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I Make $35,000 a Year. How Much House Can I Afford?

I Make $35,000 a Year. How Much House Can I Afford?
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Home.com Contributor

“If I make $35,000 a year, how much house can I afford?”

More than you might think. Your price range depends on more than just your annual income.

Even with a low income, you could buy a home you’ll be proud of — a home that can grow in value and build generational wealth.

What's in this Article?

How much house can I buy on $35k per year?
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Loan programs to help you afford more home
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10 ways to maximize your homebuying budget
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FAQs
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See if you’re eligible to buy a home
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How much house can I buy on $35k per year?

An annual household income of $35,000 means you earn about $2,900 a month before taxes and other deductions come out of your paycheck.

Your mortgage lender will verify your income by looking at your pay stubs, W-2 forms, or bank statements.

But this doesn’t mean your lender will assign your borrowing power based solely on your household income. Instead, it’ll find your home shopping range by looking deeper into your financial life.

To get a ballpark estimate on how much house you might be able to afford, plug your numbers into this home affordability calculator.

 

Your monthly debt payments

How much home you can buy depends a lot on your current debt load: Your auto loans, student loans, and credit card minimum payments, for example.

Lenders will measure your debt through the lens of your debt-to-income ratio, or DTI. Simply put, DTI compares your debt to your income.

For example, if you’re earning $2,900 a month but spending $900 a month in car payments, $350 on your student loans, and $200 to meet the credit cards’ minimum payments, you’d be spending $1,450 on debt. Since $1,450 is half of your $2,900 gross monthly income, your DTI would be 50% even without adding a mortgage payment.

Because most loans set a maximum DTI at 50% or less (including the mortgage), you would have little or no room to add a house payment to your monthly bills.

On the other hand, if you’re paying only $350 a month for a car, $200 for student loans, and $100 on credit cards, your DTI would be much lower, and you could afford more house — even though you’re still making $35K a year.

debt to income ratio

Your down payment

The size of your down payment affects your home price range in a few different ways:

A bigger down payment:

  • Lowers your loan size: The more money you can put down, the less you’ll need to borrow. And smaller loans can mean lower monthly payments — for the same home.
  • May lower your interest rate: Putting your own money down could help you score a lower interest rate because lenders won’t be risking as much on your loan.
  • Could lower other borrowing costs: If you put 20% down, you could avoid paying private mortgage insurance (PMI) which could add about 0.5-1.5% of the loan amount in annual costs. Even if you put 10% down and need mortgage insurance, it’ll cost less on a smaller loan size.

If you can’t afford a large down payment, don’t worry. You can still find loan programs to help you buy a home, including some that offer down payment assistance.

Your mortgage rate and loan term

Your mortgage rate and term can make or break your housing budget when you make $35,000 a year.

Notice in the chart below that payments on the same loan size vary a lot based on the loan’s term and interest rate:

Monthly payment at lower rate, 30-year Monthly payment at higher rate, 30-year Monthly payment at lower rate, 15-year Monthly payment at higher rate, 15-year
$200,000 loan$843$1,013$1,381$1,529
$300,000 loan$1,264$1,520$2,071$2,294
$400,000 loan$1,686$2,026$2,762$3,059
 *Payments shown are for example purposes only and are not representative of currently available rates or payments. Payment amounts do not include property taxes, homeowners insurance, PMI, or HOA dues.

Your mortgage rate will be tailored to your specific financial life. But generally, the better your loan profile, the lower rate you may receive.

You can choose a longer loan term, such as a 30-year fixed rate mortgage, to lower your monthly costs for the same home.

Your credit score

If you have a strong credit score, you’re more likely to qualify for today’s lowest interest rates. Lower rates mean lower monthly payments, and they cost less over the life of the loan.

Taking a few months to build a stronger credit profile before applying for a loan could stretch your monthly housing budget — and give you more buying power on $35,000 a year.

But if your credit will take years to rebuild, an FHA loan can get you into an affordable house payment sooner.  

9 ways to improve your credit score

Your property taxes and insurance

Monthly mortgage payments are a packaged deal. Part of your payment goes toward your loan’s principal and interest. But another chunk covers additional costs of homeownership.

As you’re finding how much house you can afford on $35,000 a year, remember to consider:

  • Property taxes: Local governments use this money to pay for schools and other public services.
  • Homeowners insurance: Your homeowners insurance policy protects you — and your lender — in case a fire, storm, or some other peril destroys your home.
  • Mortgage insurance: Since this coverage lessens your lender’s risk, it helps lower your mortgage rate. Unless you’re getting a VA loan or putting 20% or more down on a conventional loan, you’ll need mortgage insurance.

Your monthly price tag for taxes and insurance will vary by loan size, location, and loan program. These costs could add several hundred dollars to your monthly house payment.

Your HOA dues

Some homes — especially if you’re buying a condo or a home in a planned development — require Homeowners Association (HOA) dues.

HOA dues help maintain common areas like swimming pools or nature trails, provide extra security, and help enforce property use standards.

The goal? Protecting the value of your home. Dues vary widely based on location, so be sure you know the cost going in.

Your payment comfort level

The best lenders will make sure you’re comfortable making your mortgage payment going forward.

Your debt-to-income ratio can show only part of your payment comfort level. For example, private school tuition won’t show up in your DTI. Neither will the expensive car insurance you’re paying because you have a teenage driver on the policy.

