How much house can you afford on a $120,000 salary?
Short answer
On a $120,000 salary, the 28% rule caps housing at $2,800 a month. With 10% down at 6.5%, that buys a home price near $379,000. With up to $400 a month of other debt, you still pass the 36% test at this price.
The math
The two rules lenders use
Many lenders want your housing payment (principal, interest, tax, insurance and PMI) under 28% of gross income, and all debts together under 36%. On $120,000, 28% is $2,800 a month. Some loan programs allow higher ratios, but a payment you can carry comfortably matters more than the largest loan you can get.
- Gross pay per month$10,000
- 28% for housing$2,800
- Principal and interest+$2,155.98
- Property tax+$347.42
- Insurance+$150
- PMI+$142.13
- Monthly payment=$2,795.53
The numbers
Home price you can afford on $120,000 at different rates
| Rate | Home price (10% down) | Monthly payment |
|---|---|---|
| 5.50% | $413,000 | $2,794 |
| 6% | $396,000 | $2,798 |
| 6.50% | $379,000 | $2,796 |
| 7% | $364,000 | $2,800 |
| 7.50% | $349,000 | $2,797 |
Assumes 10% down, a 30-year fixed rate of 6.5%, property tax of 1.1% of the price a year, $1,800 a year insurance and PMI of 0.5% of the loan a year.
Cash you need besides the down payment
A 10% down payment on $379,000 is $37,900. Closing costs often add 2% to 5% of the price, and you'll want your emergency fund intact after you move in. Plan for moving costs and early repairs too.
What moves the number
Each half point of rate changes the price you can afford by thousands, as the table shows. Property taxes vary a lot by place: this page assumes 1.1% of the price a year and $1,800 a year for insurance. Paying down a car loan or card before you apply raises what lenders will approve.
Try your own numbers
Questions people ask
Can I buy a house making $120,000 a year?
Often, yes, depending on prices where you live, your debts and your savings. At 6.5% with 10% down, $120,000 supports about $379,000 under the 28% rule.
Should I use gross or take-home pay?
Lenders use gross pay. For your own budget, check the payment against take-home pay too. Keeping housing near 25% to 30% of take-home leaves room to save.
How much do I need for a down payment?
Some loans allow 3% to 3.5% down, and many buyers put down less than 20%. Under 20% usually means PMI, which this page includes at 0.5% of the loan a year.
Learn the idea
Other amounts
Sources
General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act.
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