How Much House Can I Afford With a 100K Salary?

Once you’ve broken through the six-figure ceiling, you likely have more room in your budget. So it’s natural to start wondering, “How much house can I afford with a 100K salary?”

The answer might be more than you expect, especially if you know how to shuffle your budget around to make even more room for monthly mortgage payments. We’ll walk you through your options, plus show you how to stretch your budget even further with down payment assistance.

Get more house on $100K a year with down payment assistance

Making a larger down payment impacts how much house you can afford in a big way. The good news is that there are programs available to help you get there sooner.

Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.

How much house can I afford with a 100K salary?

Depending on your specific financial situation, you can likely afford a house that costs between $241,300 and $667,500 on a $100K salary. Yes, this is a broad range of home prices, but that’s because there are a handful of factors that impact how much house you can buy, and tweaking any of them changes your house budget.

We’ll go over those other factors in a minute. But first, here is a broad overview.

Numbers based on a 30-year standard mortgage and no additional debts.

Where you land on this spectrum of home affordability is based on these factors:

• Debt-to-income ratio
• Credit score
• Down payment amount
• Down payment assistance

Adjusting any of these factors will increase or decrease your home purchase budget. However, some of these factors have a bigger impact on your home purchase budget than others. 

How down payment affects the amount of house you can afford

Increasing your down payment is one of the most efficient ways to boost your home purchase budget. Increasing your down payment not only decreases how much money you must borrow, it can also decrease your mortgage interest rate. This means you get an extra boost to your budget just by increasing your down payment.

However, it’s worth noting that not every dollar you invest in your down payment gives you the same return. 

Your interest rate decreases at 5%, 10%, and 20% of the purchase price. So increasing your down payment from 3% to 4% won’t give you as much benefit as increasing your down payment from 3% to 5%, and so on for the 10% and 20% marks.

Therefore, it’s a good idea to strategically use any down payment money you’ve saved (including making an initial deposit to strengthen your offer).

For example, it might be wiser to make a 5% down payment, and use additional funds for house repairs or improvements, rather than making a 6% down payment. Your mortgage lender can help you think through the nuances based on your specific situation.

Read more: Does a higher down payment make your offer stronger?

Affording more house with down payment assistance

Governments at every level — federal, state, and local — offer down payment assistance programs. Private organizations, corporations, and mortgage lenders also sponsor down payment assistance programs. The bottom line is there’s a lot more down payment assistance out there than most people realize.

Additionally, you can combine funds you’ve saved for a down payment with money you get from down payment assistance. Many down payment assistance programs can also be combined, so you could potentially get thousands or tens of thousands of dollars to put toward the purchase of a home. 

Down payment programs usually offer money through one of four methods: grants, down payment assistance loans, deferred repayment loans, and tax credits.

Grants

Down payment assistance grants give you a lump sum of money for your down payment which you don’t need to pay back. Since the money doesn’t have to be repaid, grants are the best type of down payment assistance for homebuyers.

However, grants tend to be less common than other types of down payment assistance, and down payment assistance grants can usually only be dispensed to a limited number of buyers because grant funds eventually get exhausted.

Down payment assistance loans

Down payment assistance loans are loans structured specifically to help buyers make a larger down payment with their existing assets. Down payment assistance loans often feature lower interest rates or modified repayment timelines to make it easier to repay this secondary loan while also making your regular mortgage payments.

Some down payment assistance loans even have terms that allow you to repay only a portion of the loan as long as you meet certain criteria. For example, some down payment assistance loans only need to be partially repaid, as long as you live in the home for at least five years. 

Deferred repayment loans

Deferred repayment loans are similar to standard down payment assistance loans, but you don’t have to start repaying them right away. 

Some deferred repayment loans don’t require you to make payments on the secondary, down payment loan until you’ve been making payments on your mortgage for a certain number of years, or until you have a certain amount of equity in the house. 

There are other methods of deferring repayment, but they all come down to giving you some financial breathing room before you need to start paying. 

Additionally, some deferred repayment loans also have forgiveness or reduction terms, where the loan effectively turns into a grant or only needs to be partially repaid if you meet certain criteria, such as living in the house for a specific number of years.

Tax credits

Tax credits are only offered through federal down payment assistance programs, such as Biden’s $15,000 First-Time Homebuyer Tax Credit (which is still pending legislation and not currently available). 

Tax credits are a unique sort of down payment assistance in that they do not give you money when you purchase the home. Instead, tax credits reduce your tax burden for the year in which you purchase the house. 

Down payment assistance tax credits are also often refundable, which means you get the tax credit money back as a tax return if the credit reduces your tax bill below zero.

Tax credits can be a little trickier to work with from a financial perspective, because you won’t get any money until you file your taxes for the year. However, there’s absolutely no harm in taking a down payment assistance tax credit if you qualify for one.

Learn more about your down payment assistance options.

