The income needed for a $450,000 mortgage varies based on a few factors, but generally speaking, an income of $130,000 would put you in the position to afford a $450,000 mortgage. You can estimate how much you need to make by focusing on principal and interest. Together, these two factors account for a majority of a home’s monthly mortgage payment and reveal an approximate income you’ll want to bring in.
For a more accurate monthly payment estimate, you’ll need to know the home’s property taxes, home insurance costs, as well as which type of home loan you plan on using. Certain loans come with monthly fees that will increase your monthly housing costs.
If you’re thinking about borrowing $450,000 to buy a home, here’s what you need to know.
Income Needed for a $450,000 Mortgage
The income needed to qualify for a $450,000 mortgage varies on a few factors. However, the principal and interest (P&I) payment for a $450,000 mortgage would be $2,996 for a 30-year term with a 7.00% interest rate. For a 15-year term, the payment is $4,047. Keep in mind that these calculations do not include other fees that will increase how much you actually pay.
Many lenders want borrowers to stick to a 28% housing cost, meaning that they will not approve loans that take up more than 28% of the borrower’s gross monthly income. A mortgage calculator can do the math for you, but for a payment of $2,996 each month to equal 28% of your monthly income, you would need to earn about $10,800 per month, or about $130,000 per year. However, these calculations do not factor in other fees that contribute to your monthly mortgage payment.
To get a more accurate monthly payment, use a mortgage calculator with taxes and insurance included.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Recommended: First-Time Homebuyer Guide
How Much Do You Need to Make to Get a $450K Mortgage?
The income needed for a $450,000 mortgage varies based on:
• Loan term
• Interest rate
• Property taxes
• Home insurance
• Loan-specific fees
However, the loan term and interest rate determine a majority of the costs for any monthly mortgage payment.
What Is a Good Debt-to-Income Ratio?
The maximum debt-to-income (DTI) ratio lenders often accept is 36%, with a maximum of 28% going toward housing costs. Some lenders have higher margins, and some are willing to work with borrowers who have unusually high incomes and amounts of debts.
What Determines How Much House You Can Afford?
The two biggest factors that determine how much house you can afford are your income and DTI ratio. Regardless of your debts, the mortgage payment cap is often 28% of the borrower’s gross income.
What Mortgage Lenders Look For
Mortgage lenders typically look for a low DTI ratio, a strong credit score, a history of stable employment, and a high income. All of these factors suggest you are not only responsible enough to take on a mortgage but are financially capable of repaying your debts.
$450,000 Mortgage Breakdown Examples
When determining a home’s affordability, compare loan terms. A 30-year loan may enable you to buy a more expensive home, but increases the amount you pay in interest. For example, if you borrow $450,000 with a 30-year mortgage at 7.00%, over the life of the loan you will pay about $628,208 in interest in addition to the $450,000 principal. Borrow the same amount at the same rate but pay it back over 15 years and your interest charges shrink to around $278,236.
Remember, the above calculations do not include property taxes, home insurance, and loan-specific fees.
Pros and Cons of a $450,000 Mortgage
A $450,000 mortgage loan comes with its share of pros and cons. Here are a few things to consider:
Pros:
• You build equity with each monthly payment
• Equity can be used to secure a low rate loan
• Fixed housing costs
• Freedom to make changes to the property
Cons:
• Yearly home maintenance costs
• Large down payment
• Large closing costs
How Much Will You Need for a Down Payment?
The minimum down payment a buyer can make for a conventional loan is 3%, and this low rate is often only available to first-time buyers. Assuming your mortgage is for $450,000, this means the purchase price must be $463,918. A 3% down payment would be $13,918.
Can You Buy a $450K Home With No Money Down?
It’s possible to buy a $450,000 home with no money down using a loan from the U.S. Department of Agriculture or the U.S. Veterans Administration (a VA loan). All other traditional mortgages require a down payment. However, other options do exist.
Can You Buy a $450K Home With a Small Down Payment?
