Finance & Loan · Guide
How Much Income Do You Need for a Mortgage?
Lenders look at two ratios. Pass both, and the bank will usually lend. Here is the salary each loan size needs.
Want the answer for your own numbers? Use the free Mortgage Calculator — it does every step below for you.
The 28/36 rule lenders use
Most lenders check two debt-to-income (DTI) ratios, using your gross monthly income (before tax):
- Front-end ratio: housing costs (principal, interest, tax, insurance) should be no more than about 28% of income.
- Back-end ratio: housing plus all other debt payments (car, student loans, cards) should be no more than about 36%.
Some loan programs allow higher limits — FHA loans and automated underwriting often go into the 40s — but 28/36 is a sensible budget.
Income needed by loan size
Assumptions: 30-year fixed at 6.5%, 20% down, property tax 1% of the price a year, insurance $150 a month, and $500 a month of other debt.
| Loan | Monthly housing cost | Income by 28% rule | Income by 36% rule |
|---|---|---|---|
| $250,000 | $1,991 | $85,300 | $83,000 |
| $300,000 | $2,359 | $101,100 | $95,300 |
| $400,000 | $3,095 | $132,600 | $119,800 |
| $500,000 | $3,831 | $164,200 | $144,400 |
You need to pass both tests, so the higher figure counts. That makes the income needed for a $300k mortgage about $101,000 a year, and for a $500k mortgage about $164,000, under these assumptions.
Smaller and larger loans, on the same assumptions:
| Loan | Monthly housing cost | Income by 28% rule | Income by 36% rule |
|---|---|---|---|
| $200,000 | $1,622 | $69,500 | $70,700 |
| $350,000 | $2,727 | $116,900 | $107,600 |
| $600,000 | $4,567 | $195,700 | $168,900 |
Notice the $200,000 row. On a smaller loan, the $500 of other debt is a bigger share of the budget, so the 36% test becomes the stricter one. The bigger your other debts, the more this happens.
Work it out for yourself
Income needed (yearly) = monthly housing cost × 12 ÷ 0.28
Or: (housing cost + other debts) × 12 ÷ 0.36
Example: a $400k house, 10% down
Loan: $360,000. Principal and interest at 6.5%: $2,275. Tax: $333. Insurance: $150. PMI estimate: $150.
Housing cost: $2,908 a month. $2,908 × 12 ÷ 0.28 = $124,600.
Income needed: about $125,000 a year
Flip it round: what your salary buys
Know your income instead? Here is the largest loan each salary supports, passing both tests, with the same assumptions — 6.5%, 30 years, 20% down, 1% property tax, $150 insurance and $500 of other debt:
| Gross income | Largest loan | House price with 20% down |
|---|---|---|
| $60,000 | $156,200 | $195,300 |
| $80,000 | $233,200 | $291,500 |
| $100,000 | $296,600 | $370,700 |
| $120,000 | $359,900 | $449,900 |
| $150,000 | $455,000 | $568,800 |
How the interest rate moves the target
Same $300,000 loan, three rates:
| Rate | Monthly housing cost | Income needed |
|---|---|---|
| 5.5% | $2,166 | $92,800 |
| 6.5% | $2,359 | $101,100 |
| 7.5% | $2,560 | $109,700 |
Each percentage point moves the income you need by roughly $8,000 to $9,000 a year on a $300,000 loan.
What changes the answer most
- The interest rate. At 5.5% instead of 6.5%, the income needed for a $300k loan drops by roughly $8,000.
- Other debt. When the 36% test is the one holding you back, a $600 car payment can cut what you can borrow by roughly $80,000 to $95,000.
- Property tax. In high-tax areas, tax alone can add $500 or more a month.
- Down payment. A bigger down payment shrinks the loan and can remove PMI.
How the down payment changes the income you need
A $300,000 house at 6.5% for 30 years, with 1% tax, $150 insurance and PMI estimated at 0.5% a year below 20% down:
| Down payment | Loan | Monthly housing cost | Income needed |
|---|---|---|---|
| 5% ($15,000) | $285,000 | $2,320 | $99,400 |
| 10% ($30,000) | $270,000 | $2,219 | $95,100 |
| 20% ($60,000) | $240,000 | $1,917 | $82,200 |
Moving from 5% to 20% down lowers the income you need by about $17,000 a year — partly the smaller loan, partly no more PMI.
How to qualify for a bigger loan
- Pay off or pay down a car loan or credit card before applying.
- Improve your credit score to get a lower rate — see our credit score guide.
- Add a co-borrower's income.
- Look at FHA or other programs with higher DTI limits — but make sure the payment still fits your real budget.
Qualifying is not the same as affording. A lender looks at gross income; you pay bills from take-home pay. Test your own numbers in the mortgage calculator with taxes and insurance switched on.
Gross income vs take-home pay
Lenders use gross income — your pay before tax. You pay the mortgage from what lands in your bank account. On a $101,100 salary, a $2,359 housing cost is 28% of gross pay, but it can be 37% to 40% of take-home pay for many households once tax, retirement savings and health insurance come out.
So treat the lender’s answer as a ceiling, not a target. Build a real budget from your net pay, leave room for repairs and savings, and borrow less if the numbers feel tight.
Frequently asked questions
About $95,000 to $101,000 a year, using the 28/36 rule at 6.5% for 30 years with typical tax, insurance and $500 of other monthly debt. A lower rate or less debt brings this down.
Roughly $145,000 to $165,000 a year under the 28/36 rule at 6.5%, depending on your other debts, property tax and insurance.
Gross income — your pay before tax and other deductions. That is why a payment that passes the lender’s test can still feel heavy: measured against take-home pay, the same payment is a larger share.
With 20% down, a 6.5% 30-year rate, 1% property tax, $150 a month insurance and $500 of other debt, about a $296,600 loan — a house price of roughly $370,700. Less debt, a lower rate or a bigger down payment all raise that figure.
Sources and further reading
- CFPB — What is a debt-to-income ratio? — how lenders use DTI
- CFPB — What is a debt-to-income ratio? — how lenders measure the ratio and why it matters