How much house can I afford on a $50,000 salary?

If you're in the market for a new home, the price of the home is an important consideration. After all, you don't want to enter into a mortgage only to find out that you can't comfortably afford your payments. So, how much house can you afford?

It's common to use your salary to get a rough determination of how much house you can afford. So, what if you earn $50,000 per year? What's a reasonable price to look for as you shop for your new home? Well, that answer depends on a few factors.  

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How much house can I afford on a $50,000 salary?

There are two general rules of thumb to help you determine how much house you can afford based on your salary. Those rules include: 

The 2.5 times your income rule 

The rule of 2.5 times your income stipulates that you shouldn't purchase a house that costs more than two and a half times your annual income. So, if you have a $50,000 annual salary, you should be able to afford a $125,000 home. 

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The 28% of your income rule

The 28% of your income rule suggests that you shouldn't spend any more than 28% of your income on mortgage payments. If you earn $50,000 per year, you earn about $4,166.67 per month. At 28% of your income, your mortgage payment should be no more than $1,166.67 per month. 

Considering a 20% down payment, a 6.89% mortgage rate and a 30-year term, that's about what you can expect to pay on a $185,900 home. If you only put 5% down and had a 6.89% mortgage rate and a 30-year term, you could likely afford a $159,300 home.   

(The Bankrate calculator used to determine the monthly payments above accounts for private mortgage insurance (PMI), property taxes and basic homeowners insurance, which can vary based on numerous factors. Payments were based on values for the 32446 ZIP code.)

Other costs to consider when you purchase a home

There are other potential costs to consider when you purchase a home as well, including: 

• Homeowners association (HOA) fees: If you purchase a home in a neighborhood with a homeowners association, you can expect to pay HOA fees. These fees can easily cost hundreds of dollars per month. 
• Private mortgage insurance (PMI): If you purchase a home with less than 20% down, you may have to pay for PMI. If so, the cost could be hundreds of dollars per month.   

How much home you can afford is unique to you

Both rules can help you get a general idea of how much home you can afford. However, rules of thumb are too general to be applied to every financial situation. After all, your budget is just as unique as the home you can comfortably afford to buy with it. 

For example, say you earn $50,000 per year but you have significant credit card debt and other debt. In that case, you may not be able to comfortably afford a mortgage payment that's over $1,000 per month. On the other hand, if you earn $50,000 per year, your car is paid off and you don't have any other debts, you may be able to comfortably afford a more expensive home. 

The mortgage provider also plays a role 

You may be able to comfortably afford a $185,000 home, but if the mortgage company isn't willing to extend the loan amount necessary to purchase that home, you won't be able to buy it. Ultimately, the mortgage lender you use to buy the house will determine the maximum they're willing to allow you to borrow. Some factors that play a role in this decision include: 

• Your credit score: Lenders are typically more willing to lend large sums of money to those with competitive credit scores. 
• Your debt-to-income ratio: If you have a high debt-to-income ratio, you may not be approved for the mortgage amount you think you can afford to pay back. 
• Your assets: The more assets you have, the less risk you pose to mortgage companies. So, borrowers with more assets may be able to access higher loan amounts. 
• Type of loan: The loan type also plays a role. For example, conventional mortgages have higher borrowing limits than FHA loans, which allows borrowers to access more money with a conventional loan.   

The bottom line

The amount of home you can afford on a $50,000 salary, or any other salary for that matter, is unique to you. It depends on several factors, like your down payment, your credit score and your debt-to-income ratio, as well as other factors that might influence the loan values and rates available to you. Learn more about your mortgage loan options now.