In general, you need an income of at least $64,000 a year to afford a $200,000 mortgage. If you’re carrying significant debt, however, like student loans or high-interest credit cards, you may need to buy something slightly less expensive on such a salary.
Several factors impact how much house you can afford and what lenders are willing to give you on your salary, including your credit history, your down payment, and your debt-to-income ratio. We’ll break down these and other factors as we explore the income needed for a $200,000 mortgage.
Income Needed for a $200,000 Mortgage
Mortgage lenders typically don’t list strict income requirements for a home loan, though they will want to know that you can afford closing costs, which typically range from 3% to 6% of the loan principal. For simplicity’s sake, assuming no money down, you would need $6,000 to $12,000 for a $200K mortgage in a bank account.
Mortgage lenders will, however, analyze your annual income to ensure you’re able to keep up with your estimated monthly mortgage payments. In addition, lenders will consider other factors, such as your:
• Debts
• Employment
• Down payment
• Credit history
Even if a lender would approve you for a $200,000 mortgage, it’s a good idea to decide for yourself if you can actually afford it. Many experts recommend using the 28/36 rule. This means that housing costs should account for no more than 28% of your income, and you should spend no more than 36% of your income on all debts combined.
Assuming you have minimal debt, that means you can afford to spend 28% of your gross monthly income on a mortgage. (That’s how we get our rough estimate of a $64,000 salary for a $200,000 home.) However, if you have major debt elsewhere — car loan, student loans, personal loans, and credit cards, for instance — you may need to keep your mortgage debt lower so you don’t exceed 36% of your total income.
Use a home affordability calculator if you’re not sure where to start.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
How Much Do You Need to Make to Get a $200K Mortgage?
In general, we recommend making at least $64,000 a year if you have a $200K mortgage. However, several factors can impact this, including:
• What other debts you have
• How much you have saved for a down payment
• The type of mortgage loan you’re applying for
What Is a Good Debt-to-Income Ratio?
In keeping with the 28/36 rule, lenders prefer to see a debt-to-income (DTI) ratio of 36% or lower. This is not a hard-and-fast rule, however. A qualified mortgage lender may look for a DTI ratio of 43% or less. In certain cases, Fannie Mae could allow a DTI as high as 50% for specific mortgage loans. To compute your DTI ratio, add all your monthly debts and divide by your gross monthly income, then multiply by 100.
What Determines How Much House You Can Afford?
Several factors impact how much house you can afford, including:
• Your income: The amount of money you make dictates how much you can afford to spend on a monthly mortgage payment, including property taxes, homeowners insurance, and private mortgage insurance (PMI) when required.
• Your debt: Other outstanding debts mean your funds are limited for new loans. If you’ve got to pay down other debts each month, you may want to aim for a less expensive home (and thus a smaller mortgage).
• Your location: A $200,000 home looks a lot different depending on where you live. In places with a low cost of living, you might be able to get a fully renovated home. In coastal and urban areas, $200K doesn’t go as far: You may get a small home or a home in need of major repair. Hoping to get the most bang for your buck? Here are the most affordable places to live in the United States.
• Your credit score: Even if you have the income to afford a hefty mortgage now, a spotty credit history can turn off lenders. They may either offer you an impossibly high interest rate or deny your loan request, depending on how low your score is.
Recommended: Mortgage Calculator
What Mortgage Lenders Look For
When you begin the mortgage preapproval process, lenders will be looking for a few factors to determine if you’re eligible for a loan:
• Stable, predictable income (though it’s not impossible to get a mortgage without regular income)
• Your assets
• Your credit history
• The size of your down payment
• Any existing debts, including credit cards, student loans, personal loans, and car loans
$200,000 Mortgage Breakdown Examples
Several major factors can impact how a mortgage shakes out, including your down payment amount, the interest rate (and whether it’s fixed or adjustable), and the loan term.
You should also factor in homeowners insurance and property taxes. We recommend using a mortgage calculator with taxes and insurance for an accurate picture.
Here are a few examples of how your monthly payments on a $200,000 mortgage can vary:
• A $200,000 loan with $20,000 (9%) down and an interest rate of 7.00% over 30 years, with taxes and insurance, would cost an average of $1,822 a month.
• A $200,000 loan with $20,000 (9%) down and an interest rate of 7.00% over 15 years, with taxes and insurance, would cost an average of $2,229 a month.
