How Much Income Do You Need To Buy a House?

Use Your Debt-to-Income Ratio To Determine Income Requirements To Buy a Home

what income is needed to buy a house?

The Balance / Alison Czinkota

Are you shopping for a house but wondering what your price range should be? You don't have to go to a lender and check your credit to get a ballpark idea. The income you need to buy a home will depend on your location, income, and debt-to-income (DTI) ratio. Lenders often have DTI requirements for how much income is required to pay for a mortgage. This often ranges from 28% to 45%, depending on a few factors. The lower the DTI, the higher the income requirements. Income requirements may also be lowered if you have more money for a down payment. After that, you can see how much room you have in your budget to take on a mortgage.

Here's how to figure out how much income you'll need to buy a house.

Key Takeaways

  • The income you need to buy a house will depend on the price of the house, the loan program's debt-to-income (DTI) requirements, and a few other factors.
  • The lower the DTI requirements, the more money you'll need in gross income. DTI requirements may range from 28% to 45%.
  • You'll also need to determine how much you would like to spend per month on a mortgage—the higher your down payment, the lower your monthly mortgage and the lower the income requirements.
  • Increasing your income may help you get approved for a higher mortgage, so if you have time to do that, it may be worth waiting to buy a house.

Understanding Debt-to-Income Ratios

Your debt-to-income (DTI) ratio is the amount of debt you have in relation to the amount of money you earn. For example, if your gross monthly income is $5,000 and you currently have debt obligations that total $2,000, you'd calculate it like this:

$2,000 / $5,000 = 40%

Your DTI is 40%, which means 40% of your income currently goes toward debt payments.


Monthly debt expenses include payments toward your mortgage, car loans, personal loans, student loans, and credit cards.

Mortgage loan studies have shown that borrowers with higher DTIs tend to have more trouble making their mortgage payments. Lenders will therefore calculate your DTI to determine how much house you can comfortably afford when you're looking into buying a house.

But they won't look at just your overall DTI. Lenders also look at your ratio of housing-related debt to your gross income. Your housing-related debt-to-income ratio would look like this if you pay $1,650 per month for all your housing-related expenses and your gross monthly income is $5,000:

$1,650 / $5,000 = 33%

DTI Requirements for Mortgages

The amount of income you'll need depends on your loan program, loan term, interest rate, and down payment.

Most mortgage lenders require you to have a total DTI of less than 45%, and a housing-related DTI of less than 36%.

FHA-backed loans require that your total housing debt must be 31% or less of your gross income. Your total debt can't exceed 43% of your total gross income.

Fannie Mae, a government-sponsored enterprise (GSE), has a maximum total DTI ratio of 36%. Fannie Mae will allow total DTIs up to 45% if a borrower meets certain other credit score and reserve requirements.

Freddie Mac, another GSE that finances home loans, has a maximum housing expense ratio of 28% and a maximum DTI of 36%, up to 45% if the borrower meets credit score and other requirements.

How Much Money Do You Need To Buy a Home?

Let's look at couple examples of how much income you may be required to earn per year and per month in order to buy a house. We'll look at FHA loans and loans from Freddie Mac.

Using our mortgage calculator to figure out the estimated monthly payments, here's what it may look like if you're buying a home that costs $374,900:

FHA Loan Freddie Mac (HomeOne Mortgage) Other Mortgage Lender
House Price $374,900 $374,900 $374,900
Down Payment 3.5% 3% 20%
Term 30 years 30 years 30 years
Interest Rate 6% 6% 6%
Maximum Housing DTI  31% 28% 36%
Minimum Income Required (per month) $8,783 $9,725 $5,906
Minimum Income Required (per year) $105,400 $116,700 $70,867

Your estimated monthly payment would be $2,723 if you decide to go with an FHA loan, put 3.5% down ($13,121.50), sign a 30-year term, and get a mortgage interest rate of 6%. That includes principal, interest, property taxes, homeowner's insurance, and private mortgage insurance (PMI). The FHA only allows your housing debt to account for 31% of your income, so your gross income would have to be at least $8,783 per month and $105,400 per year to buy a $374,900 house.

