How Much House Can I Afford on $120,000 a Year?

The rule behind the number

Lenders size what you can afford with the 28/36 rule — the front-end and back-end halves of what's more formally called your DTI, or debt-to-income ratio. The front-end (28%) says total monthly housing costs should stay at or below 28% of your gross (pre-tax) income. The back-end (36%, many lenders stretch to 43%) says your total debts — housing plus everything else — should stay at or below that share. On $120,000, that's $10,000 gross a month, so the 28% housing ceiling is $2,800. Add a typical car payment and student loan on top of that ceiling and your DTI carrying that debt stays under the 36% ceiling, with room to spare — the two rules don't always agree, and the next section works out which one actually governs at $120,000.

The key thing first-time buyers miss: that $2,800 has to cover the whole payment — principal, interest, property taxes, homeowners insurance, and any PMI or HOA dues, together known as PITI (Principal, Interest, Taxes, Insurance) — not just principal and interest. That's why the affordable price is lower than a principal-and-interest-only calculation suggests.

What $120,000 buys, by down payment

A bigger down payment raises the price you can carry — partly because you're financing less, and partly because at 20% down you drop PMI, freeing room in the payment. The table starts at the actual program floors — 3% conventional, 3.5% FHA — not just 10% and 20%, because most first-time buyers don't start at either of those; on $120,000, the 20%-down figure itself is the largest dollar figure in this series, and also the one most likely already sitting in savings at this income level. At 6.58% over 30 years:

Prices solved so the full monthly payment equals 28% of gross income at 6.58% (week of July 23, 2026), with property tax at 1.1%/yr, insurance at 0.6%/yr, and PMI at 0.6%/yr of the loan when under 20% down (the 3.5% row uses FHA's own mortgage insurance instead — see below). Illustrative — your taxes, insurance, and rate will differ.

Where the monthly payment goes

On the $430,000 home (20% down) example, the $2,800 monthly payment breaks down roughly like this:

Taxes and insurance are illustrative rates applied to the price; real figures vary by county and property.

Which limit binds first: the 28% ceiling, or your debts?

The $2,800 figure above is what the 28% front-end rule alone allows. It is rarely the number that actually governs, because the 36% back-end rule counts your other debts against the same income. A representative first-time buyer's car payment plus student loan runs about $700/mo. On $120,000, the back-end ceiling is $3,600 — subtract that $700 of debt and only $2,800 is left for housing. Put plainly: your DTI carrying that debt stays under the 36% ceiling, with room to spare.

At $120,000, that same $700/mo of ordinary debt does not bind at all — of everyone in this series, this is the only salary where it doesn't touch your ceiling at all. $2,800 of back-end room comfortably covers the $2,800 front-end ceiling, and your DTI carrying both stays at about 35%, under the 36% line. The 28% figure above is your real number at $120,000 — average debt isn't the constraint at this income the way it is lower in this series. Confirm your own DTI, including any debts beyond the typical example, on the DTI calculator.

Is FHA effectively your only route in?

At the 3.5% FHA floor, entry to a $348,000 home on $120,000 takes about $12,000 down — a fraction of the 20%-down figure worked out above, where the same debt math doesn't touch your ceiling at all. FHA never gets mentioned on pages like this without its real cost also being named: an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan — about $5,874, financed into the loan rather than paid in cash — plus an annual MIP of about $154/mo at this loan size. With under 10% down, that annual MIP does not cancel at any equity threshold; it runs for the life of the loan unless you refinance out of it. Compare that to a conventional loan's PMI, which cancels automatically once you reach 78% loan-to-value. Whether that trade-off is worth it at $120,000 comes down to the back-end math below, where the debt rule doesn't touch your ceiling at all — model both loans on the FHA loan calculator and the FHA vs. conventional calculator.

For $120,000, the recommendation flips: with the back-end rule not binding here, a conventional 5%–10%-down loan is comfortably reachable, and its PMI — unlike FHA's MIP — cancels automatically once you cross 78% loan-to-value. FHA is usually the worse choice at this income unless your credit is thin enough that FHA's more forgiving 580+ score floor is the deciding factor.

Do you qualify for down payment assistance?

Programs like Fannie Mae's HomeReady, state first-time-buyer bond programs, and most local down-payment-assistance funds cap eligibility at a share of the area's median income (AMI) — commonly 80%. Nationally, HUD's FY2026 median family income is $106,800, putting that national benchmark near $85,440. At $120,000, you're well over that national benchmark, so these programs are unlikely to be available to you in most of the country. AMI-based assistance generally isn't the play at this income — the FHA and conventional paths worked out elsewhere on this page are the more realistic routes in. See the full program list in the down payment assistance guide.

How long would it take to save the down payment?

At a 10%-of-gross-income savings rate — $12,000/yr on $120,000 — here's how long each down payment takes to save from zero:

• 3.5% FHA ($12,000): about 1.0 year.
• 10% down ($37,000): about 3.1 years.
• 20% down ($86,000): about 7.2 years.

That ratio — roughly 7.2 years for 20% down at a 10%-of-gross savings rate — is actually the same across every salary in this series, because both the down payment and the savings rate scale with income. What differs is the absolute dollar amount: $86,000 on $120,000. That's the largest dollar figure in this series, and also the one most likely already sitting in savings at $120,000. 20% down is a near-term target here, not a multi-year plan — the FHA route above still exists at about 12 months, but the gap to full 20% down matters far less at this income than lower in this series. Model your own savings timeline on the down payment savings calculator.

What moves your number up or down

• Your other debts. A car payment or student loan eats into the 36% back-end limit, which can cap your price below the 28% housing rule — at $120,000, that back-end rule doesn't touch your ceiling at all. Paying debt down before applying raises your number.
• The interest rate. A lower rate stretches the same $2,800 budget across a bigger loan; a higher rate shrinks it. On $120,000, a single percentage point of rate moves the 20%-down max price by about $33,077 — a modest swing in dollar terms, but still the single biggest lever on this page at this income.
• Your credit score. A stronger score lowers both your rate and your PMI — on $120,000, moving from 10% down to 20% down avoids roughly $1,987/yr of PMI, the largest PMI cost in this series — reaching 20% down carries the most annual savings here. See the score you need.
• Local property taxes and insurance. High-tax counties and high-premium regions consume more of the payment, lowering the price you can carry.
• Your down payment. More down means less financed and, at 20%, no PMI — both raise your ceiling. On $120,000, that 20%-down figure is the largest dollar figure in this series, and also the one most likely already sitting in savings at this income level.