How much house can I afford with a $120k salary? Key factors

What you’ll learn

— What a $120,000 salary can buy in today’s housing market

— How factors like debt-to-income ratio, down payments, and loan type affect affordability

— Ways to boost homebuying power and make the most of Better’s pre-approval tools ✅

A $120,000 salary is well above the U.S. median income, putting you in a strong position compared to most households. Still, with higher mortgage rates and tighter lending standards, even six-figure earners may need to stretch their budget to buy their dream home.

Here’s how much house you can afford on a $120k salary.

What home can I afford with a $120k salary?

If you’re wondering what home price you qualify for on a $120k salary, the range usually lands between $450,000 and $550,000.

The exact number shifts based on the market and personal finances, like your credit score and debt-to-income (DTI) ratio. As a result, two people earning the same $120k household income can end up qualifying for very different loan amounts.

In one scenario, for example, a buyer might keep monthly expenses low, giving themselves more room to take on a higher mortgage. Another might be juggling student loans or a big car payment that limits their budget. 

You can run the numbers yourself by using Better’s affordability and mortgage calculators to compare monthly payments at various home prices.

Breaking down the mortgage for a $120k income

Wondering how much mortgage you can afford if you make $120,000? First, it helps to know what makes up your payment — principal, interest, property taxes, and insurance (often called PITI). Together, these costs make up your total monthly housing payment and affect how much total interest you’ll pay over time.

Say you buy a $450,000 home with a 20% down payment. That leaves you with a $360,000 loan at a 6.2% fixed rate. Over 30 years, monthly costs break down roughly like this:

— Principal and interest: $2,197

— Property taxes and insurance: $675

— Total estimated housing cost: $2,872

This setup tends to feel manageable for many $120,000 earners while still leaving room for savings and everyday spending. On the other hand, making a smaller down payment increases monthly obligations, which may strain your budget.

...in as little as 3 minutes – no credit impact

Debt-to-income (DTI) ratio and home affordability 

A DTI ratio measures how much of a household’s gross monthly income goes toward existing debts, like student loans and credit card balances. Lenders use it to determine if you can comfortably handle a new mortgage. Generally, a DTI below 36% is considered healthy.

Based on the 28/36 rule, people earning $120,000 a year shouldn’t spend more than $2,800 in housing costs and $3,600 in total debt. For instance, a $3,000 mortgage payment plus $500 in other debts equals a 35% DTI — generally acceptable to most lenders. If other debts rise to $1,000 or more, the DTI exceeds 36%, limiting the loan amount you can qualify for.

Worried about your DTI? As long as it’s under 50%, you’ll still qualify for a conventional loan with Better.

4 factors that affect affordability

Income and DTI are a good place to start when deciding how much house you can afford. But other variables influence how much you can comfortably spend. Understanding these dynamics early can prevent any unwelcome surprises later in the process. Let’s take a look at four main factors. 

1. Property taxes

Property taxes and homeowner’s insurance vary widely by region and the property type. For example, New Jersey has the highest property tax rate in the U.S. at 2.23%, while Hawaii has the lowest at 0.27%.

On a $500,000 home, that difference could mean paying over $1,000 per month in taxes in New Jersey versus about $113 per month in Hawaii. Taxes can also change over time as local governments reassess property values, so it’s important to factor them into your overall budget.

2. Homeowner’s insurance

Homeowner’s insurance protects your home and belongings from risks like theft and natural disasters. Premiums vary based on factors like the home’s location, size, and the coverage limits you choose.

For example, properties in areas prone to natural disasters, like hurricanes in Florida and tornadoes in Texas, often have higher insurance premiums. But regions with fewer major risks, such as Vermont and parts of Alaska, typically have lower rates. 

3. Location

Location has a big impact on what a buyer can afford. Homes in densely populated metro areas and highly sought-after school districts usually come with higher prices and property taxes. Other factors, like proximity to jobs and nearby amenities, can also influence cost.

Buying farther from the city center can make the same salary go further. This approach allows for a larger home and a more manageable monthly payment.

4. Down payment savings

Your down payment amount affects both the loan size and your borrowing costs. A 20% down payment, for example, typically lets borrowers avoid private mortgage insurance (PMI) and lowers their monthly interest. A smaller down payment, like 10%, can help buyers purchase a home sooner. But this usually requires paying PMI, which ultimately increases the overall cost of the loan.

Affordability scenarios for a $120k income

Here’s how different factors affect monthly payments for a $500,000 home at a 6.2% interest rate:

— 20% down: With $100,000 down, your monthly payments are approximately $3,070.

— 10% down: Putting $50,000 down comes to about $3,574 per month.

— 5% down: A $25,000 down payment results in a monthly payment of nearly $3,740.

These estimates include principal, interest, and property taxes. Actual payments vary by location.

How to increase homebuying power ✅

Borrowers can stretch their salaries further by adjusting their financial profile. Let’s break down how.

Paying down debts

Paying off balances and high-interest loans reduces monthly obligations and lowers your DTI. Even small progress on credit cards and personal loans can improve your mortgage eligibility. Refinancing high-interest loans and adjusting repayment schedules can also free up cash and give lenders more room to approve a larger loan or better terms.

Making a bigger down payment

Putting down more can significantly reduce your monthly mortgage payment and improve loan options. Moving from a 10–15% down payment, for instance, noticeably lowers monthly payments, while reaching 20% often eliminates PMI.

Different loan options

Someone with a $120,000 salary can qualify for several kinds of mortgages. Conventional loans are most common for this income level, often coupled with down payments ranging 5%–20%. Borrowers who qualify for FHA, VA, or USDA programs may find lower down payment options and added flexibility based on the applicant’s credit and location. 

Turning a $120k salary into a home purchasing plan with Better

A $120,000 income provides a solid foundation for purchasing a home. DTI ratios, down payments, and credit history shape what they can afford.

Better’s online pre-approval process lets borrowers instantly see how their debt affects eligibility and what price range their income can support. The platform delivers personalized rate estimates in minutes, helping shoppers set a realistic budget when it’s time to make an offer.

...in as little as 3 minutes – no credit impact

FAQ

How do interest rates and loan terms affect mortgage affordability?

Interest rates have the biggest impact on what a buyer can afford. Higher rates increase the cost of borrowing, raising monthly payments and reducing the home price you can afford. Longer loan terms ease monthly payments but can increase the total interest paid over time. Choosing the right combination of rate and term directly shapes affordability.

With a $120k income, what monthly mortgage fits the 28/36 rule?

Under the 28/36 rule, monthly housing costs should stay near $2,800, and total debt payments below $3,600. This lets mortgage payments remain manageable while giving room for other recurring expenses.