How much house can I afford if I make $100,000 per year?

September 30, 2022 - 8 min read

A $100K salary puts you in a good position to buy a home

One of the first questions to ask when you want to buy a home is How much house can I afford?

With a $100,000 salary, you have a shot at a great home buying budget — likely in the high-$300,000 to $400,000 range or above. But you’ll need more than a good income to buy a house. You will also need a strong credit score, low debts, and a decent down payment.

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With all these factors and $100K of income per year, most doors in the mortgage world will be open to you.

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The 30% rule for home buyers

Many personal finance experts recommend spending around 30% of your monthly income on housing costs.

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If your annual salary is $100,000, the 30% rule means you should spend around $2,500 per month on your house payment. With a 10% down payment and a 6% fixed interest rate, you could likely afford a home worth around $350,000 to $400,000 (depending on the cost of taxes and home insurance).

Experts call this the 30% “rule,” but home buyers should treat it more like a general guideline.

For example, a $100,000 earner with no existing debt and no children may be able to spend 40% or more of their income on housing expenses. Another $100,000 earner who has two car payments, a big student loan balance, and a big family may spend only 25% on housing.

Your other homeownership costs — property taxes, homeowners insurance, private mortgage insurance, and HOA dues — will also impact your home-buying budget. The less you spend on these “extra” monthly fees, the more home you can ultimately afford.

How much house can you really afford?

Unless you’re making a cash offer, how much house you can afford depends on two questions:

Find out how much house you can afford. Start here

  • How much can you afford to pay each month? Your monthly budget will set the size of your house payment. Obviously, your annual income is a big piece of this puzzle, and a $100K income is a really good place to start
  • What will you get in exchange for that payment? How much home you can get for your monthly payment will depend on your credit score, down payment size, cash reserves, and debt-to-income ratio

Two different home buyers, both with $100,000 annual incomes, can afford houses with vastly different purchase prices. That’s because when it comes to buying power, so much depends on your borrowing credentials.

To see how all this plays out, let’s look at some real-life home loan examples.

How much house can I afford if I make $100K? Examples

Example 1: Buying a house with a $100K salary and great credit

The $100,000 earner in our first example has an excellent credit score of 740. This person also has no monthly debts and is prepared to put down 20% on the home.

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This buyer might qualify for an interest rate of 5.75 percent. For a payment of about $2,495, this buyer can buy a house listed at $450,000.

  • Income: $100,000/year
  • Credit score: 740
  • Down payment: 20%
  • Debts: $0 a month
  • Interest rate: 5.75%*
  • Estimated home value: $450,000
  • Monthly payment: $2,495

*Interest rates shown are for sample purposes only. Your own rate will be different. All loan amounts were calculated using The Mortgage Reports’ mortgage calculator.

This scenario assumes a homeowners insurance rate of $1,200 a year, which is the U.S. average, along with a 0.78% tax rate. Since the borrower put 20% down, the lender did not charge any private mortgage insurance (PMI) premiums.

Example 2: Buying a house with a $100K salary and good credit

Our second borrower also makes $100K a year and wants to spend about $2,500 on a house payment. But this person’s credit score is 700 and they pay $250 in non-mortgage debts each month. They’re able to put down 15% on the house.

Based on these factors, this buyer may get an interest rate of 6.75 percent and qualify for a home price of around $360,000. Let’s do the math:

  • Income: $100,000/year
  • Credit score: 700
  • Down payment: 15%
  • Debts: $250 a month
  • Interest rate: 6.75%*
  • Private mortgage insurance: $200 a month
  • Estimated home value: $360,000
  • Monthly payment: $2,521

*Interest rates shown are for sample purposes only. Your own rate will be different. All loan amounts were calculated using The Mortgage Reports’ mortgage calculator.

One big change from the first example is that private mortgage insurance (PMI) premiums are required since the buyer put less than 20% down. PMI added $200 a month.

The good news: You can cancel PMI once you’ve paid your home down by 20 percent. With a 15% down payment, it won’t take too long to get there.

Example 3: Buying a house with a $100K salary and low credit

Now, let’s look at an example of a homebuyer who makes $100,000 per year but has a lower credit score and relatively high debts.

This could be someone who recently graduated with student loans and hasn’t had a chance to build up their credit yet. Or, someone who has existing debt from a few different lines of credit — like credit cards and an auto loan.

Whatever the case, a lower credit score and higher debts mean your home buying budget will be on the lower end of the spectrum.

  • Income: $100,000/year
  • Credit score: 650
  • Down payment: 5%
  • Debts: $1,000 a month
  • Interest rate: 7.75%*
  • Private mortgage insurance: $250
  • Estimated home value: $290,000
  • House payment: $2,514

*Interest rates shown are for sample purposes only. Your own rate will be different. All loan amounts were calculated using The Mortgage Reports’ mortgage calculator.

This borrower makes a $100K salary and has a 650 credit score — still high enough to qualify for a conventional loan. This borrower’s PMI rate is a little higher than the Example 2 borrower’s because of the smaller down payment.

