How much can you afford · Phase 2
How Much House Can I Afford on $120,000 a Year?
A $120,000 salary works out to a specific home-price range once you apply the rule lenders actually use. Here's the number, the full monthly payment behind it, and everything that moves it up or down — worked at the current Freddie Mac 30-year rate of 6.58%, with every assumption shown.
The short answer. On $120,000 a year, the 28% housing rule gives you about $2,800 a month for total housing costs — which supports roughly a $430,000 home with 20% down, or about $368,000 with 10% down (which adds PMI), at 6.58%. That assumes minimal other debt — car loans, student loans, and credit cards pull the number down. Your down payment, credit, and local taxes move it too.
The rule behind the number
Lenders size what you can afford with the 28/36 rule: total monthly housing costs should stay at or below 28% of your gross (pre-tax) income, and your total debts — housing plus everything else — at or below about 36% (many lenders stretch to 43%). On $120,000, that's $10,000 gross a month, so the 28% housing ceiling is $2,800.
The key thing first-time buyers miss: that $2,800 has to cover the whole payment — principal, interest, property taxes, homeowners insurance, and any PMI or HOA dues — not just principal and interest. That's why the affordable price is lower than a principal-and-interest-only calculation suggests.
What $120,000 buys, by down payment
A bigger down payment raises the price you can carry — partly because you're financing less, and partly because at 20% down you drop PMI, freeing room in the payment. At 6.58% over 30 years:
| Down payment | Max home price | Down payment $ | Est. monthly (PITI) |
|---|---|---|---|
| 10% downIncludes PMI | $368,000 | $37,000 | $2,800 |
| 20% down | $430,000 | $86,000 | $2,800 |
Prices solved so the full monthly payment equals 28% of gross income at 6.58% (week of July 23, 2026), with property tax at 1.1%/yr, insurance at 0.6%/yr, and PMI at 0.6%/yr of the loan when under 20% down. Illustrative — your taxes, insurance, and rate will differ.
Where the monthly payment goes
On the $430,000 home (20% down) example, the $2,800 monthly payment breaks down roughly like this:
Taxes and insurance are illustrative rates applied to the price; real figures vary by county and property.
What moves your number up or down
- Your other debts. A car payment or student loan eats into the 36% back-end limit, which can cap your price below the 28% housing rule. Paying debt down before applying raises your number.
- The interest rate. A lower rate stretches the same $2,800 budget across a bigger loan; a higher rate shrinks it. Rate is the single biggest swing factor.
- Your credit score. A stronger score lowers both your rate and your PMI — see the score you need.
- Local property taxes and insurance. High-tax counties and high-premium regions consume more of the payment, lowering the price you can carry.
- Your down payment. More down means less financed and, at 20%, no PMI — both raise your ceiling.
Use your real numbers
Get your exact affordability figure
Plug in your income, debts, down payment, and rate for a price range built on your situation — not an average.
Part of Phase 2 of the First-Time Home Buyer Guide. Once you have a price, see the cash you'll need to close and which loan fits best.
Frequently asked questions
How much house can I afford on $120,000 a year?+
Using the common 28% rule — keeping total monthly housing costs at or below 28% of gross income — a $120,000 salary supports a housing budget of about $2,800 a month. At the Freddie Mac 30-year average of 6.58%, that works out to roughly a $430,000 home with 20% down, or about $368,000 with 10% down (which adds PMI). These assume minimal other monthly debt; car loans, student loans, and credit cards lower the number.
What monthly mortgage payment can I afford on $120,000?+
About $2,800 a month for total housing costs — that's 28% of the $10,000 gross monthly income a $120,000 salary provides. That figure has to cover everything in the payment: principal, interest, property taxes, homeowners insurance, and any PMI or HOA dues — not just principal and interest. Keeping to it is what keeps the rest of your budget livable.
What would the monthly payment be on a $430,000 house?+
On a $430,000 home with 20% down at 6.58% over 30 years, the full monthly payment lands near $2,800 — roughly $2,191 principal and interest, plus about $394 for property taxes and $215 for homeowners insurance in this illustration. Your actual taxes and insurance vary by location, so treat this as a starting estimate.
Is $120,000 enough to buy a house?+
In much of the country, yes. A $120,000 income supports roughly a $368,000–$430,000 home depending on your down payment, which is at or above the median price in many metros — though it may fall short in the most expensive markets. Your down payment, debts, credit score, and local taxes move the number, so the honest answer depends on where you're buying.
What down payment do I need on $120,000 income?+
You don't need 20%. First-time buyers can put down as little as 3% on a conventional loan or 3.5% on an FHA loan. At the price range a $120,000 salary supports, 20% down (about $86,000 on the $430,000 example) avoids PMI and lowers the payment, while 10% down (about $37,000) gets you in sooner but adds PMI. Down-payment assistance can cover part of it.
How do my existing debts change how much house I can afford?+
A lot. Lenders also apply a back-end rule — total monthly debts (housing plus car, student, and credit-card payments) usually at or below about 36–43% of gross income. If your other debts are high, that back-end limit binds before the 28% housing rule does, lowering the price you qualify for. Paying down a car loan or a credit card before applying can meaningfully raise your number.
Methodology
We apply the 28% front-end rule (housing costs ≤ 28% of gross monthly income), then solve for the home price at which the full monthly payment — principal and interest at the Freddie Mac PMMS 30-year average of 6.58% (week of July 23, 2026), plus property tax at 1.1%/yr, homeowners insurance at 0.6%/yr, and PMI at 0.6%/yr of the loan when under 20% down — equals that budget. Figures assume minimal other monthly debt; the 36% back-end rule can bind lower if you carry car, student, or credit-card payments. Tax and insurance rates are illustrative national placeholders and vary widely by location. Down-payment minimums are program rules from Fannie Mae (3%) and HUD/FHA (3.5% at 580+ FICO). Every figure is derived arithmetically so you can audit it. This is educational, not lending advice — your pre-approval is the authoritative number.
Sources
- Freddie Mac — Primary Mortgage Market Survey (30-yr rate, week of July 23, 2026) — accessed 2026-07-29
- Consumer Financial Protection Bureau — Figure out how much you want to spend — accessed 2026-07-29
- Fannie Mae — Mortgage affordability & the 28%/36% guideline — accessed 2026-07-29
- HUD — FHA loan requirements (3.5% down at 580+ FICO) — accessed 2026-07-29