Home buying
How Much House Can I Afford on a $120K Salary?
A lender will tell you what you can borrow. That is a different question from what you can afford, and the gap between them is where most first-time buyers get into trouble.
The short answer
On $120,000 gross, the 28% front-end rule caps the full housing payment at $2,800 a month. After roughly $520 for property tax, insurance and HOA, $2,280 is left for principal and interest — about a $360,700 loan at 6.5% over 30 years, or a $450,900 house with 20% down. That is a ceiling, not a target.
Working backwards from the payment
| Step | Figure |
|---|---|
| Gross monthly income | $10,000 |
| 28% front-end cap (total housing payment) | $2,800 |
| Less property tax, insurance, HOA (assumed) | $520 |
| Available for principal and interest | $2,280 |
| Maximum loan at 6.50% over 30 years | $360,721 |
| Purchase price with 20% down | $450,901 |
| Down payment required | $90,180 |
The tax and insurance figure is the one people leave out, and it is the one that varies most by state and county. In a high-tax area it can be double this, which takes roughly $80,000 off the price you can carry.
The back-end ratio is the binding constraint for most people
| Ratio | Cap | On $10,000/month |
|---|---|---|
| Front-end (housing only) | 28% | $2,800 |
| Back-end (all debt) | 36% | $3,600 |
| Room left for car, cards and student loans | 8% | $800 |
If you have a $450 car payment and $250 of student loans, you are already at $700 of the $800. A $2,800 housing payment then puts you at the edge of the back-end cap, and the affordable price drops accordingly. Clearing consumer debt before buying raises the house you can carry more than saving another $10,000 of down payment does.
What this assumes
- $120,000 gross annual salary, no other income.
- A 6.50% fixed rate over 30 years — the single most sensitive input here.
- $520 a month for property tax, homeowner’s insurance and HOA combined.
- 20% down, so no mortgage insurance.
- The 28/36 convention. Lenders routinely approve above it; that is the point of the distinction.
Every one of these is an input, not a fact about your situation. Change them in the calculators below and the answer changes with them.
Run the math yourself
These calculators give you the same numbers we used above — with your own inputs.
Bottom line
Run the payment at a rate one point higher than you are quoted, and check that it still works. Get the real property-tax figure for the specific address rather than a state average. Then buy meaningfully below the cap — the ceiling assumes nothing else changes, and something always does.
Disclaimer. This is educational, not personalized financial advice. Numbers depend on your specific tax bracket, state, and goals. Verify with the IRS, SSA, or a CPA before acting. See our Financial Disclaimer.
Email me this result
We will send the numbers this page just showed you, plus a link back to it. No account needed.
Keep exploring