Finding your home buying budget

In the examples above, all three home buyers earn salaries of $100,000 per year. But their home buying budgets range from $290,000 to $450,000. How do you know where you fall on this scale? What’s your exact price range for a new home?

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The fastest way to find out to get mortgage preapproval from a lender. The preapproval process involves an initial mortgage loan application that will ask about your income, credit, and debts. It shows not only your price range but also what your interest rate and monthly payment would likely be.

You can also assess your own mortgage eligibility. Here’s how:

Get your FICO credit score

Your FICO score has a big influence on the mortgage rates lenders will quote for you. The higher your score on a scale of 300 to 850, the more house you can probably afford. Your bank or credit card company may show your score for free, but keep in mind that these estimates are often different from the FICO score a lender sees.

Be wary of free credit reporting apps that don’t show FICO scores. Some of these scoring models trend higher, giving a false impression of your borrowing power.

Find your debt-to-income ratio

Lenders check your debt-to-income ratio, or DTI, to make sure you can afford your housing payments. You can check your own DTI easily:

  • Add up your total debt: Include only monthly debt payments — car payments, student loans, personal loans, credit card minimum payments — along with child support or alimony
  • Divide your total debt by gross monthly income: Gross income means earnings before taxes, not your take-home pay. If you make exactly $100,000 a year, you earn $8,333 a month

Someone who spends $3,500 in debt and earns $8,333 a month has a DTI of 42 percent. Borrowers with DTIs below 36% can usually borrow more for a home purchase.

Decide on your down payment

Bigger down payments open more doors, especially for conventional borrowers. Putting down 20% on a conventional loan eliminates PMI and it can lower your interest rate, too. Plus, it may help you overcome other weaknesses in your application, like a high DTI or lower credit.

There’s less benefit to putting 20% down on an FHA loan since these loans charge mortgage insurance premiums (MIP) no matter what. But putting 10% or more down on an FHA loan means your mortgage insurance would expire in 11 years instead of lasting for the life of the loan.

It may help to know that mortgage lenders use the term loan-to-value ratio (LTV) to show your down payment. LTV shows money down from the opposite angle. A 20% down payment means an LTV of 80 percent.

Choose a loan type and loan term

Your credit score, DTI, and down payment size should inform your decisions about loan types and loan terms.

  • Conforming loans: These work best for strong borrowers; those with credit scores above 720 and DTIs of 36% or less who can make a down payment of 5-20%
  • FHA loans: These require only 3.5% down and help borrowers with lower credit scores and higher debt burdens. The trade-off is permanent mortgage insurance premiums
  • VA loans: Military members and veterans can buy homes with 0% down, no mortgage insurance, and lower interest rates than most other loans. It’s a really good deal if you’re eligible
  • USDA loans: These 0% down loans work in rural, and some suburban, areas. They also work only for buyers with incomes lower than 115% of their area’s median. In most places this excludes $100,000 earners

Most buyers get 30-year mortgage terms. Spreading mortgage debt across a longer period of time lowers your monthly mortgage payments which means you can afford more house.

However, a shorter loan term saves on interest in the long run. For instance, a 15-year fixed-rate loan has higher monthly payments but lower interest rates. It can reduce your total interest cost by tens of thousands of dollars if you’re keeping the home loan long-term.

Other tips for buying a house on a $100K salary

Not only does your salary affect how much you can borrow in a mortgage, it also impacts the types of loans you can take out.

Find out how much house you can afford. Start here

Income limits on mortgage programs

Some programs, such as the zero-down USDA mortgage, have income limits on who can qualify. The USDA program caps income at 115% of the area median income (AMI). Note that these limits apply to total household income, not just that of the borrower.

Fannie Mae’s HomeReady loan and Freddie Mac’s Home Possible loan — both of which allow 3% down — also enforce income limits.

Income limits for down payment assistance

Earning $100K a year may also put you out of the running for down payment assistance (DPA) programs.

There are many DPA programs across the country, including at the state and local level, so eligibility criteria vary from place to place. But most programs cap assistance at a certain income threshold. So if you were counting on DPA to help you buy a home, make sure you know the requirements before factoring that into your plan.

There are loan limits to consider, too

One final word on limits. Even if you apply for a conventional loan that doesn’t have income limits, your home’s value cannot exceed a certain amount of money — known as conforming loan limits.

These limits are set annually by the federal government. Mortgages that exceed these limits are considered “jumbo mortgages" and are not government-guaranteed.

The conforming loan limit in most U.S. counties for 2024 is $, though it can increase to $ in high-cost areas.

Check your home buying budget

It’s a good idea to figure out how much house you can afford before home shopping. That way you avoid falling in love with a property you won’t be able to buy. Your monthly expenses and credit history — along with your income — determine your price range.

To find your price range, you can use a home affordability calculator. Or share your financial situation with a lender to get a quick assessment of your buying power. You can get started right here.

Time to make a move? Let us find the right mortgage for you

Casey Morris
Authored By: Casey Morris
The Mortgage Reports contributor
Casey Morris is a finance and tech journalist. She has written for Forbes Asia, The Washington Post, and a number of finance publications and institutions.