The mortgage you can afford with a salary of $60k to $120k
"I make $65,000 a year. How much mortgage will I be approved for?"
Well, that depends.
Trying to gauge mortgage approval solely based on your annual income is a bit like estimating how far you can travel on a full gas tank without factoring in your vehicle's fuel efficiency, road conditions, and driving habits.
In other words, it's not the most accurate approach.
You could qualify for a mortgage if you earn $65,000 and your financial situation is in good shape.
But let's take your foot off the gas for a minute and look at the finer details that determine average mortgage affordability and how much you can borrow.
Understanding mortgage basics
A mortgage is a loan you take out from a bank or credit union to buy a house. These lenders give you money you agree to pay back over time, plus interest.
Key components of a mortgage include:
- Principal: The money you borrow toward the purchase of a property after your down payment
- Interest: The cost of borrowing money. The interest might be fixed (remains the same for the length of the loan term) or adjustable (changes periodically according to the market)
- Term: The length of time you have to repay the loan. A common mortgage term is 30 years, although that can vary
- Monthly repayments: The amount of money you pay back to the lender each month, consisting of the principal and the interest
Factors influencing mortgage affordability
While income is the primary factor, there are several others that affect the amount lenders are willing to give you.
Debt
Lenders use your debt-to-income ratio (DTI) to determine how much you can afford to borrow. It's calculated by dividing your total monthly debt payments by your gross monthly income.
For example, if you have $2,500 in monthly debt payments and a gross monthly income of $6,000, your DTI would be 41.6%. Typically, lenders prefer you have a DTI ratio no higher than 36%, but in some circumstances may go as high as 43%.
Spending
Another metric to consider is front-end DTI. Your total monthly housing expenses shouldn't exceed 28% of your gross monthly income.
So, if you're earning $7,000 per month, your total housing expenses must be $1,960 or less. That's why it's generally best to keep your spending as low as possible for three to six months before applying for a mortgage.
Credit history
To maximize mortgage affordability, you should have a minimum FICO score of 620 for a fixed-rate mortgage, or 640 for an adjustable-rate mortgage.
Your credit score influences mortgage interest rates, terms, down payment requirements, and overall borrowing capacity. And as you can guess, lenders typically offer their most favorable terms to applicants with excellent credit scores.
Loan-to-value
Loan-to-value (LTV) is how much money you're borrowing compared to the price of the house you want to buy. For example, if you're borrowing $80,000 to buy a house that costs $100,000, your LTV is 80%.
A lower LTV implies you're making a larger down payment on your property, affording you more equity upfront. This reduces the lender's risk because they have a larger equity buffer to cover losses if you default on the loan, and because you have more invested.
Employment status and profession
If you’re self-employed, lenders may offer you a smaller loan than you can actually afford to offset income volatility. Plus, inconsistent or declining income could impact eligibility and interest rates.
Conversely, if you have a traditionally high-paying job, such as a doctor, lawyer, or accountant, lenders tend to be more generous. To them, it’s smart to build good relationships with consistent, high-income earners.
So, how much mortgage can you afford based on your salary?
Conservatively, most people can afford a mortgage 2-2.5x their gross annual income. But, keep in mind, these calculations are ballpark figures.
The actual payment will vary according to taxes, insurance, additional fees, and your financial standing.
| Annual salary | Two times | Two point five times |
| How much mortgage can I afford with 60k salary? | $120,000 | $150,000 |
| $70,000 | $140,000 | $175,000 |
| $80,000 | $160,000 | $200,000 |
| $90,000 | $180,000 | $225,000 |
| $100,000 | $200,000 | $250,000 |
| $110,000 | $220,000 | $275,000 |
| $120,000 | $240,000 | $300,000 |
A few other important considerations:
- Mortgage affordability: It's generally recommended not to allocate more than 28% of your gross monthly income to your mortgage payment.
- Qualifying vs. affordability: There's a distinction between what you qualify for and what you can realistically (and comfortably) afford. Lenders may approve you for a loan up to 4.5x your salary, but taking on a higher mortgage payment can lead to financial strain. You don't want to be house-rich but cash-poor.
- Combining incomes: If you're considering a joint mortgage with another income earner, it's likely to result in a higher mortgage amount, potentially expanding your home-buying options.
Now, let's say you take out a mortgage twice your annual salary. Compare the monthly payments for a 30-year term at two different interest rates: for example at 3.5% and 7.4% (the average interest rate over the past 50 years).
| Annual Salary | Mortgage | Monthly repayments at 3.5% | Total repayment over 30 years at 3.5% | Monthly repayment at 7.4% | Total repayment over 30 years at 7.4% |
| $60,000 | $120,000 | $949 | $467,431 | $956 | $468,982 |
| $70,000 | $140,000 | $1069 | $467,431 | $1077 | $547,960 |
| $80,000 | $160,000 | $1182 | $613,571 | $1199 | $627,118 |
| $90,000 | $180,000 | $1309 | $689,720 | $1323 | $707,544 |
| $100,000 | $200,000 | $1278 | $768,000 | $1447 | $789,236 |
| $110,000 | $220,000 | $1349 | $848,476 | $1573 | $872,204 |
| $120,000 | $240,000 | $1422 | $931,216 | $1701 | $956,448 |
How to calculate a mortgage that matches your budget
Ultimately, the mortgage you can afford with a salary range of $60,000 to $120,000 depends on your financial situation, goals, and monthly payment comfort level.
Careful budgeting, research, doing the math, and consulting with a mortgage broker, lender, or financial advisor will help you make a well-informed decision about your homeownership possibilities.