Your housing expense ratio might be capped at 28% if you go with a conventional loan financed by Freddie Mac and you put 3% down, sign a 30-year term, and get a 6% interest rate. You would need a gross income of $9,725 per month and $116,700 per year to buy the same $374,900 house.

Let's look at one more hypothetical situation. Let's say you get a 30-year conventional mortgage from a different lender. You put 20% down on the $374,900 house, have an interest rate of 6%, and pay no PMI. Your monthly mortgage payment, taxes, and home insurance totals $2,126. With a maximum housing DTI of 36%, you'd need a gross income of $5,906 per month and $70,867 per year.

The lower DTI requirements result in a higher income requirement, and the higher your down payment, the lower the income requirement.


Do you have your dream house in mind? Calculate your monthly payment with our mortgage calculator. Check the mortgage rules of your loan program for the maximum housing-expense-to-income ratio. Then divide your monthly payment by the housing-expense-to-income ratio to get the minimum income required per month.

The Effect of Your Down Payment

The amount of your down payment will affect how much gross income you need because it will either increase or decrease the amount you're borrowing and thus your monthly payments.

The FHA program requires that you put down at least 3.5%, but you'll have to put down 10% if your credit score is between 500 and 579. You'll have to put down at least 20% to avoid paying PMI on a conventional loan.

Here's a look at what you can expect to put down on a $374,900 home with each of the down payment options:

  • FHA 3.5% down payment: $13,121.50
  • FHA 10% down payment: $37,490
  • Conventional 20% down payment: $74,980


You can figure out your minimum down payment amount by multiplying your loan program's down payment requirement by the house's sale price.

Lowering Your Debt or Increasing Your Income When Buying a Home

If you already have a lot of debt obligations per month, such as a personal loan, a car loan, or credit card debt, see if you can pay those down to make room in your budget for a new home loan.

For example, if your gross income per month is $5,000, but you have a monthly personal loan payment of $350, a monthly car loan payment of $250, and monthly credit card debt of $1,000, your current DTI is 32%. By eliminating the credit card debt, your DTI would drop to 12%. This gives you more room in your budget to buy a house and take on new debt.

If your individual income is not enough to buy a house, you could look into buying a home with a partner, family member, or friend. Your monthly gross income would be the total of both of your incomes together. This could help increase the amount of home you could afford to buy.

For example, if you earn $5,000 per month and your spouse earned $5,000 per month, then you have a total monthly income of $10,000 and would be able to take advantage of any of the loan programs in our examples above.

After crunching your own DTI numbers to see how much income you need to buy a house, shop around for the right mortgage lender, interest rate, and program that fits your financial situation.

Frequently Asked Questions (FAQs)

Is there an equation to help determine if my income is enough?

The equation to determine if your income is enough starts with price of the house. Calculate your estimated monthly payment based on the down payment, potential interest rate, and loan amount. Next, find the maximum housing-related debt-to-income (DTI) ratio for the loan program. Then, divide the monthly payment by that DTI to see what the required monthly income is. Now compare it to your own income to see if it's enough.

My income changed radically. How can I calculate this change?

The maximum mortgage payment you qualify for will change if your income changes. You can figure out your maximum monthly payment by adding up your gross monthly income and multiplying it by the maximum housing DTI of the loan program you're interested in. The result will be the maximum mortgage payment you can get.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. "Debt-to-Income Calculator."

  2. U.S. Department of Housing and Urban Development. "HUD 4155.1: Section F. Borrower Qualifying Ratios," Page 4.

  3. Fannie Mae. "Eligibility Matrix," Pages 4-5.

  4. Freddie Mac. "Seller/Servicer Selling Guide: Monthly Housing Expense-to-Income Ratio."

  5. Freddie Mac. "Seller/Servicer Selling Guide: Monthly Debt Payment-to-Income Ratio."

  6. FDIC. "203(b) Mortgage Insurance Program," Pages 1-2.

  7. Consumer Financial Protection Bureau. "What Is Private Mortgage Insurance?"

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