How much do you need to make to afford a $500k house?
To afford a $500,000 house with $100,000 saved, 20% of the price, you need an income of about $173,000 a year at a 6.71% mortgage rate. The payment comes to about $4,034 a month with property tax and insurance, and $54,631 stays in the bank after closing.
Saving 20% of the price does not mean putting 20% down. Of the $100,000, $15,000 goes to closing costs and $51,881 is held back as a reserve, six months of what the house and the rest of life will cost. That reserve is our rule, not a lender's, and it caps the down payment at $33,119. At this income the lender's payment limit is met with $30,369 down, 6.07% of the price, so the other $2,750 stays in the bank as well. Below 20% down a lender adds mortgage insurance, about $333 a month here, and it is inside the payment above.
What sets the salary is the lender's payment test. At $173,000 a year, gross pay is $14,417 a month and this house takes $4,034 of it, 28%, right at the 28% ceiling lenders use. Earn less and that ceiling shrinks the loan a lender will offer, and the cash you have cannot cover the gap.
Savings move the salary more than most people expect. With half the price saved, $250,000, the income needed falls to about $156,000. With 15% saved, $75,000, no income reaches this house: the down payment, closing costs and six-month reserve need more cash than that. A lender might still approve that loan; the reserve is our rule, there so a repair or a lost job does not become a missed payment.
The rate matters too. With $100,000 saved, a 5% mortgage brings the income needed down to about $151,000, and at 7.5% it climbs to about $184,000. The table shows every combination, so you can find the row closest to your own savings.
These figures assume a 30-year mortgage at 6.71%, 1.2% property tax, 0.4% insurance, closing costs of 3%, household spending of 60% of gross income including the rent the house replaces, and no other monthly debt. A car payment or student loan comes straight off the 36% back-end ratio and raises the salary you need. Property tax varies a great deal by state, and it is inside every figure here.
Cash saved vs mortgage rate
Every combination, computed the same way — find your row and your column.
| Cash saved | 5% | 5.5% | 6% | 6.5% | 6.71%our default | 7% | 7.5% |
|---|---|---|---|---|---|---|---|
| $50,000 (10%) | — | — | — | — | — | — | — |
| $75,000 (15%) | — | — | — | — | — | — | — |
| $100,000 (20%) | $151,000 | $157,000 | $163,000 | $170,000 | $173,000 | $177,000 | $184,000 |
| $150,000 (30%) | $146,000 | $152,000 | $158,000 | $164,000 | $167,000 | $171,000 | $177,000 |
| $250,000 (50%) | $137,000 | $142,000 | $148,000 | $153,000 | $156,000 | $159,000 | $165,000 |
Each cell is the lowest salary a lender would need to see for this house. Read down a column to see what more savings is worth: more cash lowers the income needed. A dash means no income gets there with that much saved: the down payment, the closing costs and the six-month reserve we hold back need more cash than the row has. A lender might still approve the loan; the reserve is our rule, not theirs.
Assumptions
- Home Price
- 500000
- Cash Saved
- 100000
- Mortgage Rate
- 6.7%
- Mortgage Years
- 30 yr
- Property Tax Rate
- 1.2%
- Closing Cost Rate
- 3%
Frequently asked
What salary do you need to afford a $500k house?
About $173,000 a year with $100,000 saved, at a 6.71% mortgage rate. With half the price saved it falls to about $156,000.
Does saving 20% mean I can put 20% down?
Not once closing costs and a reserve are counted. Of $100,000, $15,000 goes to closing and $51,881 is held back as a reserve, which caps the down payment at $33,119. This page puts down $30,369, 6.07% of the price, because that is all the lender's payment limit needs at this income.
Is the income for a $500k mortgage the same as for a $500k house?
No. A $500k house with $100,000 saved needs a loan of about $469,631. A $500k mortgage is a bigger loan than that, so it takes a higher income than the figure on this page.
Should I wait for mortgage rates to fall?
At 7.5% the income needed is about $184,000; at 5% it is about $151,000. Saving more lowers it as well, and unlike the rate, that part is in your hands.
What about student loans or a car payment?
They come off the 36% back-end limit, so every $100 a month of other debt takes roughly $100 a month of mortgage payment away, and the salary needed rises to make up for it.
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