If I Make $60,000 a Year, How Much House Can I Afford?

Once you make $60K a year, you’re likely in a decent position to buy a house. At this point, you might start asking questions like: “If I make $60,000 a year, how much house can I afford?”

The answer is both more and less complex than you might think. There’s more to it than just figuring how much you can afford to pay in mortgage expenses each month, but there aren’t any super complicated calculations involved, either.

We’ll cover everything you need to know about affording to buy a home with a 60K salary, including information about down payment assistance and how to maximize your home purchasing power.

Maximize your purchasing power with down payment assistance

We’ll explore this more below, but putting more money down on your home almost exponentially increases your maximum home purchase price. And you might qualify for thousands, or even tens of thousands of dollars to help make this a reality.

Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.

If I make $60,000 a year, how much house can I afford?

There are several individual factors involved in determining how much house you can afford with a 60K salary. However, you can likely afford a house between $147,200 and $338,100. Your personal range may vary, but this is a decent baseline range of affordability based on your income.

Numbers based on a standard 30-year mortgage and no additional debts.

There are several factors that impact how much house you can afford with a salary of $60K. We’ll break down each of these factors individually and show you what you need to know:

• Debt-to-income ratio
• Down payment amount
• Down payment assistance
• Where you live

We’ll start with debt-to-income ratio, because you can calculate it yourself, and it’s one of the things you can control through personal finance planning.

Understanding your debt-to-income ratio

Put simply, your debt-to-income ratio is a single number that shows what percentage of your income goes to making debt payments. Loan officers look at your debt-to-income ratio when they consider you for a mortgage loan because it quickly tells them whether or not you can afford the mortgage loan payments.

Your debt-to-income ratio is calculated by dividing your total debt payments by your gross monthly income. A $60,000 yearly salary gives you a $5,000 gross monthly income. To get your debt-to-income ratio, you’ll divide your total monthly debt payments by $5,000.

Total monthly debts / gross monthly income = debt-to-income ratio

When you calculate your debt-to-income ratio, you’ll get a number between zero and one. This represents what percentage of your monthly income goes toward your debt payments.

A debt-to-income ratio of zero means you have no monthly debt payments, and a debt-to-income ratio of one means that one-hundred percent of your income goes toward debt payments.

A lower debt-to-income ratio is better, both for your personal finances and for getting a mortgage loan. However, you don’t necessarily need a zero debt-to-income ratio to get a mortgage loan.

The 28/36 rule

Loan officers like to use debt-to-income ratios, but most of us don’t think of our personal finances in these terms.

To make things easier, we recommend using the 28/36 rule, which is a general guideline supported by most personal finance experts. 

Under the 2836 rule, your housing expenses (mortgage payment, homeowner’s insurance, etc.) should be no more than 28% of your gross monthly income. Your total monthly debt payments (including mortgage and any other debts) should be no more than 36% of your gross monthly income. 

On a $60K yearly income, the 28/36 rule works out like this:

If you followed the 28/36 rule, this would mean that your mortgage payments would be no more than $1,400, and your total monthly debt payments, including your mortgage payments, would be no more than $1,800.

Of course, you can stretch the 28/36 rule, if your situation allows. However, it’s a solid baseline for home purchase planning.

Calculating home affordability with debts 

Speaking of stretching the 28/36 rule, here are a few examples for calculating how much house you can afford on a 60K salary, using a few common debt payments. 

Home affordability with student loans

On average, graduates with bachelor’s degrees make student loan payments of $267 each month. 

In this scenario, a $1,533 mortgage payment is a bit more than 28% of your gross monthly income, but since your total debt payments would be 36% of your monthly income, it would likely be workable.

Home affordability with a car payment

The average car payment for a used car in the United States is $526 per month. 

In this scenario, a mortgage payment of $1,274 is just over 25% of your monthly income. However, even with the car payment, you could still keep your total monthly debt payments at 36% of your total monthly income.

Home affordability with credit card debt

Americans have an average minimum credit card payment of $110.50. You may not be excited about credit card debt, but it’s clearly not the end of the road for your home buying journey.

Maintaining your debt payments at 36% of your total monthly income is quite doable with a bit of credit card debt. You could probably even make more than the minimum payments, if you shopped around and got the best deal on a house or increased your down payment.

How much mortgage can I afford with $60k salary? Factoring in your down payment

Increasing your down payment is the most efficient way to increase how much mortgage you can afford with a $60K salary. A larger down payment means you have to borrow less to purchase a home, which increases your maximum purchase price. 

As we show you below, when you increase your down payment amount, your maximum purchase price increases by far more than the extra amount you put down on your home. 

How a larger down payment affects the amount of house you can afford

The impact of a larger down payment can seem a bit odd. Intuitively, we tend to think that increasing our down payment by $5,000 would increase our maximum purchase price by $5,000 or about that much.

However, the interest you pay on a mortgage loan really adds up over the life of the loan, which can be 30 years. If you increase your down payment by $5,000, that means you can borrow $5,000 less, and you don’t have to pay interest on that $5,000.

To avoid boring you with a lesson about loan amortization, here are some examples to demonstrate how this works.

Calculating home affordability based on down payment (3 examples) 

Working from our debt-to-income examples from earlier, let’s assume that you can afford a $1,690 mortgage payment.

Example 1: $5,000 down payment vs. $15,000 down payment

As you can see, increasing your down payment by $10,000 increases your maximum home purchase price by $22,100 — more than double the increase in your down payment.

Example 2: $5,000 down payment vs. $30,000 down payment

Here’s what happens if you increase your $5,000 down payment by $25,000, for a total of $30,000 down.

In this case, increasing your down payment by $25,000 increases your home purchase budget by $39,000.

