How Much Income Do I Need To Buy A House ?

Definition of "How Much Income Do I Need to Buy a House ? "

Darcie Barton real estate agent

Written by

Darcie Bartonelite badge icon

Keller Williams Capital Partners

The time is here: you decided you will buy a home. Congratulations!

But soon after you get motivated to do, conscience kicks in and makes you ask yourself: how much income do I need to buy a house?

Well, it will depend first on the location of which this house is located and also on the type of house you want to buy, obviously.

If you don’t know that yet, and that decision is contingent to the available income you have, here are some informational points for you to understand how much income you need to buy a house:

You have two options when buying a home. The easiest one is when you can take the whole amount out of your own pockets at once. All you need to do is find out how much is the asking price of the home you want to buy and see if it won’t hurt your savings. This is not for everybody, of course. Considering that in 2017, the average home price in America was $398,900; you’d have to have a lot of dough to do that without suffering a huge hit on your finances, right?

The second option is the most common: through a mortgage loan in which a lender buys the house at once, and let’s you live in there while you pay monthly until that value meets whatever the value you both set in the bilateral contract of your mortgage. It is here where calculations start to kick in because it’s not so much your decision, but the mortgagee’s. So it’s important to have some of the guidelines behind their calculations to figure out not only how much income you need to buy a house but other aspects as well.

Mortgage companies use ratios to analyze your mortgage payment. The housing payment ratio (or front ratio) used in this calculation is 30%. The housing expense, or front ratio, compares your total mortgage payment to your monthly income. So the total debt expense ratio (or back ratio) is 36%. This total debt expense, or back ratio, compares your total monthly obligations including your total mortgage payment to your monthly income.

Do you know what is a credit score and how does it impact real estate? A solid credit history is of the utmost importance. If yours is weak, lenders might be wary even if your income is solid.

And you can’t forget that once you go the mortgage way, there will be a down payment, so you need to account for 3.5 to 20% of the total value of the home and add to all the calculations done to assert the ideal income to buy the specific house you want.

So, as you can see, there are no systematic formulas to answer the question of how much income one needs to buy a house. Each lender will weigh the several factors differently and propose a different strategy to cover their risk. That’s why it’s important having a real estate agent by your side to advise you of the best safest paths to success in the housing process.


Need help as a:

I'm interested to:


I work in:

Reach out to the local professionals for help
I agree to receive FREE real estate advice.

Agents, get listed in your area. Sign up Now!

Here's what you'll get:

1. Full zipcodes coverage for the city of your choice for 3 months

2. The ability to reach a wider audience

3. No annual contract and no hidden fees

4. Live customer support/No robo calls

$75 - Any City - 3 Months Coverage
loader gif

Please wait ...

I agree to receive FREE real estate advice
I agree with Terms & Conditions and Section 5-5.9.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.


Popular Mortgage Questions

Popular Mortgage Glossary Terms

Making a payment larger than the fully amortizing payment as a way of retiring the loan before term. Making Extra Payments as an Investment: Suppose you add $100 to the scheduled ...

Also called variable or flexible rate mortgage, an adjustable rate mortgage (ARM) is a mortgage where the interest rate is not constant, but changes over time by the mortgage lender. ...

All the combinations of interest rate and points that are offered on a particular loan program. On an ARM, rates and points may also vary with the margin and interest rate maximum. ...

The definition of a reverse mortgage is important for homeowners 62 and older who want to supplement their retirement income. What exactly is a reverse mortgage? Some say that it is the ...

Interest from the day of closing to the first day of the following month. To simplify the task of loan administration, the accounting for all home loans begins as if the loan was closed ...

A particular combination of loan, borrower, property, and transaction characteristics that lenders use in setting prices and underwriting requirements. ...

A document that evidences a debt and a promise to repay. A mortgage loan transaction always includes a note evidencing the debt, and a mortgage evidencing the lien on the property. ...

Someone recommended you should reach out to Freddie Mac and you came here looking for him. No, he's not a registered real estate agent at The OFFICIAL Real Estate Agent Directory ...

The definition of a foreclosure bailout loan: a secured loan obtained by a mortgagor in order to save an owner-occupied house that is under foreclosure. It is a refinancing loan and it ...