An annual income of about $76,000 should put you in the position to afford a $250,000 mortgage, assuming you have relatively little other debt. But exactly what amount you’ll need to earn will depend on your interest rate, loan term, and debt level, among other factors. If you’re considering buying a new home, let’s take a closer look at how much you’ll need to earn to qualify for a $250,000 mortgage.
Income Needed for a $250,000 Mortgage
The exact income needed to afford a $250,000 mortgage loan can’t be nailed down without more information, but what we can get pretty close to is the P&I payment, which stands for principal and interest, and represents a majority of your monthly payment. However, even this calculation won’t give you an exact income number until you know your interest rate and desired loan term (15, 20, 30 years).
Other factors that will influence your monthly mortgage payment are:
• Property taxes: Lenders often collect a portion of your property taxes each month and pay the local government on your behalf. And even if you don’t pay the taxes through your lender, you’ll need to include them in your budget.
• Home insurance: Assuming you have a mortgage, your lender will require you purchase home insurance. Depending on the house and location, you may also be required to purchase earthquake insurance and flood insurance.
• Loan specific fees: Different types of mortgage loans have unique fees that may increase the cost of your monthly mortgage payment. For example, the guarantee fee with a U.S. Department of Agriculture (USDA) loan, or mortgage insurance premium with a Federal Housing Administration (FHA) loan.
• Homeowners association (HOA) fees: Since you’ll likely pay the HOA directly, these fees should not increase the cost of your mortgage payment, but they will increase your monthly expenses. Keep this in mind while house hunting.
Moving forward, let’s assume you choose a 30-year loan term and receive a 7.00% interest rate.
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 $250K Mortgage?
Using a mortgage calculator, it’s easy to get some quick numbers for the P&I payment (principal and interest) on a $250,000 mortgage. If you’re willing to estimate, a mortgage calculator with taxes and insurance included will get you a little closer as to what to expect.
If we assume you take out a 30-year mortgage and have a 7.00% interest rate, the monthly P&I payment on a $250,000 mortgage would be $1,663. Assuming your lender wants you to have a maximum 28% housing-to-income ratio, then the minimum income you would need to make for your P&I payment would be $71,271 a year or $5,939 a month. Add in your property tax, home insurance, and private mortgage insurance (PMI, which a lender will require if your down payment is less than 20% of the home’s sales price) and you’re likely looking at a monthly payment of $2,234.
Another thing you may want to try is determine how much banks are likely to lend to you. If you know your exact gross income and monthly debts, try out a home affordability calculator. Another option is to move forward with a mortgage preapproval process so you know exactly how much you have to work with.
What Is a Good Debt-to-Income Ratio?
Ideally, lenders want borrowers to stick to a 36% debt-to-income (DTI) ratio, with a maximum of 28% going toward housing costs. However, depending on your income and credit score, some lenders may accept higher DTIs.
If we consider the cost of living by state, 28% may be too much when you account for daily expenses, such as food and gas, which can skew the income needed for a $250K mortgage. Therefore, if your job and lifestyle allow you to be flexible on where you live, you might consider checking out a ranking of the most affordable states.
What Determines How Much House You Can Afford?
Lenders look at a variety of factors when determining how much house a borrower can afford, but the big four are:
• Income
• DTI ratio
• Credit score
• Down payment amount
What Mortgage Lenders Look For
If you’re a first-time homebuyer, lenders look at the following variables for each borrower:
• Employment history
• Income
• DTI ratio
• Credit score
$250,000 Mortgage Breakdown Examples
How much income is needed for a $250,000 mortgage is significantly influenced by your rate and term. Let’s take a look at the various P&I payments you can expect with different rates and different terms:
| Term | Rate (APR) | Monthly P&I Payment: | Minimum annual gross income needed to cover P&I: |
|---|---|---|---|
| 15 | 6.00% | $2,110 | $90,429 |
| 15 | 6.25% | $2,144 | $91,886 |
| 15 | 6.50% | $2,178 | $93,343 |
| 15 | 6.75% | $2,212 | $94,800 |
| 15 | 7.00% | $2,247 | $96,300 |
| 20 | 6.00% | $1,791 | $77,014 |
| 20 | 6.25% | $1,827 | $78,300 |
| 20 | 6.50% | $1,864 | $79,886 |
| 20 | 6.75% | $1,901 | $81,471 |
| 20 | 7.00% | $1,938 | $83,057 |
| 30 | 6.00% | $1,499 | $64,243 |
| 30 | 6.25% | $1,539 | $65,957 |
| 30 | 6.50% | $1,580 | $67,714 |
| 30 | 6.75% | $1,622 | $69,514 |
| 30 | 7.00% | $1,663 | $71,271 |
Pros and Cons of a $250,000 Mortgage
Buying a house comes with both benefits and drawbacks. Here are some things you should consider:
Pros of a $250,000 Mortgage:
• Each monthly payment builds equity
• Home can be used as collateral for low rate loans
• More freedom to make changes to home
• Homeownership provides a hedge against inflation
Cons of a $250,000 Mortgage:
• Homeowners are responsible for all repairs and maintenance
• Must save up for both down payment and closing costs
• Must purchase home insurance
• Must pay property taxes
How Much Will You Need for a Down Payment?
