For most people, having their own home is a dream come true.
But getting one is quite a complicated procedure. From making an offer to negotiating the closing deal, even the savviest buyers may find the financial parts of buying a home stressful.
The leading factor you need to check if you want to buy a house is whether you can afford it.
In this article, let’s consider how much you need to make to buy a $300k house.
How Much Do I Need To Make To Buy A $300k House?
You need to earn between $45,000 and $75,000 per year to buy a $300,000 home. But, remember, this is just a general guideline. Your actual wage will depend on your
- debt-to-income ratio,
- credit score,
- type of mortgage,
- interest rate,
- duration of the loan.
Thankfully, purchasing a $300k dream house on a mortgage has less to do with your income than you think.
To break it down:
To afford a house worth $300,000 with a down payment of $60,000, with an interest rate of 5% in a 30-year mortgage, you’d need to make $46,187 per annum before tax. The monthly mortgage payment for this house would be $1,078.
How Much Down Payment And Mortgage Should I Pay For A $300k House?
Lenders specify down payments as a percentage of the entire loan. For instance, a 20% down payment would be $60,000 for a home worth $300,000.
A good rule of thumb is to limit your mortgage payment to no more than 28% of your pre-tax income. For a house worth $300,000 with a down payment of 20%, your monthly mortgage payment is around $1,078.
Thus, your monthly income should be more than $3,850 to adhere to the 28% rule.
Down Payment Options
Depending on the kind of mortgage loan you select, you’ll need a certain amount as a down payment. The down payment requirements for a $300,000 house with different loan programs are as follows:
- Conventional Loan $9,000 (3% down): A loan that complies with Fannie Mae’s and Freddie Mac’s requirements, including a minimum credit score of 620.
- FHA loan $10,500 (3.5% down): The Federal Housing Administration‘s support. A 3.5% down payment could result in your credit score dropping as low as 580.
- VA loan (0% down): Only veterans and active military personnel who have accrued the necessary service requirements are eligible. Survivors’ spouses are also eligible.
- USDA Loan 0 $ (0% down): You must buy in a designated rural area, and your income must be low to moderate for that region.
- Conventional loan with no PMI $60,000 (20% down): You need a 20% down payment to avoid paying private mortgage insurance (PMI). However, you might be able to find lenders who will let you take out a second mortgage to cover the difference between your funds and that 20%.
All of them are minimums. Generally speaking, your interest rate will be lower the more money you put down. However, you might still have options even if you fall short of 3 or 3.5% down.
Down payment assistance programs (DPAs) throughout the country can provide grants or loans to fulfill all or part of your down payment requirements.
Some even help with closing expenses. These DPA programs can make homeownership attainable for first-time buyers who may comfortably afford mortgage payments but are having problems saving for the upfront expenditures.
Factors To Consider When Purchasing A $300k Home.
- Mortgagees consider the DTI (debt-to-income) ratio to decide how much money they’ll lend you. This DTI ratio is calculated by dividing your recurring monthly debt payments by your monthly income. You may have trouble getting the mortgage if the DTI ratio is too high. Lenders often prefer DTI rates of 50% or less.
- The credit score is another important factor that lenders consider. A score between 300 and 850 indicates to lenders how responsible you are with money. When you apply for a conventional loan, lenders seek a credit score of at least 620. If your rating exceeds 620, you can quickly get the loan.
- Closing costs are additional payments made to your lender for their services. The closing cost typically ranges from 3% to 5% of the price of your house. For instance, closing expenses for a $300,000 home purchase could range from $9,000 to $15,000. Before you apply for a mortgage loan, it’s better to compare at least three lenders’ mortgage rates. This comparison might help to save you several hundred dollars.
Hopefully, this article teaches you how much you need to make to buy a $300k house. So go ahead and sit down, look over your records and decide if you are ready to buy a home or need to save more money for a downpayment first.
If not, do not let it discourage you; instead, let it give you the encouragement you need to make the changes you need to put yourself in a better position to do so.