How Much House Can I Afford with a $100,000 Salary?

Home prices have climbed in the last several years; the median sale price is now around $420,400 according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development. Still, earning a $100,000 salary puts you in a good position to buy a home if you know how to budget for it. Debt, interest rates, and your down payment can affect your monthly payments and how much house you can afford. To avoid overextending your finances, find out how to calculate your homebuying budget, what home loan options are available, and how to find the most affordable mortgage.

What factors determine how much house you can afford?

Several factors influence the amount you should spend when buying a home, including: 

• Income: Your income is the primary factor in determining how much you can spend on a home. Lenders use your monthly gross income to estimate what you can afford for mortgage payments and other housing expenses. 
• Debt-to-income ratio (DTI): Lenders use your DTI to understand how much of your income is already allocated to debt payments. A lower DTI means you have more funds available to cover a monthly payment, which increases your odds of being approved for a mortgage. 
• Down payment: A larger down payment reduces the amount you need to borrow. It can also help you avoid extra expenses like private mortgage insurance (PMI), which many lenders require if you put less than 20% down. 
• Interest rates: Interest rates significantly affect your monthly mortgage payment. Even a small difference in rates can have a big impact over time, making it important to compare your options. 
• Other costs: Owning a home involves more than just the mortgage. Property taxes, homeowners insurance, and maintenance are additional costs you need to consider in your overall budget.

How much house can you afford with a $100,000 salary?

The 28/36 rule is a common guideline for calculating how much house you can afford. It suggests that no more than 28% of your gross monthly income should be spent on housing expenses, including your mortgage, taxes, and insurance. The guideline also suggests spending no more than 36% of your gross income on total debt. This includes your mortgage, credit cards, auto loans, student loans, and other debt. 

For a $100,000 salary, this means you can allocate roughly up to $2,333 per month toward your mortgage. If you make $100,000, here's a breakdown of monthly income and maximum affordable expenses: 

• Gross monthly income: $8,333
• Maximum monthly housing expenses (28%): $2,333
• Maximum total monthly debt payments (36%): $3,000

With a $100,000 salary, you may be able to afford homes priced between $200,000 and $300,000. The actual amount you can afford will depend on your down payment, interest rate, and additional housing costs. 

Below is a breakdown of how your monthly mortgage payments can change based on your interest rate. This example assumes a 30-year repayment term. The chart below shows how slight differences in interest rates can impact monthly principal and interest payments on a $200,000 or $300,000 mortgage: 

How does your DTI affect your home affordability?

Lenders use your DTI to gauge your ability to make monthly mortgage payments. DTI is calculated by taking all of your monthly debt payments and dividing them by your gross monthly income.

A $100,000 annual salary breaks down to a gross monthly income of $8,333. To maintain a DTI under 36%, your total monthly payments should not exceed $3,000. However, having a lower DTI can increase your buying power and help you qualify for better loan terms. 

Improving your DTI now can boost your purchasing power and allow you to afford a more expensive home. Here are some ways to lower your DTI: 

 

• Pay off high-interest debt to reduce your monthly payments.
• Avoid taking on new debt before applying for a mortgage. 
• Find ways to increase your income, such as side work, bonuses, or asking for a raise. 
• Review discretionary spending to free up more funds for debt repayment. 
• Make extra payments on existing loans to reduce your balances faster.

What mortgage options are available for a $100,000 salary?

If you make $100,000 a year, you may qualify for several mortgage options: 

• Conventional loans: These mortgage loans are backed by private lenders, such as banks or credit unions, and usually require a minimum down payment between 3% and 5%. Putting 20% down helps you avoid paying PMI and can help you secure better loan terms. 
• FHA loans: FHA loans are government-backed and require as little as 3.5% down if your credit score is 580 or better. They are a good option for borrowers with lower credit scores. 
• VA loans: These loans are available for eligible military service members, veterans, and their families. They offer options for no down payment and no PMI, though there is a one-time funding fee that ranges from 1.25% to 3.30% of the loan amount.
• USDA loans: USDA loans are designed for borrowers in rural areas and offer 100% financing. For qualified borrowers, no down payment is required. Eligibility for a USDA loan depends on location and income limits. 

How to improve your home affordability with a $100,000 salary

To improve your home affordability, consider these strategies: 

• Increase your down payment: The more you put down, the less you need to borrow. This can also lower your monthly payments. 
• Shop around for the best rate: Scoring a lower interest rate can also lower your payments. Compare multiple lenders and loan options to find the best deal. Even a slight reduction can make a big difference in how much interest you pay over time. 
• Pay down debt: Paying off credit card balances and other debt can improve your debt-to-income ratio. This can increase your chances of qualifying for a larger mortgage. 
• Improve your credit score: A higher credit score can make you eligible for lenders’ best interest rates.