How Much House Can I Afford on $40,000 a Year?
On a $40,000 salary you can afford a home of about $99,815 with 10% down, a payment of $800 a month, under the conservative 28/36 rule. With 20% down it is about $116,408. 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 | $99,815 | $800 | $9,982 | $12,976 |
| Conservative 28/36, 20% down | $116,408 | $800 | $23,282 | $26,774 |
| FHA-style 31/43, 3.5% down | $121,607 | $1,033 | $4,256 | $7,904 |
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% | $107,920 | $800 |
| 7.40% (current average) | $99,815 | $800 |
| 8.40% | $92,593 | $800 |
Where the $800 goes
| Principal and interest on $89,834 | $622 |
| Property tax (1.1% a year) | $91 |
| Homeowners insurance (0.5% a year) | $42 |
| Mortgage insurance (PMI, under 20% down) | $45 |
| Total monthly payment | $800 |
Lenders measure against gross income, but you pay from take-home pay. A single filer on $40,000 takes home about $2,860 a month after federal tax and FICA, so this payment is about 28% of it, before state tax, utilities and repairs. See the full breakdown in $40,000 a year after taxes.
How this is calculated
Gross monthly income is $40,000 ÷ 12 = $3,333. The housing payment may be at most 28% of it ($933), and housing plus other debts at most 36% of it, which leaves $800 for housing after $400 of other debts. The smaller limit, $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 $40,000 salary?
Under the conservative 28/36 rule, about $99,815 with 10% down ($800 a month) or $116,408 with 20% down. With an FHA-style 31/43 limit and 3.5% down it is about $121,607. 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 $150,000 house on $40,000 a year?
Probably not. The conservative limit is about $99,815 with 10% down and the FHA-style limit about $121,607 with 3.5% down, both below $150,000. 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 $40,000 that is $3,333 a month, so 28% is $933. Your take-home pay is lower, so the same payment is a bigger share of what you receive: $800 is about 28% of the roughly $2,860 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 $99,815 to about $107,920, an increase of $8,105. At 8.40% it falls to about $92,593.
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.