How Much House Can I Afford on a $120K Salary?

The short answer for a $120,000 salary

On a $120,000 annual salary your gross monthly income is about $10,000. Using the standard 28% rule, that gives you a comfortable monthly housing budget of roughly $2,800. After accounting for property taxes, insurance, and HOA dues (typically $300–$700/month), your principal-and-interest budget lands around $2,800/month.

At today's interest rates (~6.5%) over a 30-year fixed loan, that monthly payment supports a home priced around $420,000, assuming a 10% down payment. Your real number depends on debts, credit, and where you live.

How much house affordability is actually calculated

Lenders use two ratios called front-end and back-end DTI (debt-to-income):

• Front-end DTI: housing costs (PITI + HOA) ≤ 28% of gross monthly income
• Back-end DTI: total monthly debts ≤ 36–43% of gross monthly income
• Credit score: 740+ unlocks the best rates; 620 is the typical floor for conventional loans
• Down payment: 3–5% with FHA/conventional, 10–20% to skip mortgage insurance

Plug your own numbers into the affordability calculator below for the exact comfortable price.

Down payment scenarios on a $420,000 home

• 5% down (~$21,000): smallest cash needed, but PMI applies until you reach 20% equity
• 10% down (~$42,000): the sweet spot for most buyers — manageable savings, smaller PMI
• 20% down (~$84,000): no PMI, lowest monthly payment, best long-term cost

Bigger down payments cut your monthly payment, eliminate PMI sooner, and often unlock a slightly lower interest rate. They also reduce the amount of total interest you'll pay over the life of the loan.

Three real-world examples

Single buyer, no debts

On $120,000/year with no car payment or student loans, a single buyer can comfortably target the higher end of the range — about $462,000. Lenders may approve more, but staying near 25% of gross keeps room for retirement and emergencies.

Couple with a car loan

Same income but with a $400/month car payment, the comfortable target drops to about $378,000. Every $100 in monthly debt reduces buying power by roughly $15,000.

First-time buyer with student loans

With $300/month in student loans, plan for the lower end of the range — around $357,000 — and aim for a 10% down payment to keep monthly costs manageable.

Common mistakes to avoid

• Buying at the lender's max approval instead of your comfortable max
• Forgetting taxes and insurance — they add hundreds per month
• Underestimating maintenance (budget ~1% of home value/year)
• Skipping the closing-cost reserve (2–5% on top of the down payment)
• Using gross income for budgeting instead of take-home pay

How to increase what you can afford

1. Pay off existing debts (a $300/month car payment unlocks ~$45K of buying power)
2. Boost your credit score above 740 to get the best rate
3. Increase your down payment — every dollar adds 1:1 to the home price you can afford
4. Shop at least 3 lenders — rates can vary by 0.5%+ on the same day
5. Consider a 2-1 buydown or rate lock if rates are trending down

Use the calculator