Home buyers need to meet certain standards to get a home loan, but there isn’t a minimum income required for mortgages.
There are minimum credit scores, employment requirements, and more. But many first-time home buyers don’t realize that there’s actually no minimum income required to buy a house.
Instead, you must earn enough to qualify for the requested loan amount. And the money you earn must be an acceptable type of income (though most types are perfectly fine). Here’s how to determine if your income will qualify for a mortgage.
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There is no minimum income required for mortgage approval. Home buyers at any income level can qualify for mortgage loans. The most important thing isn’t how much money you earn, but rather, that your income meets a few key requirements.
Outside of those basic criteria, income requirements for a home loan are flexible. Most types of income can qualify — from standard salaries to commission, investment, self-employment, bonus, and RSU income.
Thanks to today’s flexible mortgage programs, you don’t need a high salary to buy a home. Low-income mortgage programs can make buying affordable even for families without a lot of cash flow or savings.
There’s no true minimum income required for a mortgage loan. Lenders just want to know if you can afford the mortgage. That means you need to prove you have enough income to cover your future monthly payments.
One way lenders determine affordability is by looking at your debt-to-income ratio (DTI). DTI compares your existing monthly debt payments with your monthly gross income. This shows how much money you have “left over” each month for a mortgage payment.
Lenders look at your debt in two ways:
Your annual income must be reliable and stable, too. After all, most mortgage loans last 30 years. So you need to have a steady cash flow and the ability to keep making loan payments over that time.
Most home loan programs require two years of consecutive employment or consistent income, either with the same employer or within the same field. This is a sign of stability, indicating that your annual income will likely remain reliable for at least three years after closing on your home purchase.
There are exceptions to the two-year income rule, though. For example, “If you are in a profession like a nurse or a lawyer and you recently graduated, schooling will count towards this 2-year requirement,” says Jon Meyer, loan expert and licensed MLO.
Mortgage lenders can approve borrowers with all sorts of income, such as salaried employees, hourly wage earners, freelancers, business owners, and those who receive Social Security payments. But any source of income must meet certain guidelines to qualify on a mortgage application.
Employees can use the income they receive from a salary, hourly wage, commissions, or overtime, as well as restricted stock unit income and bonuses for mortgage-qualifying purposes. You must provide your lender with your most recent paycheck stubs, W-2s, and tax returns from the previous two years. Annual income must be consistent over this two-year period.
To use commissions, overtime, restricted stock unit income, or bonus income for qualifying purposes, you must show evidence of this income continuing for at least two to three years post-closing. This involves your employer providing written confirmation.
Getting a mortgage as a self-employed person — which includes independent contractors, freelancers, gig workers, and business owners — is a bit trickier. But it’s not impossible by any means.
Self-employment income can fluctuate from year to year. Not only will you provide your complete tax returns from the previous two years, but your annual income must either remain the same or increase during these two years.
A minor decrease from one year to the next is usually okay. Just know that lenders typically average your self-employment income over this two-year period to determine your qualifying amount. So if your freelance income is $40,000 one year and $75,000 the next year, your lender uses a pre-tax income of $57,000 to decide affordability.
As a self-employed borrower, be mindful that too many business deductions on your tax return can reduce your qualifying amount. Lenders use your net income after deductions for qualifying purposes. They can add back some deductions, such as those for mileage and use of a home office. As a rule of thumb, the more business deductions you have, the less you earn on paper.
Here’s what you need to know when using other sources of income to qualify for mortgage loans:
If you’re not sure whether your income qualifies, talk to a mortgage lender. Your loan officer can help you understand which sources of income are eligible and the home prices you can afford based on your monthly cash flow.
Low-income home loans are a type of mortgage product designed to help individuals and families with lower income levels afford a home.
