How Much House Can I Afford on $120,000 a Year?
On a $120,000 salary you can afford a home of about $349,355 with 10% down, a payment of $2,800 a month, under the conservative 28/36 rule. With 20% down it is about $407,428. This assumes a 7.40% 30-year rate (Freddie Mac average, October 15, 2026) and $400 a month of other debts.
The price by scenario
| Scenario | Home price | Payment | Down payment | Cash at closing |
|---|---|---|---|---|
| Conservative 28/36, 10% down | $349,355 | $2,800 | $34,936 | $45,416 |
| Conservative 28/36, 20% down | $407,428 | $2,800 | $81,486 | $93,708 |
| FHA-style 31/43, 3.5% down | $364,821 | $3,100 | $12,769 | $23,713 |
Payment = principal and interest, property tax, insurance and PMI. Cash at closing = down payment plus about 3% in closing costs. The FHA-style row uses the 31/43 benchmark and the same PMI rate as an approximation of FHA mortgage insurance.
What one point of interest changes
| 30-year rate | Home price (10% down) | Payment |
|---|---|---|
| 6.40% | $377,720 | $2,800 |
| 7.40% (current average) | $349,355 | $2,800 |
| 8.40% | $324,078 | $2,800 |
Where the $2,800 goes
| Principal and interest on $314,420 | $2,177 |
| Property tax (1.1% a year) | $320 |
| Homeowners insurance (0.5% a year) | $146 |
| Mortgage insurance (PMI, under 20% down) | $157 |
| Total monthly payment | $2,800 |
Lenders measure against gross income, but you pay from take-home pay. A single filer on $120,000 takes home about $7,771 a month after federal tax and FICA, so this payment is about 36% of it, before state tax, utilities and repairs. See the full breakdown in $120,000 a year after taxes.
How this is calculated
Gross monthly income is $120,000 ÷ 12 = $10,000. The housing payment may be at most 28% of it ($2,800), and housing plus other debts at most 36% of it, which leaves $3,200 for housing after $400 of other debts. The smaller limit, $2,800, is the budget. Your own debts, down payment, rate, taxes and HOA dues change the answer: enter them in the home affordability calculator. To see the mortgage payment of a specific price, use the mortgage calculator.
Frequently asked questions
How much house can I afford on a $120,000 salary?
Under the conservative 28/36 rule, about $349,355 with 10% down ($2,800 a month) or $407,428 with 20% down. With an FHA-style 31/43 limit and 3.5% down it is about $364,821. These figures assume a 7.40% 30-year rate, $400 a month of other debts, property tax of 1.1% and insurance of 0.5% a year.
Can I afford a $400,000 house on $120,000 a year?
Probably not. The conservative limit is about $349,355 with 10% down and the FHA-style limit about $364,821 with 3.5% down, both below $400,000. A larger down payment, a lower rate or less other debt would raise the ceiling.
Does the 28% rule use gross or take-home income?
Gross income, before tax. On $120,000 that is $10,000 a month, so 28% is $2,800. Your take-home pay is lower, so the same payment is a bigger share of what you receive: $2,800 is about 36% of the roughly $7,771 a month a single filer takes home after federal tax and FICA, before any state tax.
What if mortgage rates fall by one point?
At 6.40% instead of 7.40%, the price you can afford with 10% down rises from about $349,355 to about $377,720, an increase of $28,365. At 8.40% it falls to about $324,078.
Other incomes
Planning estimates, not a loan offer. A lender also looks at your credit score, employment history and savings, and being approved for a payment does not mean it fits your budget.