It’s tough to afford a home these days. If you’re looking at a $275,000 mortgage, you’ll have a monthly payment of around $2,400 with today’s interest rates at 7% on a 30-year loan. You’ll need an income of about $80,000 per year to afford this mortgage.
This can change if you have a significant amount of debt, a low down payment amount, or a less-than-perfect credit history. We’ll run through a few scenarios to show you how much income is needed for a $275K mortgage.
Income Needed for a $275,000 Mortgage
The income needed for a $275K mortgage is around $80,000. If you have more debt, the lender will need to factor that in before calculating how much income you’ll need to afford the $275,000 mortgage. For example, if you have $400 in debt payments each month, you’ll need to earn more money each month to be able to afford the $275K mortgage and still stay within the 36% debt-to-income ceiling most lenders prefer. A closer look:
$2,402 (mortgage) + $400 (other debt payments) = $2,802 total debt payments per month
For $2,802 to be 36% of your monthly income, you would need to make $7,783 each month, or $93,400 per year to qualify for the $275,000 mortgage. This estimate is based on a mortgage calculator with taxes and insurance. If you would like to see what a lender can do for you, explore getting prequalified for a home mortgage loan.
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 $275K Mortgage?
How much income you need for a $275K mortgage also depends on your debt-to-income (DTI) ratio, down payment, loan type, lender, and credit score. Let’s take a look at these each in detail.
What Is a Good Debt-to-Income Ratio?
The gold standard for debt-to-income ratios is <36%. However, there are lenders who are able to originate loans for borrowers with a DTI ratio up to 45%. Lenders who fall outside the norm in DTI and credit score requirements will influence how much you need for a $275K mortgage.
What Determines How Much House You Can Afford?
Home affordability isn’t a simple equation. There are a number of factors that go into a lender’s decision about your loan.
Income
Reliable income is the largest determinant in loan approval. The more you make, the more you have to work with each month. However, your income and home affordability are affected by how much debt you have.
Debt
Your lender will take into account any monthly debt obligations you have. These will be added to the maximum DTI. If you have debt, your monthly mortgage will need to be lower.
Down Payment
A larger down payment can afford you a larger mortgage. If you’re able to put down 20%, you won’t need to pay for private mortgage insurance (PMI), which saves you money every month. However, 20% could be a big chunk of change to come up with, and most loans accept lower than a 20% down payment to start. See this mortgage calculator for examples.
Loan Type
Home affordability is also affected by the different types of mortgage loans. Fixed-rate loans will have a different monthly payment than adjustable-rate loans, for example. Likewise, the monthly payment on a 15-year mortgage is far different from the payment on a 30-year mortgage.
Lender and Interest Rate
Interest rates will vary from lender to lender. You may also see a different acceptable DTI ratio from lender to lender. When a lender is able to offer a lower interest rate, you’ll see your home affordability improve. When a lender has a higher acceptable DTI ratio, you may be able to qualify for a higher mortgage amount.
Recommended: Cost of Living by State
What Mortgage Lenders Look For
Worried about qualifying for a $275K mortgage? Here’s what your lender will look for during the mortgage preapproval process. These are right in line with home affordability requirements.
• Income Your income needs to be reliable and sufficient to qualify for the loan you want.
• Credit score A good credit score helps with approval and lower interest rates.
• Debt-to-income ratio Too much debt could prevent you from securing the loan you want. Before you apply for a loan, work on paying off debt as best you can.
• Down payment A higher down payment can help you qualify for a larger purchase price on a home. A down payment over 20% can help you avoid the monthly mortgage insurance payment as well.
• Loan-to-value ratio Lenders also want to be sure the property you’re buying qualifies for a loan. They don’t want to loan more on the property than it’s worth.
$275,000 Mortgage Breakdown Examples
Your individual situation will influence the income needed for the mortgage you want. Here are a few examples created with a home affordability calculator to show you how this works. In each case, the interest rate is 7% on a 30-year mortgage.
With no debt
• Principal and interest: $1,830
• Taxes and insurance: $573
• Total monthly payment: $2,403
Income needed to afford the monthly payment: $6,672 per month, or $80,064 per year.
Assumptions: 20% down payment. The original purchase price would be $343,750 to get a $275,000 mortgage with a 20% down payment.
With $1,000 per month in debt
• Principal and interest: $1,830
• Taxes and insurance: $573
• Total monthly payment: $2,403
Add monthly debt obligations to the monthly mortgage payment. $2,402 + $1,000 = $3,402 monthly debts.
Income needed to afford the monthly payment: $9,450 per month, or $113,400 per year.
Assumptions: 20% down payment. The original purchase price would be $343,750 to get a $275,000 mortgage with a 20% down payment.
With no down payment and $600 in monthly debt payments
• Principal and interest: $1,830
• Taxes and insurance: $458
• PMI: $252
• Total monthly payment: $2,540
Add monthly debt obligations to the monthly mortgage payment. $2,540 + $600 = $3,140
Income needed to afford the monthly payment: $8,722 per month, or $104,664 per year.
Assumptions: No down payment. The original purchase price would be $275,000.
Pros and Cons of a $275,000 Mortgage
Pros
• Lower mortgage payment than for the median home price in the U.S.
• Lower income requirement than a higher-priced mortgage
Cons
• Few homes can be found for $275,000
• May still be unaffordable for many families
How Much Will You Need for a Down Payment?
If you’re deciding how much of your hard-earned money to put down for a down payment on a property that you plan to buy with a mortgage of $275,000, here’s how it breaks down by loan program.
| Program | Minimum down payment percentage | Amount for $275,000 |
|---|---|---|
| VA, USDA | 0% | $0 |
| Conventional | 3% or more | $8,250 or more |
| FHA | 3.5% or more | $9,625 or more |
Keep in mind, when you make a payment lower than 20%, you’ll need to pay PMI each month. For some loans, like the Federal Housing Administration (FHA) mortgage, you’ll need a mortgage refinance to get rid of PMI.