Buying a house with 100K salary: Factoring in debts

A larger down payment can make your offer stronger, and it helps you get a better mortgage loan. However, your budget and existing debts also play a big factor in how much house you can afford on a $100K salary. 

The 28/36 rule is a relatively simple way to work out your home purchase budget while factoring in any existing debts, such as car, credit card, or student loan debt.

The 28/36 rule

The 28/36 rule is a budgeting strategy recommended by many personal finance experts. The strategy is to allocate no more than 28% of your monthly income to housing expenses and no more than 36% to debt payments, including your mortgage as well as any other debts.

A $100K salary is $8,333 per month in gross monthly income. If you were to follow the 28/36 rule exactly, you would have $2,333 to spend on mortgage payments and $667 for other debts, for a total of $3,000 each month allocated to paying down debt.

Now, this rule can be flexed a bit. Some lenders will extend mortgage loans with monthly payments that take up to 50% of total monthly income. However, just because you can pay this much on your mortgage doesn’t necessarily mean you should.

Yes, allocating more of your monthly income to mortgage payments will increase your home purchase budget. Just be sure you’re not putting yourself in a tough financial position by taking on too much debt.

Two examples of buying a house with debt

If you are going to go outside the bounds of the 28/36 rule, it’s critical to factor in your other debt. If you allocate 50% of your monthly income to your mortgage payment, but have other debts, you might end up paying 60% or 70% of your income to debts. That’s a lot of financial stress.

Here are two examples of how it might look to stretch the 28/36 rule within more reasonable bounds.

The average student loan payment is $267 each month. If you wanted to mostly follow the 28/36 rule, but still maximize your home purchase budget, you could actually allocate more than 28% of your monthly income to your house payment and still keep your total debt payments to 36% of your monthly income.

The average used car payment is $526 per month. However, even with this larger debt payment, you could still potentially buy a house while keeping your budget in the ballpark of the 28/36 rule.

What else to consider when buying a home on a 100K salary

Most of your home purchase costs get covered with your monthly payments. This is convenient. However, you need to know what goes into your monthly payments, so you account for them accordingly. 

Also, some of these factors (such as property taxes) change over time, so you need the most recent information when you run the numbers.

Interest rates

Interest rates have the biggest impact on your monthly payments. The interest rate is how much the bank charges you to borrow money.

Interest rates change almost daily, and even a small increase in interest rates can change your monthly payments by hundreds of dollars. However, remember that making a larger down payment can get you a lower interest rate, so there is a way to manage this expense to a degree.

Credit score

Your credit score can affect what sort of interest rates you get. Generally, a higher credit score will net you a lower interest rate.

Additionally, most down payment assistance programs have credit score requirements. The most common credit score range to qualify for down payment assistance is between 600 and 640. 

Property taxes

Property taxes do impact your monthly mortgage payments. However, property taxes in most states are below 5% and aren’t exactly game changers.

Since your property taxes get paid when you make your mortgage payments, the best thing to do is find out what your property tax rate will be and factor that in when you do your budget calculations. 

Homeowner’s insurance

Homeowner’s insurance is almost always required by the lender, and it’s a good idea regardless. The thing about homeowner’s insurance is that the cost varies widely from location to location. Homeowner’s insurance can be notably more expensive in places which are known to have natural disasters.

The best way to manage home insurance costs is to get quotes from multiple insurance companies before your home sale closes. That way you can choose the most affordable insurance, rather than just going with the insurance company your lender prefers.

Private Mortgage Insurance (PMI)

Private Mortgage Insurance (PMI) is required if you make less than a 20% down payment on your house. However, PMI can be removed once you have 20% equity in your home, and most PMI automatically cancels once you reach 22% equity. 

It may not be a permanent expense, but PMI usually costs a few hundred dollars a month. So be sure to account for it if you think you’ll be using a conventional loan with less than 20% down.

Homeowner’s Association (HOA) fees

Homeowner’s Association (HOA) fees can be a bit steep, and homeowner’s associations often have rules for how your house can look, among other regulations. Many people are fine with this, as HOAs do offer benefits.

However, if you’d rather not have the expense of an HOA, tell your real estate agent not to consider houses that are in HOA areas, and you can avoid this cost altogether. 

Read more: How much do I need to make to buy a 300K house? 

Maximize your budget with down payment assistance

Even though a $100K salary is ample enough for most people to purchase a home, down payment assistance makes a big difference in how much house you can afford, as well as on your long-term finances.

Making a large enough down payment to reduce your interest rate by one percent will save you thousands over the life of your home loan. Unfortunately, it can be nearly impossible to get information about all the down payment assistance available.

Stairs Financial has the answer.

Stairs brings all of the information about down payment assistance (DPA) together in one place. Stairs connects you to qualified lenders who work with DPA programs, then lets you compare all your options side-by-side.

Learn more.