How Much House Can You Afford On $100K?

A home is a big investment, but if you have a salary in the six-figure range you’re already off a pretty good start. As long as you have manageable debt, it’s a decent bet that you can find something that meets your needs.

The Answer: $294,633 – $425,642*

If you’re given a hypothetical on home price ranges, it’s based on assumptions, hence the asterisk above. You can afford between $294,633 – $425,642, but you should know the scenario. With a $100,000 salary, we had $30,000 for down payment and closing costs and $600 in monthly debts before the mortgage with a 720+ credit score.

The interest rate here is around 6.99% with a 30-year term. The closing costs are 2.9% of the loan amount and affordability includes a $67 monthly homeowners insurance premium along with an assumption for property taxes. This is a suburb of Chicago.

Of course, affordability is highly variable based on where you’re looking to purchase, your debt-to-income ratio (DTI), how much you have saved and your credit score.

Estimating How Much House You Can Afford With $100K

The best way to get an estimate of how much home you can afford without going through with an actual preapproval is to use a Home Affordability Calculator. But the problem with any calculator is that it doesn’t account for your comfort level and how you like to budget. Even a preapproval will show you the top end of what you can afford.

But you want room for emergency funds as well as the things that make life fun, so you don’t want all your resources tied up in your house payment. Here are some general rules to decide how much home you can afford.

The 28% Rule

One of the basic rules used by many experts to give a guideline on how much you can afford when buying a home is that the mortgage payment should comprise no more than 28% of your monthly income before taxes. Based on this, on a $100,000 salary, your mortgage payment should be no more than $2,333.33 per month.

The 28% rule is often combined with a rule that says no more than 36% of your monthly income should go toward all of your debt payments, including your mortgage.

Mortgage Breakdown On A $100K Salary

We’ve gone over what buying the mortgage on $100,000 looks like in one specific scenario, but what happens if we change up some numbers based on your situation?

While leaving the interest rate the same at 6.99%, we’ve changed factors like the debt being brought into the transaction and the cash you have to buy. If interest rates: lower or higher, you would obviously be able to afford more or less. But it’s not really possible to time the market. Beyond your personal qualifications, rates aren’t in your control.

Can I Afford A $400K-$500K House?

It’s much easier to determine how much you can afford if you know the price of the house and then you can work backward. For this formula, there’s a way to calculate how much salary you would need to afford a house at any given price. For this, you need to know four things:

• Home price
• Monthly payment
• DTI expected by the lender
• Monthly debts outside your mortgage

You can get to the monthly payment by putting the home price, your interest rate and down payment into any mortgage calculator. The formula we used doesn’t include taxes and insurance, but you can add them in if you know them.

Here’s the formula for minimum salary:

(Monthly Payment ÷ DTI + Existing Monthly Debts) × 12

For the home price, we’ll run the calculation at both $400,000 and $500,000. Let’s keep going with an interest rate of 6.99%. Lenders have different requirements, but because we’d been using 36% as an affordability benchmark, we’ll keep rolling with that. Assume $600 in existing debts. When you do that, here’s how the math comes out:

Based on the assumptions above, you would be able to afford a $400,000 home in any of the usual down payment scenarios. Let’s see what happens if we want a $500,000 home: