Mortgage Required Income Calculator - Capital Bank (2023)

The best way to think about how much home you can afford is to consider what your maximum monthly mortgage can be. As a general rule of thumb, lenders limit a mortgage payment plus your other debts to a certain percentage of your monthly income, which can be approximately 41%.

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Glossary of terms

  • Desired mortgage amount
  • Monthly housing expenses
  • Monthly liabilities
  • Monthly housing payment
  • Maximum principle and interest
  • Start interest rates
  • The term in years
  • Real estate taxes
  • Hazard insurance
  • Association dues or fees
  • Monthly PMI

Desired mortgage amount

The amount a borrower agrees to repay, as set forth in the loan contract.

Monthly housing expenses

Monthly outlay that includes monthly mortgage payment plus additional costs like property taxes and homeowners insurance, as well as other potentially applicable costs like mortgage insurance, flood insurance, homeowners association or co-op fees, or special tax assessments.

Monthly liabilities

Amounts of money that you owe to another person or entity. Liabilities can be short-term like credit card payments or longer-term like car loans or mortgages.

Monthly housing payment

A mortgage payment that includes PITI (principal, interest, taxes, insurance).

Maximum principle and interest

Calculated by subtracting your monthly taxes and insurance from your monthly PITI payment to calculate the maximum principle and interest (PI) payment to determine the mortgage amount that you could qualify for.

Start interest rates

The introductory interest rate, also known as the teaser rate or start rate, on an adjustable or floating-rate loan. It is usually lower than most other interest rates and often stays consistent within a specific time frame only.

The term in years

Mortgage terms aren’t limited to 30 and 15 years. Plenty of buyers prefer other options like 10-year, 20-year, 25-year, 40-year, and even five-year terms, based on their monthly income and budgetary goals.

Real estate taxes

Charged on immovable property, including land and structures that are permanently attached to the ground, such as a house or building. When you buy a home, you must pay real estate taxes, also known as property taxes, directly to your local tax assessor or indirectly as part of your monthly mortgage payment.

Hazard insurance

Insurance coverage for the structure of a home.

Association dues or fees

Required by some condominiums and neighborhoods as part of a homeowners’ association (HOA). Dues are typically paid directly to the homeowners’ association (HOA) and are not included in the payment you make to your mortgage servicer.

Monthly PMI

Stands for private mortgage insurance, which is a type of mortgage insurance you could be required to pay for if you have a conventional loan. PMI is typically required when you obtain a conventional mortgage and make a down payment of less than 20 percent of a home’s purchase price.

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Commonly Asked Questions

For most buyers, obtaining a mortgage and buying a home is the largest financial undertaking they will complete in their lifetime. Homes appreciate in value and are typically considered a sound investment for most applicants.

But committing to repay a large amount of money can be confusing. Let’s look at the most commonly asked questions that pop up during the process.

Lenders consider two main points when reviewing loan applications: the likelihood of repaying the loan (typically determined by a credit score) and the ability to do so (typically determined by proof of income). explains that mortgage income verification, even if they have impeccable credit, borrowers still must prove their income is enough to cover monthly mortgage paymen

Online resource explains that the lower an applicant’s debt-to-income ratio, the greater the chances that the borrower will be approved for a credit application.

As a customary rule, 43 percent is the highest debt-to-income — read DTI — ratio a borrower can have and still be qualified for a mortgage.

However, lenders prefer a debt-to-income ratio lower than 36 percent, with no more than 28 percent of that debt as a mortgage or rent payment.

In reality, though, the maximum DTI ratio varies from lender to lender.

Mortgage refinancing options are reserved for qualified borrowers, just like new mortgages. As an existing homeowner, you’ll need to prove your steady income, have good credit, and be able to prove at least 20 percent equity in your home.

Just like borrowers must prove creditworthiness to initially qualify for a mortgage loan approval, borrowers have to do the same for mortgage refinancing.

Both ratios are considered for credit application approvals.

