The short answer for $120,000 a year
$120,000 a year is $10,000.00 a month before tax. Under the 28/36 guideline, your full house payment (principal, interest, property tax, insurance and any PMI) stays under 28% of that, which is $2,800.00 a month, and all your debt payments together stay under 36%, $3,600.00.
With no other debts and 10% down at 6.5%, $2,800.00 a month buys about $389,404: $2,215.17 principal and interest, $288.81 property tax, $150.00 insurance and $146.03 PMI. That needs $38,940 down, plus closing costs.
Home price you can afford, no other debt
| Example rate | 5% down | 10% down | 20% down |
|---|---|---|---|
| 6% | $387,811 | $406,902 | $478,506 |
| 6.5% | $371,037 | $389,404 | $457,038 |
| 7% | $355,329 | $373,009 | $436,999 |
| 7.5% | $340,615 | $357,644 | $418,286 |
Putting 20% down instead of 5% raises the price from $371,037 to $457,038, partly because there's no PMI. A rate of 7.5% instead of 6.5% cuts the 10%-down price to $357,644.
With $500 or $1,250 a month of other debt
On $120,000, $500 a month of other debt changes nothing: 36% of your income is $3,600.00, and after the $500 there's still $3,100.00, more than the 28% housing limit of $2,800.00. The prices above still apply. The 36% limit only starts to bind once other debts pass $800 a month. With $1,250 a month of other debt, it leaves $2,350.00 for housing:
| Example rate | 5% down | 10% down | 20% down |
|---|---|---|---|
| 6% | $321,956 | $337,806 | $397,250 |
| 6.5% | $308,031 | $323,278 | $379,427 |
| 7% | $294,990 | $309,668 | $362,792 |
| 7.5% | $282,775 | $296,912 | $347,256 |
How it's worked out
H is the lower of 28% of monthly income and 36% minus other debts, d the down payment share, k = i ÷ (1 − (1 + i)^−360) the monthly payment per dollar borrowed at monthly rate i, t the property tax rate ÷ 12, and PMI = (1 − d) × 0.5% ÷ 12 when you put down less than 20%.
Assumptions you can change in the calculator above: 30-year fixed loan, 0.89% property tax (the US median tax paid ÷ median home value, Census ACS 2024), $1,800 a year insurance, 0.5% a year PMI under 20% down, no HOA. Rates are examples, not today's rates.
Limits
- 28/36 is a cautious guide, not a lender's limit. Fannie Mae allows total debt up to 36% on manually underwritten loans, and up to 45% or 50% in some cases, so you may be approved for more than this.
- It uses gross income, so it doesn't see taxes, childcare or savings goals. A comfortable payment may be lower.
- Property tax and insurance vary widely. Try your state's rate from the mortgage calculator by state.
Other salaries: $40k · $50k · $60k · $70k · $80k · $90k · $100k · $150k · $200k. Know the loan size instead? See the income needed for a $400k mortgage.
Sources
- CFPB: What is a debt-to-income ratio?
- Fannie Mae Selling Guide B3-6-02: debt-to-income ratios (36% maximum for manually underwritten loans, up to 45% or 50% in some cases)
- CFPB: What is private mortgage insurance?
- US Census Bureau, American Community Survey 2024 1-year estimates, table B25077: median value of owner-occupied homes
- US Census Bureau, American Community Survey 2024 1-year estimates, table B25103: median real estate taxes paid
This is an estimate for planning. A lender's pre-approval uses your credit, the loan program and local costs. It isn't financial advice.