Example 3: Reducing mortgage payments but increasing down payment

Even if you have a more limited budget for your monthly mortgage payments, increasing your down payment still increases your home purchase budget quite significantly. In this scenario, you’ve decided to cap your monthly mortgage payments at $1,274. 

Increasing your down payment by $25,000 increases your purchase budget by $38,150.

Your down payment amount makes a big difference in how much house you can afford with a 60K salary. It might seem like a stretch to come up with $25,000 for a down payment, but that’s where down payment assistance comes in.

How down payment assistance affects the amount of house you can afford

First, each state has several down payment assistance (DPA) programs for first-time home buyers with moderate incomes. With a $60K salary, you should qualify based on your income. There are also national down payment assistance programs, which are available to residents of any state.

Most DPA programs require a credit score better than 640, and a relatively small down payment — usually between $1,000 and $3,000. Some programs don’t even have the down payment requirement, meaning you could get assistance even if you have no out-of-pocket funds to contribute. 

In short, there are almost certainly down payment assistance programs that you qualify for.

Additionally, many DPA programs can be used in combination, making it entirely possible to get $25,000 or even more in down payment assistance and boost your home purchasing power by nearly $40,000.

The only problem with DPA programs is that many people don’t know about them, and therefore never even apply for down payment assistance when they buy a house. They miss out on a ton of home purchasing opportunities.

Stairs Financial can help you find the best down payment assistance programs available in your area and maximize your home buying budget. Learn more.

How much house can I afford on $60,000 in my part of the country?

It’s true that some states are more expensive than others, and there are several factors that impact home prices in each state, including taxes. However, the differences in the cost of buying a house in each state are based on average and median home prices.

What does this mean in terms of how much house you can afford on $60,000 in your part of the country?

It means that there are affordable houses in your state, even if you live in a more expensive state. Yes, there may be fewer houses available in your price range if you live in a high cost of living state, but they’re out there.

If you happen to live in an extraordinarily expensive state, such as New York, moving to one of the cheapest states to buy a house may be a viable option. Just keep in mind that moving costs money, and you may be better served investing that money in a down payment and shopping around in your area for affordable houses.

What does all of this boil down to? Your budget, not where you live, is the primary factor that determines how much house you can afford.

What else affects home affordability?

One of the most important things to do before buying a home is to understand everything that impacts the price of a house. That way, your budgeting calculations are as accurate as possible.

These are the other major factors that affect home affordability.

Interest rates

Interest rates might have the biggest impact on home affordability. Interest rates can change almost daily, and even a small change in interest rates significantly changes your monthly mortgage payment, even if the selling price stays the same.

Keep an eye on interest rates as you house shop, that way you know your most up-to-date budget. 

Credit score

A higher credit score qualifies you for lower interest rates. In fact, your credit score can change your available interest rates by one or two percent, which is significant. Down payment assistance programs also typically require a minimum credit score higher than 600.

Before you start shopping for a house or applying for down payment assistance, get your credit score. You can get your credit score for free, but paid services such as MyFICO and Experian give you the most accurate credit report, and the fee is relatively small. 

Property taxes

Your property taxes almost always get rolled into your monthly mortgage payments. You can’t avoid property taxes, but they’re usually relatively minimal. Even Hawaii, the highest taxing state in the U.S., only has a 2.21% property tax rate.

So, even though you’ll need to factor property taxes into your budgeting calculations, it’s best not to get too focused on them. Find your state and local property tax rates, figure them into your home buying budget, and continue with your planning.

Homeowner’s insurance

Most lenders require homeowner’s insurance, and having insurance on your house is smart. However, the price of homeowner’s insurance varies from state to state.

Homeowner’s insurance is more expensive in states where it’s more likely that your home might be damaged by a natural disaster. Insurance is also a better value in these areas, though.

If you want to make sure you’re getting the most from your homeowner’s insurance, shop around and get rates from different companies before you buy a house. Otherwise you may end up with whatever insurance company your lender works with, which may not be the most affordable choice.

Private Mortgage Insurance (PMI)

Another way that a larger down payment impacts how much house you can afford is due to private mortgage insurance (PMI). If your down payment is less than 20% of the home purchase price, you have to pay for PMI, which can be upwards of a few hundred dollars a month.

You can eliminate this cost with a larger down payment and down payment assistance.

The good news is that you can request to cancel PMI once you have 20% equity in your home, and PMI automatically cancels once you have 22% equity in your home. So, even if you’re unable to put at least 20% down on your home, you can make extra payments on your loan to build your equity and drop the PMI.

Homeowners Association (HOA) Fees

Homeowners Association Fees can be a bit steep, but they’re entirely avoidable. All you have to do is buy a house that’s not in an HOA area. However, if you know that the areas where you’re looking to buy are in an HOA area or might be, make sure you account for those fees when you do your budget calculations.

Expecting an increase in your income? 

If you’re expecting a change in your income, check out how much house you’ll be able to afford with your new salary.

How much house can I afford with:

• $50,000 salary
• $70,000 salary

Down payment assistance gets you more house with less money out of pocket

For most people, $60,000 a year offers plenty of room for the monthly payments on a home. The down payment is the biggest obstacle.

Down payment assistance can help. Even if you’ve been saving for a house and have a nice nest egg built up, down payment assistance significantly increases your home buying budget. In some cases it can even cover other closing costs or help you buy down your interest rate.

Unfortunately, information about down payment assistance programs is disparate and difficult to find. 

Stairs Financial gets you the help you need.

Stairs connects you to qualified lenders who work with all the down payment assistance programs you might qualify for, then lets you compare your options side-by-side so you can make the most informed decision

Learn more.