Front-end DTI s a calculation beyond DTI that pinpoints how much of a person’s gross income is going toward housing costs. If a homeowner has a mortgage, the front-end DTI is typically calculated as housing expenses, including mortgage payments, mortgage insurance, and homeowners insurance, divided by gross income.

On the other hand, back-end DTI estimates the percentage of gross income going toward other types of debt, such as credit cards or car loans.

Experian explains that prequalification tends to refer to less rigorous assessments, while a preapproval will require you to reveal more personal and financial information with a creditor.

As a result, an offer based on a prequalification may be less reliable than an offer based on a preapproval.

There are four key factors to qualifying for a home mortgage: a down payment of at least 3 percent, a credit score of at least 620, PMI rates or similar fees, and DTI

For an FHA loan, the residence must be the primary place you will live. In addition, you need to have a credit score of at least 500, a down payment of at least 3.5 percent, and a DTI ratio of less than 50 percent. No specific income minimums are required. Watch our video for more information. (This is an estimated example.)

To afford a house that costs $600,000 with a 20 percent down payment (equal to $120,000), you will need to earn just under $90,000 per year before tax. The monthly mortgage payment would be approximately $2,089 in this scenario. (This is an estimated example.)

To afford a $400,000 house, borrowers need $55,600 in cash to put 10 percent down. With a 30-year mortgage, your monthly income should be at least $8200 and your monthly payments on existing debt should not exceed $981. (This is an estimated example.)

To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually. (This is an estimated example.)

The maximum mortgage you may qualify for depends on several factors, including: credit score, combined gross annual income, monthly expenses, the proposed down payment, and other associated costs.

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In conclusion, the primary factors for mortgage approval are credit score, income, existing debt, and down payment. As a savvy consumer, you can run scenarios with various inputs to find the right mortgage lending solution for you.

Once you procure a mortgage, be sure to pay your payments on time and include extra principal payments as available. These actions will ensure you are able to refinance should mortgage rates become more desirable.

Home-ownership is a journey and a dream for most Americans. Use the research we’ve compiled to make the most of your adventure toward owning a home.


The information provided by these calculators is for illustrative purposes only. Results do not reflect all loan programs and are subject to specific loan limits. Qualification, rates and payments will vary based on timing and individual circumstances. This is not a commitment to pre-approve or lend. Be sure to consult a financial professional prior to relying on the results. The calculated results are intended for illustrative purposes only and accuracy is not guaranteed.


How much income do you need to qualify for a $300 000 mortgage? ›

To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.

How much income do you need to qualify for a $600 000 mortgage? ›

What income is required for a 600k mortgage? To afford a house that costs $600,000 with a 20 percent down payment (equal to $120,000), you will need to earn just under $90,000 per year before tax. The monthly mortgage payment would be approximately $2,089 in this scenario. (This is an estimated example.)

How do you calculate how much income you need for a mortgage? ›

Lenders use your gross monthly income before taxes and other deductions as your qualifying income. If you are an hourly full-time employee, lenders will multiply your hourly wage by 2080 hours (40 hours per week X 52 weeks per year) and then divide by 12 for monthly gross income.

How much income do you need to qualify for a $400 000 mortgage? ›

Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000. Based on these numbers, your monthly mortgage payment would be around $2,470.

Can I afford a 300k house on a 70k salary? ›

On a $70,000 income, you'll likely be able to afford a home that costs $280,000–380,000. The exact amount will depend on how much debt you have and where you live — as well as the type of home loan you get.

How much income do I need to qualify for a $250000 mortgage? ›

How much do I need to make for a $250,000 house? A $250,000 home, with a 5% interest rate for 30 years and $12,500 (5%) down requires an annual income of $65,310.

Can I afford a 500k house on 100K salary? ›

A 100K salary means you can afford a $350,000 to $500,000 house, assuming you stick with the 28% rule that most experts recommend.

What income do you need for a $800000 mortgage? ›

Prospective buyers should bring in more than $100K per year before considering a home in the $800K range. Home pricing is tricky business.

