What Home Price Can I Afford With a $100k Salary?

Are you looking to buy a home on a $100,000 income? Qualifying for a mortgage should be straightforward if you have good credit and a modest down payment. But what price property will you qualify for?

Based on our general assumptions outlined at the end of this article, a borrower with a $100k income could afford a home priced up to $378,000. However, your actual figure may be higher or lower. We'll explain why and suggest some ways to maximize your purchasing power.

How Much Home Can I Afford With a $100k Salary?

Your income plays a primary role in how much you qualify for, but it isn't the only factor. Two buyers, each with a $100k income, could be shopping in drastically different price ranges depending on the rest of their financial profile.

Some of the considerations that could affect how much home you can afford with a $100k salary include:

• Lender guidelines on the percentage of income you can spend on housing

• Other outstanding debt payments

• Your interest rate

• The size of your down payment

Understanding Your Debt-to-Income (DTI) Ratio

Lenders set limits on the amount borrowers can spend on mortgages and related housing expenses to prevent borrowers from purchasing more than they can afford.

This figure is your front-end debt-to-income (DTI) ratio, sometimes called your housing DTI, and includes your monthly mortgage payment, applicable taxes, insurance premiums, and any home or condo association dues.

Most conventional lenders will let you have a front-end DTI as high as 36%. With an annual income of $100,000, you make $8,333 per month. Your approximate maximum housing expense is $3,000 per month (36%).

The amount of home this gets you depends on your interest rate and the size of your down payment.

However, let's assume that you're making a 5% down payment and qualify for an interest rate of 7.222% – the average 30-year conventional rate per the Mortgage Research Center rate tracker at the time of writing. This would translate into a maximum purchase price of around $378,000.

But even with those terms, that number isn't concrete. First, we need to consider how other existing debts could reduce the size of the monthly payment that you're eligible for.

How Other Debts Impact Your Purchasing Power

In addition to a front-end DTI of 36%, most conventional lenders have a back-end (total) DTI limit of 45%. Your total DTI measures all your monthly debts, including your proposed housing expenses. Lenders may reduce your borrowing power if you have too much in other payments.

For example, a $100k income equates to $8,333 per month. We've established that this income level supports a monthly housing expense as high as $3,000 (36%). With a back-end DTI of 45%, your total expenses could add up to $3,750.

Here, you could have up to $750 in monthly debts – things like car payments, credit card minimums, and student loans – and still be eligible for a $3,000 monthly mortgage.

But what if your other expenses are higher? Here are a few examples of how having more debt could impact the size of the mortgage you qualify for:

*Estimate based on a sample interest rate of 7.222%, a 5% down payment, and mortgage cost inclusive of escrowed taxes and insurance.

As you can see, based on a $100k salary and standard conventional guidelines, an increase in other payments above $750 per month directly decreases the mortgage payment you're eligible for.

In this example, a prospective buyer with $2,000 in other payments – which today could easily be a household with two auto loans and a little bit of credit card debt – would see their purchasing power drastically reduced to nearly $200k.

If you’re trying to buy as much home as possible on a $100k income, you may want to look into ways to consolidate and reduce your monthly payments. Work to eliminate some of the accounts before moving forward with your property purchase.

Get a personalized homebuying analysis from a lender. Start here.

Lower Interest Rates Help You Afford More Home

The interest rate you qualify for is key in determining how much home you can afford. A lower rate means you'll spend less on interest each month and be able to qualify for a larger principal loan balance on the same $100k salary.

As we covered above, at the current average interest rate of 7.222%, a borrower with $100k in income and other monthly debts no higher than $750 could expect to afford a home price of around $378,000, assuming a 5% down payment.

But the average rate is just that: average. Well-qualified buyers will likely be eligible for lower rates. At the same time, those with a sub-par credit score or other financial issues could face much higher interest costs.

To put things into perspective, here is a chart showing how various interest rates could affect the home price you’re able to afford based on a monthly housing expense of $3,000 and a 5% down payment:

In some cases, reducing your interest rate by half a percent could increase your purchasing power by $20,000 or more. Some practical ways that you could reduce your rate include:

• Shopping around and comparing quotes from at least three lenders

• Purchasing lender discount points (typically costing 1% of your loan balance in exchange for a roughly 0.25% rate reduction)

• Improving your credit score, which could be as simple as correcting any erroneous entries

Expand Your Price Range With a Larger Down Payment

So far, we’ve been basing our calculations on a down payment of 5% of the home’s value. On our estimate of a $378,000 purchase price, this would equate to just under $19,000.

But putting more money down doesn’t just increase your purchasing power – it can also result in lower interest rates and cheaper private mortgage insurance (PMI) premiums. With a 20% down payment PMI isn’t required.

So what price home can you get on a $100k salary by putting more down? Here's an idea of what you might expect based on a 10%, 15%, or 20% down payment:

In this example, putting 20% down instead of 10% increases buying power by nearly $60,000. In practice, affordability could be even higher.

We've used a steady interest rate of 7.222% to keep things consistent. Typically, though, the higher your down payment, the lower your interest rate.

Say, for example, you plan to put down 20% and can secure an interest rate of 6.5%. By combining a lower interest rate with a higher down payment, your purchasing power could be as much as $488,000 (with $97,600 down) – just short of a half-million dollar home.

Discover What Home Price You Qualify for With a $100k Income

While our base calculations estimate that someone with $100k income could purchase a home priced as high as $378,000, you've seen how other factors could significantly impact that figure. Having too much additional debt or a high interest rate could shrink your purchasing power.

On the other hand, well-qualified buyers with a larger down payment may be able to afford a property priced far higher. Use our mortgage calculators to see what you may be able to afford based on your unique situation.

If you want to find out precisely how much of a loan and what price home you qualify for, check today's current mortgage rates and apply with a competitive lender who can help you review your options.

Get started here.

Methodology

Unless otherwise noted, all estimates in this article are based on a 30-year conventional mortgage at an example 7.222% interest and a 5% down payment. Total monthly payments include principal, interest, PMI, taxes, and insurance. Taxes are assumed to be 1% of the purchase price, and homeowners insurance at $125 monthly premium. Mortgage insurance costs are based on MGIC rates for a credit score of 760. No closing costs are included in the loan.