# How Much House Can I Afford with a \$80K Salary?

April 9, 2024 - 6 min read

## I make \$80,000 a year: How much house can I afford?

If you’re an aspiring homeowner, you may be asking yourself, “How much house can I afford with a \$80K salary?”

If you make \$80K a year in today’s market, you can likely afford a home between \$263,000 and \$336,000. However, it’s important to understand all the factors impacting affordability, such as interest rates, down payments, and other expenses.

So whether you’re buying for the first time or looking for a bigger space, knowing what you can comfortably afford allows you to step into homeownership with confidence.

## If I make \$80,000 a year, what mortgage can I afford?

Generally speaking, financial experts advise following the 28% to 30% rule for house affordability. This guideline suggests that your monthly mortgage payment not exceed 28% to 30% of your gross monthly income.

Still curious, “How much house can I afford with a \$80K salary?” Let’s do the math.

An \$80,000 annual salary is a monthly gross income of approximately \$6,666. Using the 28% to 30% rule, your ideal maximum monthly payment shouldn’t exceed \$1,866 and \$2,000.

With that being said, if you’re getting a 30-year fixed-rate mortgage with a 6% interest rate, you can likely afford a home valued up to \$263,000 (including property taxes and insurance, and assuming a 5% down payment).

This doesn’t mean, however, that two people earning the same salary will qualify for an identical loan. Lenders consider other factors when determining affordability, such as a borrower’s credit score, down payment amount, and existing total debt.

## \$80K income mortgage payment breakdown

Principal is the amount you borrow, and interest is the fee for borrowing money. Both of these amounts make up the bulk of your monthly payment. But these aren’t the only expenses included in a housing payment.

If you buy a house with less than a 20% down payment, in most cases, you’re also responsible for private mortgage insurance (PMI). This extra fee protects your lender in case of default.

Additionally, your mortgage lender will likely include property taxes as part of your monthly payment, as well as homeowner’s insurance. And if your neighborhood is part of a homeowners association (HOA), you’ll need to budget for this expense too.

Lenders take all of these costs into account when deciding the maximum you can afford to spend on a new home.

## Maximum home purchase price by down payment

Keep in mind that putting down a larger down payment can affect your purchasing power and monthly payment.

Let’s say you’re thinking about buying a \$300,000 home. With a 20% down payment of \$60,000, your mortgage loan balance is \$240,000. But if you purchase with a smaller down payment, say 10% or \$30,000, your mortgage loan balance increases to \$270,000.

A lower loan balance due to a larger down payment not only results in a more manageable monthly payment, it can also increase your purchasing power.

With a \$240,000 loan and a 30-year fixed-rate mortgage at 6%, your monthly payment would be roughly \$1,835 (including taxes and insurance). On the other hand, a \$270,000 loan balance increases the monthly payment to approximately \$2,065.

## Maximum home purchase price by mortgage rate

Interest rates also play a role in deciding the maximum home price you can afford. In which case, what you’re able to afford at 3% interest will be significantly more than what you’re able to afford at 7% interest.

Using the 30% rule, a 3% interest rate means that an \$80,000 earner could possibly comfortably afford a home price of approximately \$336,000.

But when mortgage interest rates jump to 7%, the maximum affordability decreases to roughly \$242,000.

## Maximum home purchase price by debt-to-income ratio

Debt-to-income (DTI) is another factor mortgage lenders consider when determining a borrower’s ability to afford a home.

This percentage measures how much of your monthly income goes toward existing debts, and it’s calculated by dividing your total monthly debt payments by your gross monthly income.

If you have a monthly income of \$6,666 and \$1,700 in minimum monthly debt payments—credit card bills, auto loans, student loans, etc—your DTI ratio is 24%.

However, if you only have \$266 in minimum monthly debt payments, your DTI decreases to 4%.

Despite the same income, having \$1,000 in monthly debt payments means you’ll qualify for a smaller mortgage loan. Lenders typically prefer lower DTI ratios because there’s a lower risk of default due to more disposable income.

## Strategies to increase home buying power

Save for a bigger down payment and utilize downpayment assistance programs

Increasing your down payment can reduce your loan amount and improve your chances of getting more favorable loan terms. Most programs require a minimum of 3% to 5% down, but you can aim for 10% down or more. Also, ask your lender about down payment assistance programs like grants or low-interest loans to help with your down payment and closing costs.

A higher credit score opens the door to better mortgage rates and terms. Always pay bills on time, pay down your credit card balances, only apply for new credit when necessary, and check your credit report.

Lenders prefer borrowers with lower DTI ratios, as this typically indicates a healthier financial history. Pay down existing balances and avoid taking on new debt.

Avoid homeowners associations (HOAs)

HOA fees can increase your monthly expense. If possible, look specifically for properties that aren’t part of an HOA. This not only lowers your housing costs, it can also increase purchasing power.

This type of loan isn’t suitable for everyone. However, an ARM can offer lower initial interest rates, resulting in lower initial monthly loan payments. There is the risk of a rate adjustment in the future, so make sure you can afford any possible payment increases.

## The bottom line

We hope you now have a better understanding of how much house you can afford with a \$80K salary. When determining affordability on an \$80K salary, take into consideration factors like down payment, credit score, and your debt-to-income ratio. Review your financial readiness, explore down payment assistance programs, and buy within your means to avoid being house poor.

## FAQ: How much house can I afford with a \$80K salary?

What type of loan should I consider if I make \$80,000 a year?

Different types of loans are available to borrowers earning \$80,000 a year. This includes conventional, FHA, VA, and USDA home loans. These include fixed-rate options (ideal for stable payments), and in most cases, you can buy with a down payment between 0% and 5%, and a credit score of 620 or higher.

What percentage of my income should I spend on housing if I make \$80,000 a year?

Experts recommend spending no more than 28% to 30% of your gross monthly income on housing costs. These include mortgage payments, property taxes, insurance, and HOA fees. Sticking to this guideline leaves room in your budget for other financial goals and savings.

How does my credit score affect the house I can afford on a \$80,000 salary?

With a higher credit score, typically above 700, lenders offer lower interest rates. This means you could afford a more expensive home or have a lower monthly payment. On the other hand, a lower credit score might result in higher interest rates, which can limit your purchasing power.

How much house can I afford with a \$80,000 salary?

With an \$80,000 annual salary in today’s market, you can possibly afford a home priced between \$263,000 and \$336,000. This estimate will vary based on a borrower’s down payment amount, existing debt payments, and current interest rates. Keep in mind, the higher your down payment and the lower your mortgage rate, the more house you can afford. Use an online mortgage affordability calculator or speak with a mortgage lender for a more precise range based on your specific financial situation.

Authored By: Valencia Higuera
The Mortgage Reports contributor
Valencia Higuera is a freelance writer from Chesapeake, Virginia. As a personal finance and health junkie, she enjoys all things related to budgeting, saving money, fitness, and healthy living.