Here’s one way to estimate how much mortgage you can get with a salary of $35,000:
- Calculate your monthly income. Divide your annual salary of $35,000 by 12 to get your monthly pay: $2,917.
- Find your monthly mortgage max. No more than 39% of your income can go toward your mortgage payment, including property taxes and utilities, per a common lender measurement called your gross debt service ratio. A monthly salary of $2,917 multiplied by 0.39 is $1,138.
- Determine the price range of houses to look at. If you were approved for a mortgage with an interest rate of 5%, that $1,138 monthly payment translates into a home price of about $170,000 with a 20% down payment.
But these numbers may not apply to everyone who makes $35,000 per year. Why not?
One reason is that this estimate assumes you can get a mortgage interest rate of 5%. This rate may not be available when you apply for a mortgage. And even if lenders advertise a 5% rate, your entire mortgage application, which includes your credit score, will be reviewed before you receive an offer. A credit score that’s good but not great may result in a rate above advertised rates.
Another reason is that this estimate also includes property taxes of 0.5% per year and about $266 in monthly home insurance and other ongoing costs, like utilities. Your housing-related expenses might be different.
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In addition, if you have other monthly debt payments (student loans, credit card payments), lenders won’t want the total of these payments plus any mortgage payment to exceed 40-44% of your income.
Convert your salary to the monthly payment limits lenders use using this calculator:
This monthly payment calculator is just a start. There are other factors to consider, including:
- You may not want to stretch your budget as far as lenders allow.
- The taxes or utilities where you live may eat a higher percentage of your overall monthly payment, reducing the amount left for the mortgage payment itself.
To get an answer more closely aligned to your situation, you’ll want to use a mortgage affordability calculator. An affordability calculator lets you control more variables when estimating mortgage payments.
» NEXT: Learn how to apply for a mortgage
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