If the size of the new house payment makes you uncomfortable, listen to these feelings. Tell your loan officer before the loan closes.

Loan programs to help you afford more home

The best mortgage loan program for you can stretch your homebuying dollars so you can afford more home on $35,000 a year.

Conventional loans

A conventional loan can help some borrowers buy more home on $35,000 a year because:

  • There’s no upfront mortgage insurance requirement, unlike with FHA, USDA, and VA loans. Since these premiums tend to be rolled into the loan balance, your conventional loan amount can be smaller.
  • Your down payment could be as low as 3% — lower even than an FHA loan. Only VA and USDA loans can go lower, and they’re not available for all borrowers.

But the government does not insure conventional loans so you’d need strong credit to qualify for the best conventional loan mortgage rates.

FHA loans

The Federal Housing Administration insures FHA loans. This federal backing lowers the risk lenders face, helping credit challenged borrowers get competitive interest rates.

It’s possible to qualify with a score in the 500s, though you’d need to make a 10% down payment if your score falls below 580.

FHA loans also have a higher DTI threshold than most other loans which can help a lot when you earn $35,000 a year. You can qualify with a DTI of 50% or even higher in some cases.

HomeReady and Home Possible

The HomeReady and Home Possible loan programs help income-challenged borrowers qualify for conventional loans.

For example, Fannie Mae’s HomeReady program lets you document income from your roommate to strengthen your loan application. Or, you could even qualify with income from family members who won’t live in the home with you.

Home Possible, from Freddie Mac, can help you turn “sweat equity” into a larger down payment.

Any of these advantages can end up lowering your monthly payment, making it easier to afford the same home on the same income.

State bond loans

Your state housing finance agency (HFAs) exists to help lower income borrowers get into affordable home loans.

Along with extending lower interest rates, these programs can help you find money for your down payment or closing costs, enhancing your borrowing power.

Some state programs walk lower-income first-time homebuyers through the mortgage process while also offering a down payment assistance loan. Others offer low interest loans that can include down payment assistance grants which homeowners never have to repay.

USDA loans

The U.S. Department of Agriculture offers two loan programs designed especially for homebuyers with income challenges:

  • USDA Guaranteed Loans: The USDA insures these mortgages from private lenders, allowing borrowers with no down payments to qualify if they make below 120% of their area’s median income. You apply with mortgage companies for these loans
  • USDA Direct Loans: The USDA issues these loans directly to homebuyers who make less than 80% of their area’s median income. These loans are only available directly from the government

USDA loans work only in areas that meet the USDA’s definition of rural. Most geographic locations outside of major U.S. cities qualify. 

10 ways to maximize your homebuying budget

These tips will help stretch your homebuying dollars with any type of mortgage:

  • Improve your credit score: Credit reporting errors could be lowering your credit score. Or, you may need to improve your financial habits. Either way, a better credit score can lower your interest rate which means you can get more house for your money
  • Buy down your rate: You can pay cash up front to lower your rate — and your monthly payment. You could even ask the seller to put up this cash as a seller concession
  • Add a co-borrower: Adding a co-borrower who lives with you can boost the income and the credit score for your loan application. Fannie Mae’s HomeReady program could even let you include income from a family member who doesn’t live with you
  • Pay off some debts: This will help lower your DTI, and it could even help with your credit score. Start with your loan that has the smallest balance but the largest monthly payment
  • Ask for down payment help: Your state or city could offer down payment assistance grants or loans. Or, you could ask a friend or family member for help. Most loan programs allow using gifts as a down payment
  • Avoid homes with HOAs: Finding homes outside these associations can save a lot monthly
  • Eliminate unnecessary expenses: Be realistic when you assess your monthly spending. If you can make sustainable spending cuts, you can save more money while also making more room in your budget for your new house payment
  • Shop around for rates and insurance: Annual homeowners insurance premiums vary by insurer. Shopping around for the best deal can trim your monthly house payment.
  • Shop outlying areas: Shopping beyond your region’s most popular neighborhoods could reveal nicer homes with lower costs.
  • Consider a mobile or manufactured home: It might not appreciate in value the way a stick-built home should, but a manufactured home could offer a place to start. Homes built before June 15, 1976, can’t be financed

How much house can I afford on $35,000 FAQs

How much of a house can I afford if I make $36,000 a year?

Housing budgets vary widely when you make $36,000 a year. Your housing budget depends on your unique financial life: Your existing debt load, your credit score, how much money you have saved for a down payment, and your loan type. A home affordability calculator can show your ballpark price range.

What mortgage can I afford on a $30k salary?

Your annual salary is only one component of mortgage qualifying. Your other debts, your credit score, and your down payment size will affect the size of your mortgage. Apply for mortgage pre-approval to pinpoint your price range.

How much do I need to make to afford a $250k house?

Since annual income is only one factor lenders consider, people with a variety of incomes can afford a $250,000 home. Lowering your monthly debts, improving your credit score, and saving for a down payment will help you qualify for a $250,000 mortgage loan even if you have a lower income.

See if you’re eligible to buy a home

Your annual salary matters to mortgage lenders. That’s why they ask about it when you apply for a loan.

But income matters only within the context of your entire financial life. It’s not an absolute measure of your homebuying power.

So if you earn about $35,000 a year, you may be surprised how much house you can afford when you apply for mortgage preapproval.


Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.

Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.

Further Reading

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