How Much House Can I Afford on $100k Salary?
The 28/36 rule, what lenders actually check, and why the number they approve you for is almost always more than you should spend.
Here's the uncomfortable truth most first-time homebuyers learn too late: the bank's maximum isn't a target, it's a ceiling you should stay well below. On a $100k salary, lenders will often approve you for a $400,000-$450,000 home. The amount you should actually spend is usually closer to $300,000-$350,000 — and this article will show you why.
The 28/36 rule in plain English
The classic affordability guideline, codified by Fannie Mae and followed by most conventional lenders, is called the 28/36 rule:
28% (front-end ratio): Your monthly housing payment — principal, interest, taxes, insurance, and HOA if any — shouldn't exceed 28% of your gross monthly income.
36% (back-end ratio): Your total monthly debt payments — housing plus car loans, credit cards, student loans, personal loans — shouldn't exceed 36% of your gross monthly income.
On $100k gross ($8,333/month), that's a housing cap of $2,333 and a total-debt cap of $3,000. If you have no other debt, you can use all $3,000 for housing under the back-end test. If you have a $500 car payment and $100 minimum credit card payment, you're capped at $2,400 for housing.
What $2,400/month actually buys
Let's translate that into a home price. Assume:
- 20% down payment
- 30-year fixed rate at 7%
- Property tax ~1.2% of home value (national average)
- Homeowners insurance ~$1,200/year
With those assumptions, $2,400/month total PITI works out to a home price around $315,000. Run your own numbers with the
mortgage calculator
using your actual rate and tax estimate.
Why the bank will offer you more
Many lenders will push the front-end ratio to 35-40% for strong borrowers (FHA goes to 43% or higher). On your $100k income, that could mean approval for a $450,000 house with $2,900+ monthly payments.
The bank is underwriting their risk, not your lifestyle. They want to know you probably won't default — not whether you can still eat out, save for retirement, or handle a surprise $10k expense. The formula ignores:
- Retirement contributions (401k, IRA)
- Childcare ($1,200-$2,500/month per child in many metros)
- Health insurance if you're self-employed
- The jump in utilities from a 900 sq ft apartment to a 2,200 sq ft house
- Maintenance (rule of thumb: 1% of home value per year)
- Furniture and setup costs (a new house easily eats $10-20k)
Closing costs: the hidden 2-5%
On top of your down payment, expect 2-5% of the loan amount in closing costs: lender fees, title insurance, appraisal, inspection, prepaid taxes and insurance, and more. On a $350,000 house with 20% down ($70,000), closing costs will run $7,000-$17,500. That money is due at signing, not absorbable into the mortgage.
A better rule: the 25% rule
Many personal-finance writers recommend a stricter cap: housing should be no more than 25% of your net (take-home) income, not 28% of gross. This accounts for taxes, retirement savings, and other pre-tax deductions that the lender's formula ignores.
On $100k gross, after federal tax, state tax, FICA, and a 10% 401k contribution, take-home might be ~$5,500/month. 25% of that is $1,375/month — which is actually about what $220,000 of house buys at 7%. Yes, that's much less than the bank will approve. It's also why people who follow the 25% rule build wealth and people who max out their approval often don't.
Run three scenarios, not one
Before you fall in love with a number, model three cases:
The bank's max: see the stress.
28% of gross: the traditional guideline.
25% of net: the sustainable number.
Compare each against your actual monthly budget — not what you "could" do if you cut back on dining out. Use what your life actually looks like today, plus a buffer for surprises.
