your costs, the higher the loan principal can be.

For example, if you make $50,000 per year, your max total mortgage cost is around $420,000. If you choose a 30-year fixed mortgage with a 5% interest rate, pay $100 per month towards property taxes, $300 towards monthly recurring debt, and $100 for homeowners insurance, you can likely get a loan up to around $175,000. Here’s how the costs break down.

Mortgage Costs Breakdown
Annual Income$50,000
Cost of house$200,000
Loan term360 months
Down payment11%
Monthly payment$956
Interest rate (fixed)5%
Principal loan amount$178,000
Interest$165,000
Taxes (360 months)$36,000
insurance (360 months)$36,000
Total$415,000
Max mortgage cost$420,000

Note that any one of the above factors can move the principal loan amount up or down. Each mortgage differs depending on the borrower’s unique circumstances.

FAQ about mortgages

How much do I need to make to buy a 400k house?

To buy a 400k house, you need to earn at least $85,000 to $115,000 per year. The amount will vary based on many factors including your chosen lender, your loan type, your existing debt, and mortgage-related expenses.

How many times my salary can I get for a mortgage?

There is no hard rule, because the amount you can borrow depends on many factors beyond your annual income (interest rate, property tax, homeowners insurance, and HOA fees). However, some experts suggest you can get a rough idea by multiplying your annual income by 2.5 to 3.5.

How can I increase my buying power?

What if you don’t get approved for the amount you need for the house you want? You have a few options. You could apply with a co-applicant, put down a larger down payment, apply with a different lender, work on your credit, or pay points to lower your interest rate.

How do I know if I qualify for a mortgage?

The best way to find out is to get prequalified with a few reputable lenders.

How much mortgage do I qualify for with the FHA?

The general rule with FHA is 31/43, meaning your mortgage payment (PITI) can consume 31% of your gross monthly income, while your monthly debt can consume 43% of it. FHA gives you more leeway than the 28/36 rule of a traditional mortgage.

Is there a minimum mortgage loan amount?

Yes, most lenders have minimum mortgage loan amounts ranging from $25,000 to $50,000.

Can I get a mortgage on 30k?

Yes, you likely can. However, it may not be for the amount you need. If you need more, consider applying with a co-applicant.

How much do homes cost in my state?

Once you figure out what you can qualify for, it’s time to find out what kind of home you can purchase. Here’s a look at the median home listing price in each state and the square footage it will get you.

However, prices can vary greatly from one city to another within each state. You’ll need to check out your local market to get a clearer picture.

How much mortgage can you afford?

The best way to find out how much mortgage you can afford is to get prequalified. Prequalification involves a lender assessing your finances and offering you estimated terms for a mortgage loan. Many lenders now prequalify you online, making it convenient to shop around.

And remember, it’s up to you to decide how much you want to spend on your home. Don’t be tempted to borrow more than you need — you’ll end up paying for it in interest in the long run.

Ready to find out what mortgage you can qualify for? Click here to compare leading mortgage lenders in the industry. Find your favorites and get prequalified. Homeownership may be closer than you think!