How much do you need to make to afford a $500 000 mortgage? ›

How much income to afford a $500,000 home? To afford a $500,000 home, a person would typically need to make about $140,000 a year, said economic data analyst Hannah Jones. The principal and interest payments would total $2,791 per month, and with taxes and insurance, that number comes up to $3,508.

How much income do you need to buy a $650000 house? ›

Based on the current average for a down payment, and the current U.S. average interest rate on a 30-year fixed mortgage you would need to be earning $126,479 per year before taxes to be able to afford a $650,000 home.

Do banks use gross or net income for mortgage? ›

But realistically, your net income will give you a better understanding of what you can actually afford. When you apply for a mortgage, your lender will use your gross monthly income to determine an appropriate loan amount.

How much mortgage can you borrow based on income? ›

The general rule is that you can afford a mortgage that is 2x to 2.5x your gross income. Total monthly mortgage payments are typically made up of four components: principal, interest, taxes, and insurance (collectively known as PITI).

How much income do you need to qualify for a $1000 000 mortgage? ›

The income required to make the payments each month will vary based on your down payment, interest rate, and other factors, but you're still likely to need an annual salary that's close to $200,000.

How much income do you need to buy a $450 000 house? ›

You need to make $166,514 a year to afford a 450k mortgage. We base the income you need on a 450k mortgage on a payment that is 24% of your monthly income. In your case, your monthly income should be about $13,876. The monthly payment on a 450k mortgage is $3,330.

How much house can I afford if I make $60000 a year? ›

The general guideline is that a mortgage should be two to 2.5 times your annual salary. A $60,000 salary equates to a mortgage between $120,000 and $150,000.

Can I buy a 300k house with a 100K salary? ›

A $100K salary puts you in a good position to buy a home

With a $100,000 salary, you have a shot at a great home buying budget — likely in the high-$300,000 to $400,000 range or above. But you'll need more than a good income to buy a house. You will also need a strong credit score, low debts, and a decent down payment.

What house can I afford on 120k a year? ›

Safe debt guidelines

If you make $50,000 a year, your total yearly housing costs should ideally be no more than $14,000, or $1,167 a month. If you make $120,000 a year, you can go up to $33,600 a year, or $2,800 a month—as long as your other debts don't push you beyond the 36 percent mark.

What mortgage can I afford on 75k salary? ›

If you're making $75,000 each year, your monthly earnings come out to $6,250. To meet the 28 piece of the 28/36 rule, that means your monthly mortgage payment should not exceed $1,750. And for the 36 part, your total monthly debts should not come to more than $2,250.

How much do you need to make to qualify for a $2 million mortgage? ›

Assuming you are financing the purchase and put at least 20% down, most lenders will require you to have a salary of at least $450,000 per year to qualify for a $2 million home loan. This could be household income if both you and your spouse are on the loan.

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

If you're an aspiring homeowner, you may be asking yourself, “I make $70,000 a year: how much house can I afford?” If you make $70K a year, you can likely afford a home between $290,000 and $360,000*. That's a monthly house payment between $2,000 and $2,500 a month, depending on your personal finances.

How much mortgage can I get with 200k salary? ›

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.

Can I afford a million dollar home if I make 100k? ›

Experts suggest you might need an annual income between $100,000 to $225,000, depending on your financial profile, in order to afford a $1 million home. Your debt-to-income ratio (DTI), credit score, down payment and interest rate all factor into what you can afford.

How much house can I afford on 175k? ›

For example, if you're bringing in $175,000 a year, have relatively low monthly debt payments of $1,000 a month and have saved up $100,000 for a down payment, you can afford to spend $754,916.73 on a home.

How much house can I afford making $100,000? ›

The most common rule for deciding if you can afford a home is the 28 percent one, though many are out there. You should buy a property that won't take anything more than 28 percent of your gross monthly income. For example, if you earned $100,000 a year, it would be no more than $2,333 a month.

