How Much House Can I Afford with a 120k Salary
According to the Federal Reserve Bank of St. Louis, the median home sales price in the US is $436,800. But as we walk through below, even if you're making $120k a year and can make a $15k down payment, your home-affordability could range from $265k to nearly $400k (based on several factors specific to your situation). Maximizing your home affordability isn’t only about your income or the size of your down payment – it depends on your specific location, your existing debts, market rates, your financial goals, and more. If you want to get straight to business, try our full-blown homebuying service that automatically evaluates your situation and gives you clear, personalized directions on improving your home-buying power. You can also try our free-to-use home-affordability calculator. If you want to learn the ins-and-outs of home affordability, keep reading.
The house you can afford with a 120k salary:
Let’s walk through a couple examples. For both of these examples, let’s assume our potential homebuyer has an annual salary of $120,000, available savings of $15,000, a good credit score (700-739), and existing debt obligations (car payments, student loans, credit card payments) of $1,500 per month.
The first homebuyer is shopping for a home in Austin, TX. The second is shopping for a home in Boston, MA.
How much House Can You Afford with a 120k Salary in Austin, TX
How much House Can You Afford with a 120k Salary in Boston, MA
Remember, these numbers are purely hypotheticals, and how much house you can afford with a 120k salary depends on a lot of variables other than the amount of cash you earn each month - a big factor is your existing monthly debt payments and another is the amount of cash you have saved up. Maximizing your home affordability is all about acquiring the right knowledge and tools, and that’s what we're here for. Our calculators take care of the hard work for you.
Let's dive deeper into the inner workings of our “how much house can I afford” calculator to understand how it helps you navigate the home-buying process more efficiently.
Important Factors to Consider When Shopping for a New Home:
Debt-to-Income Ratio (DTI): Your DTI is a significant determinant of the mortgage you can qualify for. This ratio is calculated by dividing your monthly debt payments by your monthly gross income. Depending on your credit score, DTI can reach up to 50%, and many lenders are willing to accept higher ratios, provided you have a stable income and a better credit score So, if you make $120,000 a year (roughly $10,000 a month), you'd ideally want your total monthly debt obligations including your prospective mortgage to be less than $3,600.
Down Payment: The size of your initial down payment significantly influences how much house you can afford. If you've already qualified for a certain mortgage amount, having more cash on hand allows you to afford a more expensive home. For the same house price, a larger down payment results in a lower mortgage rate, which in turn leads to smaller monthly payments. This change greatly impacts your borrowing capacity and your debt-to-income (DTI) ratio.
Credit Score: A high credit score unlocks lower interest rates, meaning lower monthly payments and less of your money going towards interest (which compensates lenders for giving you money). For instance, on a $240,000, 30-year mortgage, a drop from a 4% to a 3% interest rate could save you around $50,000 over the life of the loan.
Interest Rates: Speaking of interest rates, the current market rates can drastically impact the total cost of your loan. A fraction of a percentage can equate to tens of thousands of dollars over the life of your loan, affecting the type and price of the home you can afford.
Loan Term: A shorter loan term (say, 15 years) will have higher monthly payments but lower interest over the life of the loan. Conversely, a longer-term loan (like 30 years) will have smaller monthly payments but more interest accrued over time. Your choice would depend on your financial comfort with monthly payments. Remember, just because you qualify for a certain amount doesn't mean you need to borrow that much. Always factor in other life goals, emergency funds, and lifestyle choices. It's all about balance.
While shopping for a new home, you’ve likely asked yourself one of the following questions: What is the best way to optimize my finances? How do I know if I’m overpaying for my mortgage? Where can I find the lowest prices for new mortgage loans and optimize my mortgage choice? How can I lower my debt to income ratio? With questions like these swarming your mind, you might feel like you're yearning for some unbiased personal financial advice.
Today, the finance world is saturated with resources, but it's challenging to differentiate between clickbait articles and legitimate financial guides aiming to help you effectively manage your debts and optimize your finances. If you’re looking for a personalized answer to “how much house can I afford with a 120k salary,” you’re in the right place. We provide unbiased financial advice that works for you, including free tools to get you started, and affordable, customized advice tailored to your needs. To explore different scenarios and get personalized debt advice, use the latest financial advisor technology tools like our Debt Optimizer to optimize your home-buying power, or our free Home Affordability Calculator to explore the best strategies for your financial goals.