Can You Buy a $275K Home With No Money Down?
Yes, you can buy a $275K home for no money down. The two main programs that don’t require a down payment include:
• VA (U.S. Department of Veterans Affairs) mortgages
• USDA (U.S. Department of Agriculture) mortgages
Beyond these two programs, you may also find local housing programs that offer down payment assistance that may be able to help get you into a home with no money down (or close to it).
Can You Buy a $275K Home With a Small Down Payment?
Since a $275K mortgage loan falls under the conforming loan limits, it qualifies for loan programs with lower down payment requirements. These include conventional financing with a minimum 3% down payment for qualified first-time buyers, FHA with a 3.5% minimum down payment, as well as VA and USDA loans which have no down payment requirement.
Recommended: Best Affordable Places to Live
Is a $275K Mortgage with No Down Payment a Good Idea
It’s possible to get a $275K mortgage with no down payment. It also may help you get into a home that you otherwise wouldn’t be able to.
If you’ve run your numbers through a mortgage calculator and have worked closely with a lender to determine if the monthly payment is affordable for you, you shouldn’t hesitate to get a mortgage with no down payment.
The major downside to getting a mortgage with no down payment is the amount of mortgage insurance you’ll pay every month. That will need to be factored in when the lender determines how much mortgage you’ll be able to afford.
Can’t Afford a $275K Mortgage With No Down Payment?
If you still have a little work to get qualified for a $275K mortgage, especially if the cost of living in your state is high, there are some smart moves you can make to help your odds of approval.
Pay Off Debt
You may qualify for more house by paying down debt. Let’s take a look at our previous examples:
With no debt, a $275K mortgage will cost $2,402 per month, and you’ll need to earn $6,672 per month, or $80,064 per year.
With $1,000 monthly debt obligations, a $275K mortgage will have a total of $3,402 monthly debts and you’ll need $9,450 per month, or $113,400 per year to afford a $275K mortgage.
With a reduced debt load of $600 instead of $1,000, and a $275K mortgage, you’ll have a total debt load of $3,002. You’ll need $8,339 in income per month, or $100,067 per year to afford your debt load. This is much less than the previous example where the debt load was $1,000 per month.
Look into First-Time Homebuyer Programs
Most states and local housing programs have some type of first-time homebuyer program. It may be a down payment assistance program or a forgivable second mortgage that helps cover closing costs.
Build Up Credit
There’s nothing you can do about the current interest rates, but you can work on your credit to get the best rate you can. A better credit score translates into a better interest rate almost every time, which helps immensely with affording a $275K mortgage.
Start Budgeting
Good old-fashioned budgeting can help you zero in on your goals and save a large enough down payment to afford a $275K home. It helps to think of budgeting as a tool for achieving goals, rather than a punishment or restrictive way of life.
Alternatives to Conventional Mortgage Loans
If you’re not able to qualify for one of the different types of mortgage loans just yet, you might want to look into the following alternative financing methods:
Seller financing Seller financing is where the seller agrees to carry the mortgage and acts as lender. Usually, it’s a short-term agreement and the seller may charge a higher interest rate than what a traditional lender would. The details of the arrangements are made between buyer and seller, and can be quite complex. But it also avoids many closing costs and can be a faster transaction than a traditional sale.
Private lending A private lender is any lender not associated with a bank or lending institution. They may be more flexible with qualification and offer a wider range of lending tools, such as bridge loans to help you get from one house to another.
Recommended: Home Loan Help Center
Mortgage Tips
Getting a mortgage is intimidating at first. Once you’re done reading tips to qualify for a mortgage, you’ll want to start talking to lenders. Here’s what you’ll do to find the best rate.
1. Shop around for a loan. Shopping around for a loan within a 45-day window only counts as a single credit inquiry on your credit report, so you can check out as many mortgage lenders as you want. This can help you find one with a great deal and terms that work for you.
2. Compare loan estimates. A loan estimate is a document that outlines the different loan costs the lender charges. You’ll be able to compare origination fees, underwriting fees, and other closing costs in determining which loan will work best for you.
3. Don’t get caught up in analysis paralysis. After you’ve looked at a handful of lenders, it’s time to pick one. Make a decision and go forward with excitement about moving into your home.
The Takeaway
Affording a home in today’s economy seems hard, and the amount of income needed for a $275K mortgage may feel like a heavy lift. But it’s not impossible to qualify for the mortgage you want. Even after you’ve worked out all the numbers online, you’ll still want to talk to a lender. They may have more options than you’d expect, and it’s worthwhile to start the process sooner rather than later.
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
Can I afford a $275K house on a $60K salary?
If you have a large enough down payment, you may be able to afford a $275,000 house on a $60,000 salary. For a $5,000 monthly income, you’ll need your mortgage amount to be around $1,800. To get to that payment, you’ll need a 20% down payment ($55,000) and a 6% interest rate (if rates don’t drop to that level, you can buy down your rate by paying mortgage points to your lender).
How much does a $275K mortgage cost over 10 years?
With an interest rate of 7%, a $275,000 mortgage will cost $383,158 over 10 years. So your total interest paid on this loan will top $108,000.
What credit score is needed to buy a $275K house?
Your credit score is only one factor in determining whether or not you can afford to buy a $275K house. FHA loans, for example, allow borrowers with credit scores as low as 500 (with a 10% down payment) and 580 (with a 3.5% down payment) to apply. Lenders also look at your debt-to-income ratio, income, employment history, and loan-to-value ratio.
Photo credit: iStock/FG Trade Latin
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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.
SOHL-Q224-1878500-V1