USDA and VA loans do not have down payment requirements. The lowest amount needed for a conventional loan for some buyers is 3% of the purchase price. FHA loans require a 3.5% down payment.
Is a $450K Mortgage with No Down Payment a Good Idea?
It certainly can be. For example, if you use a loan that doesn’t require a down payment, such as a USDA loan, you could use the money for something else. If you were to fix up the home and sell it after a few years, those renovations might bring in a good return on your investment.
Ultimately, however, it depends on the monthly payment. As long as you can comfortably afford the monthly payment, whether the mortgage requires a down payment or not doesn’t matter too much.
Can’t Afford a $450,000 Mortgage With No Down Payment?
You may want to consider lowering your maximum purchase price if you can’t afford the P&I payment.
If housing prices are high where you live, another thing you may want to consider is looking in another area. Consider looking at the cost of living by state with data that rates the most affordable states. You may find moving to a new location deserves some consideration.
You may also consider the following tips.
Pay Off Debt
Debts like student loans, credit cards, and car loans eat up your monthly income. As they are paid off, three things happen:
• You free up cash
• You lower your DTI ratio
• You cultivate a better credit score
Once you do this, you may be approved for a higher loan amount or the monthly payment on a $450K mortgage will become more manageable.
Look into First-Time Homebuyer Programs
First-time homebuyer programs help homebuyers with down payments and closing costs. They often come in the form of grants, forgivable loans, or low interest loans. Many programs can be found through HUD and are first-come-first-served. Apply early if you’re interested.
Build Up Credit
The stronger your credit score, the more confidence lenders have in you. This will likely result in a lower rate, and may also result in a higher loan limit. However, your lender will still likely want you to stick to a 28% DTI for housing costs.
Start Budgeting
Create a monthly budget to intentionally track how much you spend and save. See if there are places where you can cut back to help save up for a larger down payment.
Alternatives to Conventional Mortgage Loans
There are alternatives to conventional mortgage loans, but they involve working with a seller who is open to nontraditional financing methods. Some nontraditional methods include seller financing and lease-to-own options.
Another option is a portfolio loan, which some banking institutions offer. A portfolio loan is a loan lenders don’t sell to another institution. Instead, they keep it in their own books, which enables them to allow for looser eligibility requirements.
Recommended: Home Loan Help Center
Mortgage Tips
Here are a few quick tips to qualify for a mortgage:
1. Get preapproved as early as possible: The mortgage preapproval process helps with a lot of things, and it will tell you how much house you can afford.
2. Use a mortgage calculator when shopping online: This will help you quickly crunch some numbers. There are many types of mortgage calculators online, including home affordability calculators.
3. Compare loan types: There are many different types of mortgage loans, each of which comes with different requirements and different fees.
4. Pay down your debts: The fewer debts you have, the more room in your budget you’ll have for a higher mortgage.
5. Know that you can always refinance in the future: A mortgage refinance will take a fresh look at your credit score and income, and will also include your existing home equity when determining your new rate.
The Takeaway
You’ll need an annual income of around $130,000 if you want to be in a good position to make payments on a $450,000 home mortgage loan. Remember that your payments will likely include principal and interest, but also homeowners insurance and property taxes. Getting preapproved by a lender can help make your search less stressful.
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 do you need to make to qualify for a $450K mortgage?
Just considering the P&I payment of a $450K mortgage, the minimum you would need to make is around $130K a year. This is for a 30 year mortgage with a 7.00% interest rate.
What would my mortgage be on a $450,000 house?
How much money you would have to borrow to buy a $450,000 house would depend on the size of your down payment. First-time homebuyers can sometimes put down as little as 3% ($13,500). In this case, you would need a home mortgage loan for $436,500. If you put down 20% ($90,000), you would need a mortgage loan for $360,000.
Can you buy a house with a $40,000 salary?
Yes, but it depends on the purchase price of the home. The gross monthly income is $3,333, which means the maximum amount spent on housing should be $933. This puts the purchase price around $140,000.
Photo credit: iStock/FreshSplash
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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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