This Is How Much Money You Need to Make to Afford a $500,000 Home (2024)

Buying a house is one of the most consequential decisions of our lives. It is a huge investment that can provide you with a sense of security and a place to call home. However, it can also be a stressful and overwhelming experience. The average sales price of a home has increased by almost 40% since the start of the COVID-19 pandemic, hitting a record high of $552,600 in Q4 2022, before dropping to $516,500 in Q1 2023.

With home prices so high, you may be wondering what salary you'd need to earn to afford a home costing $500,000. This question can be difficult to answer, but with a few simple calculations, you can get an estimate of how much you need to make to purchase a home at this price point.

28/36 ratio rule

The 28/36 mortgage rule is a helpful guide to calculate how much you need to make. This rule suggests that borrowers should devote no more than 28% of their monthly gross income to housing expenses. This is known as the front-end ratio.

The rule also holds that no more than 36% of your total monthly income goes to all debt obligations. This is the back-end ratio. Following this rule could help homeowners avoid stretching their budgets too thin and potentially falling behind on payments.

This rule is often used by lenders in determining how much they will lend you.

How much do I need to make for a $500K house?

Based on the 28/36 rule, you would need a salary of around $170,228 per year or $14,186 per month to comfortably afford a $500,000 home. Here's how the calculations work:

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  • Home purchase price: $500,000
  • Down payment: $30,000 (assuming 6% of the purchase price, the average amount for first-time buyers, per 2022 data from the National Association of Realtors)
  • Loan term: 30 year fixed-rate mortgage
  • Loan interest rate: 6.39% (the average rate as of May 18, 2023)
  • Monthly mortgage payment: $3,227
  • Average monthly homeowners insurance premium: $149
  • Average monthly property tax: $471
  • Average monthly HOA fees: $125
  • Total monthly housing expenses: $3,972
  • $3,972 / 28% = $14,186 monthly income required

A common mistake that people often make is only calculating the mortgage payment and not including all the true costs of homeownership, such as property tax, homeowners insurance, and potentially HOA fees. To be safe, you may want to add in a buffer for maintenance costs.

But even if you are making this amount, the other half of the rule requires you to take into account your other debt. This could be credit card debt, car loans, or other personal loans. Let's say this amounts to $700 a month. We add that to the total housing expenses to calculate your back-end ratio:

  • $3,972 + $700 = $4,672
  • $4,672 / 36% = $12,977

So in other words, you will need to make at least $13,000 a month to afford a $500,000 home and the $700 debt payment for a mortgage lender to feel comfortable lending you the money.

How much can I afford now?

If you currently make $5,000 a month, using the 28/36 rule this is how much you can afford.

$5,000 x 28% = $1,400 total housing costs

$5,000 x 36% = $1,800 total debt payments (housing costs + other debt)

However, keep in mind that other factors like interest rates and down payments could also affect a home's affordability. It is always better to be more conservative. By working with a trusted lender and calculating your budget carefully, you can increase your chances of success as you embark on your home-buying journey.

Buying a $500,000 home is a large investment that requires careful consideration and planning. If you use the 28/36 ratio rules, you can estimate how much money you need to make to afford a home at this price point. Remember, owning a home is not just about the initial purchase price, but also the ongoing expenses associated with homeownership. By doing your research, being diligent with your budget, and working towards your financial goals, you can make owning a home a reality.

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This Is How Much Money You Need to Make to Afford a $500,000 Home (2024)


This Is How Much Money You Need to Make to Afford a $500,000 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 should I make to afford a $500,000 house? ›

Since many lenders don't want more than 28% of a person's income to go toward their mortgage debt, borrowers will generally need an annual combined household income of at least $120,000 to buy a $500,000 house.

How much down payment for 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 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.

How much income to afford a 700k house? ›

How Much Income Do You Need to Buy a $700k House?
Interest RateMonthly PaymentIncome Needed
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5 days ago

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.

What is the average monthly payment for a $500000 house? ›

The monthly cost of a $500,000 mortgage is $3,360.16, assuming a 30-year loan term and a 7.1% interest rate. Over the course of a year, you would pay $40,321.92 in combined principal and interest payments.

How much house for $3,500 a month? ›

A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.

What income do you need for a 400k mortgage? ›

Your payment should not be more than 28%. of your total gross monthly income. That means you'll need to make 11,500 dollars a month, or 138 k per year. in order to comfortably afford this 400,000 dollar home.

How much mortgage can I get for $6,000 a month? ›

How Much House Can You Afford?
Monthly Pre-Tax IncomeRemaining Income After Average Monthly Debt PaymentMaximum Monthly Mortgage Payment (including Property Taxes and Insurance) with the 36% Rule
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How much house can I afford if I make $36,000 a year? ›

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

How much income do I need for 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 is the 28/36 rule? ›

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.

Can I afford a 500K house if I make 200k? ›

A mortgage on 200k salary, using the 2.5 rule, means you could afford $500,000 ($200,00 x 2.5). With a 4.5 percent interest rate and a 30-year term, your monthly payment would be $2533 and you'd pay $912,034 over the life of the mortgage due to interest.

How to afford a $500,000 house? ›

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 income do you need for a $500,000 mortgage? ›

The salary to afford a 500K house ranges between $101,040 and $180,429, assuming a 30 year mortgage, a 7.48% interest rate, and down payment between zero and $15,000.

How much house can I afford if I make $70,000 a year? ›

The home price you can afford depends on your specific financial situation—your down payment, existing debts, and mortgage rate all play a role. Most experts recommend spending 25% to 36% of your gross monthly income on housing. For a $70,000 salary, that's a mortgage payment between roughly $1,450 and $2,100.

How much income to afford a 400k house? ›

To afford a $400,000 home, assuming a 20% down payment and a 6.5% interest rate on a 30-year mortgage, you would need a gross monthly income of approximately $7,786.55. This assumes you have $1,000 in monthly debt.

How much house can I afford with an 80k salary? ›

Using the 28% to 30% rule, your ideal maximum monthly payment shouldn't exceed $1,866 and $2,000. With that being said, if you're getting a 30-year fixed-rate mortgage with a 6% interest rate, you can likely afford a home valued up to $263,000 (including property taxes and insurance, and assuming a 5% down payment).

How much house can I afford with a 60k salary? ›

The 28/36 rule holds that if you earn $60k and don't pay too much to cover your debt each month, you can afford housing expenses of $1,400 a month. Another rule of thumb suggests you could afford a home worth $180,000, or three times your salary.


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