They often come with lower interest rates, reduced down payments, and more flexible qualification requirements. Government agencies typically back these loans, which lowers the risk for lenders and enables them to offer more benevolent terms.
| Loan Type | Down Payment | Credit Score Requirement | Special Requirements |
| HomeReady Loans | As low as 3% | Varies | Homeowner education course, income eligibility |
| Home Possible Loans | As low as 3% | Varies | Homeowner education course, income eligibility |
| Conventional 97 Loans | As low as 3% | At least 620 | Single-unit primary residence |
| FHA Loans | As low as 3.5% | At least 580 | Steady income |
| USDA Loans | None | Varies | Income eligibility, rural area |
| VA Loans | None | Varies | Service requirements |
Low-income home loans are ideal for individuals or families who have a steady income but find it challenging to save for a large down payment or qualify for a conventional mortgage due to their income level.
They’re also a good fit for first-time homebuyers who may not have a substantial credit history. Here’s what you can expect.
Some mortgage programs have income limits, meaning your income cannot exceed a certain percentage of the area’s median income (AMI) to qualify. Standard conventional loans, VA loans, and FHA loans don’t have income limits. But household income limits are typical with USDA loans and some specialized programs.
Keep in mind, too, that many down payment assistance programs have income limits. These limits vary depending on the program. Typically, your income cannot exceed 100% to 115% of the median area income.
The amount of money you earn isn’t the only thing that matters when buying a home. You should be mindful of other factors lenders take into consideration when reviewing your application:
buying a house with low income, these other factors can help you qualify. For example, a higher credit score or bigger down payment could make up for a lower income and higher DTI. Your mortgage lender will look at your entire financial profile — not just income — to see if you can afford a home.
This home affordability calculator is a useful tool that helps you determine the income required for a mortgage and the overall cost of homeownership at today’s mortgage rates. This includes your loan principal, interest rate, property taxes, and homeowners insurance — commonly referred to as PITI.
PITI is an acronym that means:
The mortgage calculator will estimate your monthly payment using your PITI and additional inputs, including purchase price, down payment, state of residence, and loan term. Furthermore, you’ll be able to filter results by monthly mortgage payments, income requirements, and home price.
Navigating the world of mortgages can seem daunting, but understanding the income requirements for different mortgage amounts can make the process a bit smoother. Here’s a rough guide.
| Mortgage Amount | Estimated Annual Income Required |
| $200,000 | Around $50,000 |
| $300,000 | Around $75,000 |
| $400,000 | Around $100,000 |
| $500,000 | Around $125,000 |
When it comes to securing a mortgage, your income is a key factor. But what if your current income isn’t quite hitting the mark? Here are some strategies to help you improve your income for mortgage approval
Remember that these are only suggestions. Everybody has a different financial situation, so what works for one person might not work for someone else. A financial advisor or mortgage expert should always be consulted to determine the best course of action.
There’s no universal minimum income required for mortgage loans. Your approval depends on the mortgage amount, your debt-to-income ratio, credit score, and other factors. However, you need to prove that you have a stable income that’s sufficient to cover the mortgage payments, property taxes, and homeowner’s insurance.
How much income is needed for a $300,000 mortgage?The exact income needed can vary based on a number of factors, including your debt-to-income ratio, credit score, and the terms of the mortgage. However, as a rough guideline, you might need an annual income of around $75,000 to qualify for a $300,000 mortgage.
How much of your income should go toward a mortgage?A common rule of thumb is the 28/36 rule, which says that you should spend no more than 28% of your gross monthly income on housing expenses, and no more than 36% on total debt, including your mortgage, credit cards, and other loans.
How to get a home loan with low income?There are several types of home loans designed specifically for low-income borrowers. These include FHA loans, VA loans, USDA loans, and certain Fannie Mae and Freddie Mac programs. These loans often have lower down payment requirements and more flexible credit requirements, making them more accessible for low-income borrowers.
Numerous factors determine whether you’ll qualify for a home loan. Your mortgage lender will look closely at your credit history, your debts, cash on hand, and income to gauge affordability.
Mortgage approval isn’t one-size-fits-all, so it’s also important to get preapproved for a loan before shopping for a new home. This way, you’ll know how much house you qualify for with your current income. You can then search for real estate within that price range.