How much house can I afford making $90,000 a year? ›

I make $90,000 a year. How much house can I afford? You can afford a $270,000 house.

What is the house payment on a $800000 house? ›

Monthly payments on an $800,000 mortgage

At a 7.00% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total $5,322 a month, while a 15-year might cost $7,191 a month.

How much do I need to make to afford a 450k house with no down payment? ›

To finance a 450k mortgage, you'll need to earn roughly $135,000 – $140,000 each year. We calculated the amount of money you'll need for a 450k mortgage based on a payment of 24% of your monthly income. Your monthly income should be around $11,500 in your instance.

How much do you have to make a year to afford a $400 000 house in California? ›

The annual salary needed to afford a $400,000 home is about $165,000. Over the past two years, home prices have skyrocketed amid the combined impacts of a global pandemic and housing inventory shortages. Between 2020 and 2022, home prices soared 30%, according to Freddie Mac.

What credit score do you need to buy a 500k 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 payments.

How much income do you need to buy a $1000000 house? ›

To afford a 1 million dollar home, you need a minimum annual income of $200,000 to $225,000. You'll also need to have enough money saved for the down payment and closing costs, which can add up to over 20% of the purchase price. There are a variety of reasons someone might want a million-dollar home in the first place.

Is 90k salary rich? ›

As we noted earlier in the post, $90,000 a year is just above the median income of $30000 that you would find in the United States. Thus, you are able to live an above-average lifestyle here in America.

Why do lenders look at gross income and not net income? ›

While your net income accounts for your taxes and other deductions, your gross income does not. Lenders look at your gross income when determining how much of a monthly payment you can afford.

Is mortgage 25% of net income? ›

The 25% rule allows borrowers to use their net income in calculations, which may be easier for borrowers who are unsure about their gross monthly income. This rule states that no more than 25% of your post-tax income should go toward housing costs. To follow this model, multiply your monthly income after taxes by 0.25.

What is the 28 rule in mortgages? ›

The 28/36 rule states that your total housing costs should not exceed 28% of your gross monthly income and your total debt payments should not exceed 36%. Following this rule aims to keep borrowers from overextending themselves for housing and other costs.

What is the 30% income mortgage rule? ›

You may have heard it—the old rule that says, “Homeowners shouldn't spend more than 30% of their gross monthly income on housing.” The idea is to ensure they still have 70% of their income to spend on other expenses. The intent is good. But is it realistic today? That depends on your financial situation.

What percentage of income do banks allow for mortgage? ›

1. Gross Income. Lenders use a mortgage-to-income ratio to confirm that you make enough money to comfortably afford the mortgage payments on your new home. According to the FDIC, most lenders have a maximum allowable ratio of 25-28% of your gross income going toward your mortgage payment.

What is the 25 percent rule for mortgage payments? ›

To calculate how much house you can afford, use the 25% rule: Never spend more than 25% of your monthly take-home pay (after tax) on monthly mortgage payments. Following this rule keeps you safe from buying too much house and ending up house poor.

How much is a downpayment on a 500k house? ›

For a $500,000 home, a 20% down payment would be $100,000. At a 5.5% rate, the monthly payment for this would be $2,940 (this includes taxes and insurance - scroll down to see how much local taxes can impact your monthly payment and may alter this number for you).

What salary do you need to buy a 350k house? ›

You need to make $129,511 a year to afford a 350k mortgage. We base the income you need on a 350k mortgage on a payment that is 24% of your monthly income. In your case, your monthly income should be about $10,793.

What is the 20% down payment on a $300 000 house? ›

Most lenders are looking for 20% down payments. That's $60,000 on a $300,000 home. With 20% down, you'll have a better chance of getting approved for a loan. And you'll earn a better mortgage rate.

What mortgage can I get with 100k salary? ›

The most common rule for deciding if you can afford a home is the 28 percent one, though many are out there. You should buy a property that won't take anything more than 28 percent of your gross monthly income. For example, if you earned $100,000 a year, it would be no more than $2,333 a month.


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