How Much Home Can I Afford with A $100k Salary?

Many aspiring homeowners fear that having a home of their own may be out of reach in this competitive market. Others worry that buying a home will leave them “house poor,” with no extra money for things like a dining room table or home upgrades. If you are wondering how much house you can afford to buy, we can help you figure that out.

How Much Home Can I Afford According to The 28/36 Rule?

The 28/36 rule is a quick affordability check you can do if you want an instant answer to the question, “How much home can I afford?” This calculation determines your overall financial status and is a traditional way to evaluate a borrower’s ability to service any kind of debt, including a mortgage. If you have applied for any sort of loan in the past, your lender will probably have applied the 28/36 rule.

The rule requires that no more than 28% of gross monthly income goes toward housing costs (mortgage, taxes, insurance), and no more than 36% of gross monthly income is spent on total debt (housing cost + car loans, student loans, credit card, etc). With a $100K salary, you would pass this test if you spent less than about $2,333/month for housing and a maximum of $3,000/month for all your financial obligations including housing.

The ratio of your gross monthly income to your total debt is also called your debt-to-income ratio (DTI), a term you may encounter elsewhere. To combine this term with the information above, a DTI of under 36% makes you a reasonable risk from the lender’s perspective.

What Is Included in Housing Expenses? 

When you ask, “How much home can I afford?” you will be asked to estimate your housing expenses. This is what you should include:

• Mortgage payments
• Property taxes
• Housing-related insurance payments
• Homeowner’s association or condo fees

You may also be asked how much you spend on utilities per month, but not every lender needs this information.

What Are the Key Factors That Impact Affordability?

Income, housing expenses and debt servicing are a big part of how much home you can afford, but other factors include:

• Your down payment: A larger down payment reduces your housing costs and raises the amount you can qualify for.
• Loan type: FHA, VA, and conventional loans have different requirements. More on this below.
• Interest rates: Higher interest rates mean higher housing costs.
• Property taxes: These vary widely by state and by county, which affects your housing costs.
• Homeowners insurance & HOA fees: These expenses also vary. As part of your housing costs, these must be factored into the budget.

How Much House Can I Afford With a Conventional Mortgage?

With a salary of $100,000, a 20% down payment, and non-housing debt of $400/month, you would be able to afford a house in the $488,500 to $605,400 range, depending on the interest rate.

How Much House Can I Afford With an FHA Loan?

FHA loans are government-backed mortgages for low-to-moderate-income homebuyers. FHA loans allow you to get financing with a lower down payment than a conventional mortgage: as little as 3.5% with a credit score of 580+ and 10% with a credit score of 500-579.

FHA loans also allow a debt-to-income (DTI) ratio of up to 43%, but they require a mortgage insurance premium (MIP) for the life of the loan unless it is converted to a conventional mortgage. The MIP forms part of your housing costs, so that is included in your DTI.

Here is what you could afford with a $100,000 salary and an FHA loan. These figures assume $400 in monthly debt payments outside of housing costs.

How Much Home Can I Afford with a VA Loan?

VA loans are available to eligible military service members, veterans, their spouses and their survivors. They require no down payment and no private mortgage insurance (PMI).

Here is what you could afford with a $100,000 salary and a VA loan. These figures assume $400 in monthly debt payments outside of housing costs.

Home Affordability Calculator

Use this calculator to answer the question, “How much home can I afford with a $100,000 salary?” Simply enter your income, monthly debt, and downpayment amount to see what you could get!

Conclusion: Know Your Budget Before You Buy

On a $100,000 salary, you can afford quite a bit of house, but it depends on your down payment, your loan type, and your other debts. If you are ready to buy a home, consult with a lender about pre-approval and contact an experienced REMAX agent to get started!