How Much Mortgage Can I Afford on My Salary
You know your salary. You know the interest rate. But how much house can you actually afford? Let's figure out the real number.
Quick Answer
Most lenders say your mortgage payment should be under 28% of your gross monthly income. Use the free mortgage calculator at dotsapps.com to see exact payments for any loan amount.
The 28/36 Rule for Mortgage Affordability
Lenders use the 28/36 rule as a guideline:
- Your mortgage payment should be under 28% of your gross monthly income
- Your total debts (mortgage + car + student loans + cards) should be under 36%
If you earn $5,000 per month before taxes, your mortgage payment should be under $1,400. Your total debt payments should stay under $1,800.
This is a guideline, not a hard rule. Some lenders allow higher ratios, but stretching too far makes life stressful.
What Goes Into a Monthly Mortgage Payment
Your mortgage payment is more than just the loan. It includes:
- Principal — Paying back the loan amount
- Interest — The cost of borrowing
- Property tax — Usually 1-2% of home value per year
- Insurance — Homeowners insurance
- PMI — Private mortgage insurance (if down payment is under 20%)
A $300,000 mortgage at 7% for 30 years has a principal and interest payment of about $1,996. But taxes and insurance can add $300-500 more per month.
How Interest Rates Affect What You Can Afford
Interest rates make a huge difference. On a $300,000 loan for 30 years:
- 5% rate = $1,610/month
- 6% rate = $1,799/month
- 7% rate = $1,996/month
- 8% rate = $2,201/month
Each 1% increase in rate adds about $200/month on a $300K loan. Over 30 years, that is $72,000 more in interest.
This is why people care so much about getting the lowest rate possible.
15-Year vs 30-Year Mortgage
A 15-year mortgage has higher monthly payments but saves a ton in interest. On a $300,000 loan at 7%:
- 30-year = $1,996/month, total interest $418,527
- 15-year = $2,696/month, total interest $185,268
The 15-year option costs $700 more per month but saves $233,000 in interest. If you can afford the higher payment, it is a much better deal.
Use the calculator to compare both options with your specific numbers.
How to Do It: Step-by-Step
- 1
Open the Mortgage Calculator at dotsapps.com
- 2
Enter the home price and your down payment amount
- 3
Set the interest rate and loan term (15 or 30 years)
- 4
See your monthly payment breakdown (principal, interest, taxes)
- 5
View the full amortization schedule to see how payments are applied over time
Frequently Asked Questions
How much house can I afford on $60,000 salary?
Using the 28% rule, your monthly payment should be under $1,400. At 7% for 30 years, that supports roughly a $200,000-$220,000 home with a 10% down payment.
How much do I need for a down payment?
Conventional loans require 3-20% down. FHA loans need 3.5%. A 20% down payment avoids PMI insurance, which saves $100-300 per month.
What is an amortization schedule?
It is a table showing every monthly payment and how much goes to principal vs interest. Early payments are mostly interest. Later payments are mostly principal.
Should I get a 15-year or 30-year mortgage?
A 15-year mortgage saves huge amounts on interest but requires higher monthly payments. Choose 15-year if you can comfortably afford it. Choose 30-year for lower payments and more flexibility.
Does the calculator include property tax?
Yes. You can add estimated property tax and insurance to see the true total monthly cost, not just the loan payment.
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