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 afford for a 125k salary? ›
They also like to see total housing costs of less than 30%. Therefore, he advises using the 28/36 rule, which allocates 28% of your gross monthly income for your mortgage payment and 36% for your non-housing debt. 28% of $125,000 is $35,000. Divided by 12, that's $2,916 per month for your mortgage.
Can I afford a 300k house on a 100K salary? ›
With a 100K salary you can afford a $300,000 to $480,000 house at current interest rates. This would mean you would spend around $2,300 per month and you stick with the 28% rule that most experts recommend. You would also need to put down a down payment of 5% to 20%.
How much mortgage can I afford with a 115k salary? ›
The 28/36 rule
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 house can I afford on 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.
What house can I buy with a 120k salary? ›
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.
Is 125k a good salary in the US? ›
A $125 000 in your area makes on average $296,459 per year, or $4 (0.014%) more than the national average annual salary of $287,784.
Can I afford a 500k house if I make 100K a year? ›
In today's climate, the income required to purchase a $500,000 home varies greatly based on personal finances, down payment amount, and interest rate. However, assuming a market rate of 7% and a 10% down payment, your household income would need to be about $128,000 to afford a $500,000 home.
What house can I afford on 140K a year? ›
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 home can I afford with a 150k salary? ›
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%.
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 is a good credit score to buy a house? ›
Some types of mortgages have specific minimum credit score requirements. A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
What is a good mortgage for 100K salary? ›
Using this calculation, a person making $100k annually could purchase a home between $3-$400k purchase price. The 28/36 rule: Most lenders want a borrower's total debt load to be below 36% of their pre-tax income.
How much house can I buy with a 125k salary? ›
Using NAR's 25 percent metric, at the current mortgage rate (6.66 percent in late March), “buyers earning $125,000 a year can purchase a home up to $510,000 if they put 20 percent down,” Evangelou says. “However, if they put 10 percent down, they can afford to purchase a home for up to $450,000.”
Is 130k a high salary? ›
$130,000 is the 75th percentile. Salaries above this are outliers. $143,000 is the 90th percentile.
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.
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.
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 is the hourly rate for 125k salary? ›
If you make $125,000 per year, your hourly salary would be $60.10.
How much is 125 000 a year biweekly? ›
If you make $125,000 per year, your Biweekly salary would be $4,808. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