A side-by-side scenario: $100k income, two different choices
Here's what the numbers look like for a buyer earning $100k in a mid-cost city who has a $400/month car payment and $200/month in student loan minimums:
| Scenario | Home Price | Monthly PITI | % of Gross | Left Over |
|---|---|---|---|---|
| Bank maximum (43% DTI) | $415,000 | $2,900 | 35% | $2,833 |
| 28% front-end rule | $320,000 | $2,333 | 28% | $3,400 |
| 25% of net (take-home) | $225,000 | $1,650 | 20% | $4,083 |
The "left over" column is after PITI, car payment, and student loans. Notice that the bank-max scenario leaves only $2,833 for food, utilities, childcare, retirement, emergencies, and everything else. One broken furnace or a month without overtime pay turns "manageable" into a missed payment fast.
How your credit score changes the math
The interest rate you qualify for has a dramatic effect on affordability. On a $300,000 30-year mortgage:
Credit score 760+, rate 6.5%: Monthly payment ~$1,896. Total interest paid: ~$182,000.
Credit score 700, rate 7.2%: Monthly payment ~$2,030. Total interest paid: ~$231,000.
Credit score 640, rate 8.5%: Monthly payment ~$2,307. Total interest paid: ~$330,000.
That's a $411/month difference and $148,000 in additional interest over the life of the loan between a strong and weak credit score — on the same house. If your score is below 700, spending 6-12 months paying down balances, disputing errors, and avoiding new inquiries before applying can save more money than negotiating the house price by $20,000.
The maintenance budget most buyers forget
A useful benchmark: budget 1-2% of your home's value per year for maintenance and repairs. On a $300,000 house, that's $3,000-$6,000 annually — or $250-$500 per month set aside. Older homes (20+ years), homes in harsh climates, and homes with large lots or pools run higher. This money needs to exist in your budget before the furnace dies, not improvised after.
New-construction homes have lower near-term maintenance but often come at a 10-20% price premium and in locations with higher HOA fees. Factor both into your mortgage payment estimate before comparing a new build to a resale.
When to walk away from a "dream home"
Emotional attachment is the enemy of sound affordability decisions. Some signals that a house is wrong for your finances right now, even if you love it:
The only way it works is by stretching to the bank's maximum approval.
You'd have less than 3 months of expenses left after closing costs and down payment.
You're counting on an income increase that isn't yet confirmed.
Monthly payment plus existing debt obligations would exceed 40% of gross income.
Housing markets cycle. A house you can't comfortably afford at current rates is more likely to become affordable through income growth and patience than through hoping rates drop.
Related calculators
Car affordability
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Paycheck after taxes
Common questions
What's the difference between pre-qualification and pre-approval?▾
Pre-qualification is a soft estimate based on what you tell a lender — no credit pull, no verification. Pre-approval involves a hard credit check and document review (pay stubs, tax returns, bank statements) and produces a conditional commitment. Sellers take pre-approval seriously; pre-qualification letters are basically decorative.
Does my car loan affect how much house I can afford?▾
Yes, significantly. Your car payment counts toward your debt-to-income ratio (DTI). A $500/month car loan can reduce your maximum mortgage approval by roughly $75,000-$100,000 depending on rates. If you're about to buy a house, don't take out a new car loan in the six months before.
How much should I put down?▾
20% avoids private mortgage insurance (PMI) and gets you better rates, but it's not required. Conventional loans allow as little as 3% down for first-time buyers; FHA goes to 3.5%; VA and USDA can be 0%. Putting less down means a higher monthly payment and PMI (~0.5-1% of loan balance annually) until you reach 20% equity.
Should I max out my approval?▾
Almost never. Lenders approve based on backward-looking income and a formula that ignores childcare, retirement savings, medical expenses, and the cost of actually owning the house (maintenance, HOA, utilities jumping from apartment-size to house-size). A common guideline: spend about 80% of what you're approved for.
How do property taxes and insurance factor in?▾
Most lenders calculate a payment with principal, interest, property taxes, and insurance (PITI). Property taxes vary wildly — Texas averages 1.7% of home value, California 0.7%, Hawaii 0.3%. On a $400k house, that's a $200-$570/month spread just in taxes. Get specific quotes for your zip code before you fall in love with a price.
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