By Caroline Banton ·February 08, 2024 · 8 minute read
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One rule of thumb is that the cost of your home should not exceed three times your income. On a salary of $70k, that would be $210,000. This is only one way to estimate your budget, however, and it assumes that you don’t have a lot of other debts. The truth is that how much house you can afford depends on many factors, so let’s take a look at them.
If I Make $70,000 a Year, How Much House Can I Afford?
“How much house can I afford if I make $70,000 a year” is a question with no single right answer. A second popular guideline for knowing how much house your budget can bear is the 28/36 rule, which stipulates spending no more than 28 percent of your salary on overall housing costs, and no more than 36 percent on all of your debts, including housing costs.
If you follow the 28/36 rule, your housing costs should be less than $1,633 a month, and your debt and housing costs should not exceed $2,100 a month. But how much house that will buy depends on where you live and your existing debt level.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Your Debt-to-Income Ratio
Lenders look at various things when they qualify you for a loan, but your debt-to-income (DTI) ratio is definitely one of them. This ratio is the amount of income you have relative to the amount of payments you make each month to cover your debt.
A higher ratio means you are using more of your income to cover existing debt, which means, from the lender’s point of view, you will have less cash to pay for your home loan each month. Therefore, a lower debt-to-income ratio, under 36 percent ideally, is better and will likely give you better mortgage terms from a lender.
Your Down Payment
Conventional lenders require a down payment on a home. The amount depends on lender requirements and the borrower’s financial situation. According to the National Association of Realtors®, the average first-time buyer pays about 8% while repeat buyers put down 19%.
The higher your down payment, the lower your monthly housing costs. The interest rate will also affect your monthly costs. You can use a mortgage calculator to see how different down payments affect your loan.
Home Affordability
Depending on the location, homes can be more affordable or less affordable. As noted above, the local housing market, the cost of living, your income, and current interest are all factors affecting home affordability. Remember that if your interest rate feels high, you can consider a mortgage refinance if rates drop and you plan to stay in the home long-term.
House Prices
House prices vary. You might be selling a house where the prices are low and wanting to buy a home where prices are high. If that’s the case, you might have to settle for a much smaller home.
Cost of Living
The cost of living varies depending on where you live. In areas where the cost of living is cheaper – the southern states tend to have lower property taxes and a lower cost of living – you will spend less on necessities and have more money to put towards your monthly home expenses. If you are moving from New York to South Carolina, your household expenses will be much lower in South Carolina, so you might be able to afford a more costly house.
Property Taxes
Your property taxes are based on the assessed value of a property. They vary widely and significantly increase the costs of homeownership in areas where they are high.
How to Afford More House With Down Payment Assistance
The hardest part of buying a home is, arguably, coming up with the down payment. Some state and local governments offer down payment assistance programs to help with the down payment and closing costs for qualified borrowers. Usually for first-time homebuyers, these programs are often low-interest loans or grants, or they might help with closing costs.
If you have a $200,000 home mortgage loan, the closing cost could be around 5 percent, or $4,000. A down payment assistance program might help with those costs, allowing you to use more of your savings for the down payment. You can apply for assistance using a formal application to your state or local government.
Home Affordability Examples
Below are some hypothetical examples for buyers who make $70,000 a year with different savings for a down payment and with various levels of debt. The interest rates are assumed to be 7%, and property tax rates are assumed to be average (1.12%). A buyer in these scenarios would need an additional $4,000 to $6,000 on hand for closing costs.
Example #1: Saver with a Down Payment
Gross annual income: $70,000
Down payment: $21,000
Monthly debt: $250
Home budget: $210,000
Monthly mortgage payment: $1,667
Total Monthly Payments $1,667
• Principal and Interest: $1,257
• Property Taxes: $197
• Private Mortgage Insurance: $158
• Homeowners Insurance: $55
Example #2: Saver with A Down Payment … and Debt
Gross annual income: $70,000
Savings for down payment and closing: $12,000
Monthly debt: $500
Home budget: $120,000
Total Monthly Payments $953
• Principal and Interest: $719
• Property Taxes: $113
• Private Mortgage Insurance: $90
• Homeowners Insurance: $31
Using a home affordability calculator, you can plug in different amounts for down payments to get a sense of what you can afford.
How to Calculate How Much House You Can Afford
Rather than relying on a rule of thumb, first keep a budget to track your monthly expenditures, not including any rent. Your expenses should include credit card debt, student loans, other mortgages, etc. Next, decide how much you can put down as a down payment.
Plug your gross annual salary and other numbers into an affordability calculator along with the average interest rate and the property taxes in the area that you want to live. This should give you a general idea of how much home you can afford.
How Your Monthly Payment Affects Your Price Range
Your monthly payment is made up of principal and interest. The interest is determined by the lender, and the higher the rate, the higher your monthly payment. If your down payment is large and you get a good interest rate because you have good credit, you might be able to afford a more expensive house. But you still have to save the down payment.
Types of Home Loans Available to $70K Households
Conventional, FHA, USDA, and VA are the most common home loan options available:
• Conventional These loans are the most common. They typically require a credit score of at least 620. Some lenders will require a down payment as low as 3 percent, but that will mean your monthly payments will be higher because you will borrow more.
• FHA Federal Housing Administration loans are a good option if you have a credit score between 500 and 579. These loans require a 10 percent down payment, but if you have a score of 580 or higher, 3.5 percent is accepted.
• USDA United States Department of Agriculture loans serve low-income borrowers in designated rural areas and require no down payment.
• VA U.S. Department of Veterans Affairs loans offer a no-down-payment option.
💡 Quick Tip: Active duty service members who have served for at least 90 consecutive days are eligible for a VA loan. But so are many veterans, surviving spouses, and National Guard and Reserves members. It’s worth exploring with an online VA loan application because the low interest rates and other advantages of this loan can’t be beat.†
The Takeaway
Your salary is just one factor determining how much house you can afford. You also have to consider your monthly expenses, how much debt you have, the property taxes in the area where you want to live, current interest rates, and how much you can afford as a down payment. The good news is that if you earn $70,000, most estimates show that you can afford to spend around $2,100 a month on housing expenses so a home should be within reach.
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
Is $70K a good salary for a single person?
A salary of $70,000 is significantly higher than the national median income for a single person in 2022, which was $51,930 for men and $40,200 for women, according to Census data. It’s a good salary, but it does make buying a home harder when the interest rates are high, particularly if you want to live in an area with a high cost of living.
What is a comfortable income for a single person?
A comfortable income for a single person is one that provides a good standard of living where the person lives. The cost of living can vary significantly between and within states. The Massachusetts Institute of Technology Living Wage Calculator is a good place to look at what equates to a livable wage in your specific county.
What is a liveable wage in 2023?
According to the Massachusetts Institute of Technology, the living wage in the United States was $104,07 per year before taxes per year in 2022 for a family of four (two working adults with two children).
What salary is considered rich for a single person?
According to Internal Revenue Service data, an income of $540,009 per year puts a person in the top 1% earnings category.
Photo credit: iStock/svetikd
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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 circ*mstances.
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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.
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FHA 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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