• A $200,000 loan with 20% down and an interest rate of 7.00% over 30 years, with taxes and insurance, would cost an average of $1,622 a month.
• A $200,000 loan with 20% down and an interest rate of 7.00% over 15 years, with taxes and insurance, would cost an average of $2,089 a month.
You’ll notice that a 15-year loan results in higher monthly payments; however, because the loan is only 15 years, the homeowner would spend significantly less in interest over the life of the loan and would be debt free much sooner.
How Much Will You Need for a Down Payment?
How much you need for a down payment depends on the type of loan you’re applying for and your other financial goals. Conventional wisdom used to advise putting 20% down on a house, but that’s often unrealistic for today’s homebuyers.
Certain loan types require significantly less down. An FHA loan (from the Federal Housing Administration) requires as little as 3.5% down. A VA loan (from the U.S. Veterans Administration and USDA loans (from the U.S. Department of Agriculture) don’t require any down payment.
Can You Buy a $200K Home With No Money Down?
If you can qualify for specific types of loans, such as a VA loan or USDA loan, it’s possible to buy a $200,000 home with no money down. These loans, however, have strict eligibility requirements that are limited to a small percentage of borrowers.
Can You Buy a $200K Home With a Small Down Payment?
FHA loans are an option for borrowers who can’t come up with 20% or even 10% money down for a home. With a government-backed FHA loan, you can put down as little as 3.5%. In the case of a $200K mortgage, that’s $7,000. Some conventional lenders also allow as little as 3% down for first-time homebuyers.
Is a $200K Mortgage With No Down Payment a Good Idea?
In today’s housing market, it’s hard to come buy a house that is less than $200,000. A $200K home — or one that’s even more expensive — may be your only option. If it is your only option, and you can’t come up with the funds for a down payment, a 0% down mortgage could be a good idea.
However, keep in mind that you’ll have no home equity at the start of the loan, and you’ll likely have to pay PMI until you’ve paid off at least 20% of the home. It also means your monthly payments will be larger.
Recommended: Home Loan Help Center
Can’t Afford a $200K Mortgage With No Down Payment?
When you don’t put any money down when buying a home, monthly payments will be higher. If you find they’re too high for you to afford, you’ll need to make some changes before you can buy a home. Here are some ideas:
Pay Off Debt
Focus on other debts, such as high-interest credit cards and student loans. If you’re able to wipe out debt, you’ll have more money in your monthly budget to spend on housing costs.
Look Into First-Time Homebuyer Programs
First-time homebuyer programs can help you out when you’re trying to get your first mortgage. For instance, if you can save up 3.5%, you can qualify for an FHA loan with an affordable interest rate.
Build Up Credit
If you take the time to focus on your credit score (make on-time payments, pay down debts, reduce credit utilization), you may get a lower interest rate on a loan offer. This can help keep your monthly payment down.
Start Budgeting
If all else fails, put the new house on hold and start focusing on growing your savings. You can do this by finding a new income source, but you can also analyze your budget and cut out unnecessary expenses. Try getting rid of some streaming services, dining out less, and finding ways to reduce your utility bills.
Mortgage Tips
We’ve put together several tips for qualifying for a mortgage, but here’s the quick version:
• Make sure you’re good to go before applying: Spend time with your budget to understand what you can afford, focus on paying down debts to reduce your DTI, and check your credit score to ensure it’s strong enough to qualify.
• Understand the language: Knowing the difference between fixed-rate and adjustable-rate mortgages is crucial. Research other terms such as principal, escrow, mortgage refinance, and PMI to make sure you’re armed with all the info you need.
• Shop around: Get prequalified with multiple lenders to ensure you find the right mortgage loan for you.
The Takeaway
The income needed for a $200,000 mortgage is roughly $64,000, but so much of that depends on other factors, including your down payment, your credit score, the type of loan you’re getting, and your other debts.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
How much income do I need for a $200K mortgage?
We estimate that the average homebuyer needs a $64,000 annual income for a $200,000 mortgage, but several factors can impact this.
Can I afford a $200K house on $50K?
While we recommend a $64K salary for a $200,000 mortgage, you may be able to afford a $200,000 house on $50,000 if you have a large down payment saved up and have minimal other debts.
Can I afford a $200K house on a $60K salary?
At $60,000, you might be able to handle a $200,000 mortgage if your other debts are minimal and you have a good-sized down payment ready to go.
Photo credit: iStock/martin-dm
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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