FAQs
So, assuming you have enough to cover that down payment plus more left over for upkeep and emergencies — and also assuming your other monthly debts don't take you over that 36 percent figure — you should be able to afford a home of $470,000 on your salary.
How much mortgage can I get with a 120K salary? ›
According to the Federal Reserve Bank of St. Louis, the median home sales price in the US is $436,800. But as we walk through below, even if you're making $120k a year and can make a $15k down payment, your home-affordability could range from $265k to nearly $400k (based on several factors specific to your situation).
How much mortgage can I afford for a 125k salary? ›
The 28/36 rule
With a gross income of $125,000, your monthly income is about $10,400. The 28/36 rule dictates that you shouldn't be putting more than about $2,916 a month toward your mortgage, and no more than $3,750 toward your overall debt.
How much mortgage can I afford on a 115k salary? ›
It's a standard guideline that states you should limit your monthly housing payment to no more than 28 percent of your monthly income, and your total debt payments — including that housing payment — to no more than 36 percent. If you earn $110,000 in gross income, that's approximately $9,166 each month.
How much income to afford a $400,000 house? ›
The annual salary needed to afford a $400,000 home is about $127,000. Over the past few years, prospective homeowners have chased a moving target: homeownership. The median sales price of houses sold in the U.S. stood at $417,700 in the fourth quarter of 2023—down from a peak of $479,500 in Q4 2022.
How much home can I afford with a 130k salary? ›
Applying the 28/36 rule, a $130,000 annual earner should keep housing costs below $3,033. However, there are many other factors besides just your income that shape how much house you can comfortably afford. Credit score: A strong credit score is important when you apply for a home loan.
How much house for $3,500 a month? ›
A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.
What mortgage can I afford on 150k salary? ›
$150k income should be able get you a $700k mortgage with that $350k down on a $1M property. There are a handful of 3bd/2ba homes in Pasadena for less than $1M. A $700k mortgage with $300k down on a $1M property will cost you about $3k in mortgage and interest with a fixed 30 year. Plus another $1k a month in taxes.
Can I afford a 300k house on a 100k salary? ›
Using my rough estimates and plugging in the factors mentioned above, someone with a $100k salary should look for a home between $320,000 – $400,000. Bear in mind that in 2023's high-interest rate environment, $300k+ won't go as far as it would when interest rates were sub 4% back in 2022.
What is the hourly rate for 125k salary? ›
How much is your salary? $125,000 yearly is how much per hour? If you make $125,000 per year, your hourly salary would be $60.10.
Let's apply the 28/36 rule to your $140K salary to see how much you should be spending on housing costs: $140,000 / 12 = $11,667 (gross monthly income) $11,667 x 0.28 = $3,267 (the most you should spend on housing costs each month) $11,667 x 0.36 = $4,200 (the most you should spend on total debt each month)
How much house can I afford if I make $36,000 a year? ›
On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.
Can I afford a 300k house on a 60k salary? ›
An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.
How much house can I afford if I make $120 000 a year? ›
So, assuming you have enough to cover that down payment plus more left over for upkeep and emergencies — and also assuming your other monthly debts don't take you over that 36 percent figure — you should be able to afford a home of $470,000 on your salary.
What should my income be for a 300K house? ›
How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific annual salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.
What is the minimum income for a 200k mortgage? ›
What income is required for a 200k mortgage? To be approved for a $200,000 mortgage with a minimum down payment of 3.5 percent, you will need an approximate income of $62,000 annually. (This is an estimated example.)
How much mortgage can I afford with 100k a year salary? ›
This commonly used guideline states that you should spend no more than 28 percent of your income on your housing expenses, and no more than 36 percent on your total debt payments. If you're earning $100,000 per year, your average monthly (gross) income is $8,333. So, your mortgage payment should be $2,333 or less.
What house can I afford on 150k a year? ›
With a $150,000 salary, you could afford a home priced around $415,000-$430,000, assuming you have $20,000 saved up for a down payment and are carrying some monthly debt already, such as a car payment or student loan. This also assumes an interest rate of 7%.
How much do I need to make to afford a 900k house? ›
Experts often advise that you spend no more than approximately one-third of your income on housing costs. That means you can triple $64,800 to get a clearer picture of what the annual income requirements would be in order to comfortably afford a $900,000 home: approximately $194,400, at a bare minimum.