If $250,000 is the purchase price, the lowest down payment a first-time borrower could make with a conventional loan is $7,500. If you choose an FHA loan, the lowest down payment you can make is $8,750. VA loans (from the U.S. Department of Veterans Affairs) and USDA loans don’t require down payments. It’s worth noting that even if you have owned a home before, you might qualify as a first-time homebuyer from a lender’s perspective if it has been at least three years since you had ownership in a principal residence.
Can You Buy a $250K Home With No Money Down?
Yes, both USDA loans and VA loans don’t require a down payment. VA loans are for qualified active and retired military and surviving spouses, while USDA loans are for homes bought in certain rural areas the USDA has deemed to be in need of economic development.
Can You Buy a $250K Home With a Small Down Payment?
If you use a conventional loan, the lowest down payment a first-time homebuyer can make is typically 3%. The lowest down payment with an FHA loan is 3.5%. USDA and VA loans don’t require a down payment, but they do have eligibility requirements.
Is a $250K Mortgage with No Down Payment a Good Idea?
Whether skipping the down payment on a home is a good idea depends on your long-term goals and what you hope to do. If you want to save money over the life of the loan, making a down payment will save you money in interest. If you need the money now for other endeavors, there’s nothing wrong with choosing a loan that doesn’t require a down payment.
Can’t Afford a $250K Mortgage With No Down Payment?
If you can’t afford a $250,000 mortgage, there are some things you can do to make homeownership a little easier.
Pay Off Debt
Paying off your debt will lower your DTI, improve your credit score, and give you more cash to work with each month. Because there are so many benefits, it may be worth your time to pay down as much debt as possible before applying for a mortgage.
Look into First-Time Homebuyer Programs
There are many first-time homebuyer programs across the United States. Assistance can come in various forms. It may be a low-rate loan, a forgivable loan, or a grant. It often comes as a forgivable loan, which doesn’t require any form of repayment as long as certain conditions are met. Assistance is often first come first served, so apply early if you’re interested.
Build Up Credit
The lower your score, the higher your interest rate. Strengthen your credit score, and you could qualify for a better interest rate that would lower your monthly payment and save you money in interest over the life of the loan.
Start Budgeting
Take steps to eliminate unnecessary spending so you can put as much as you can toward your savings. Monthly subscriptions and dining out, for example, may need to be put on the back burner as you work toward your savings goals.
Also, any lump payments you receive throughout the year could be put toward savings. For example, an end-of-the-year bonus or tax refund should be tucked away as soon as it’s received. Currently, the average federal tax refund is $2,869. That’s 33% of an $8,750 down payment.
If you’re new to the world of mortgages and financing, check out our home loan help center where we go in-depth on everything you need to know about buying your first home or moving forward with a mortgage refinance.
Alternatives to Conventional Mortgage Loans
It depends on the seller, but some sellers are open to lease-to-own or seller financing. Another option may be to pursue a portfolio loan with a local bank or credit union.
Mortgage Tips
Here are some tips to qualify for a mortgage:
• Pay down your debts
• Pay close attention to your credit score
• Save up for a down payment
• Stick with your current employer
• Gather all supporting paperwork needed for your mortgage application
The Takeaway
For a 30-year loan on a $250,000 mortgage with a 7.00% interest rate, you’ll need a gross income of around $76,000 a year. But exactly how much income you would need to have depends on several factors that are specific to you, including your existing debts, your credit score, and what loan term you choose and what interest rate you qualify for.
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 you need to qualify for a $250,000 mortgage?
To cover the monthly mortgage payment on a $250,000 mortgage, you’ll need an income of around $76,000 a year. For the most accurate estimate, you will need to know your exact interest rate, property taxes, home insurance, and home loan term.
Can I afford a $250K house on a $50K salary?
It would be difficult to afford a $250,000 house on a $50,000 annual salary unless you are able to make a large down payment, which would reduce your monthly mortgage costs to a manageable level. If you earn $50,000 a year and have minimal debts, you could probably qualify for a mortgage loan of around $150,000.
What is the monthly payment on a $250K mortgage?
The monthly principal and interest payment on a $250,000 home mortgage loan ranges from around $1,500 to $2,250, depending on the loan term (15 vs. 30 years) and interest rate (6.00% to 7.00%, although a higher or lower rate might be possible). The shorter the term and the higher the interest rate, the greater your monthly payment will be.
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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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