Barrons Independent


How Much House Can I Afford With A $120,000 Salary Per Year?

It's not easy to justify which kind of house you can buy if you are earning $120,000 per year because many individuals make $120,000 per year, but it depends on their monthly expenses.

How Much House Can I Afford With A $120,000 Salary Per Year?

Morgan Barrons

Nov 10, 2023

It's not easy to justify which kind of house you can buy if you are earning $120,000 per year because many individuals make $120,000 per year, but it depends on their monthly expenses. However, you earn $10000 per month, which is quite good, and if your expenses are no more than 36% of your total income, then you can own a beautiful house in a decent location.

Breaking Down A $120,000 Salary

The simple method to break down your salary is called the 28/36 rule because if you earn $120,000 annually, your monthly salary will be $10,000, and 28% of your monthly salary is $2,800. Now, you must cover your monthly home expenses under 28% of your monthly salary; otherwise, your debt and other costs will stay the same from 36% of your gross monthly income. If you follow this fantastic rule, you are eligible for any loan and will also get your net pay. The net pay is when you earn $10,000 per month, so after paying on all expenses, the remaining money is called net pay.

Evaluating Your Financial Health

There are several ways to evaluate your financial health, like constantly reviewing your budget before buying a house. Remember that your monthly expenses will stay the same as your monthly salary, and make sure you spend less than you earn. If you save a good and healthy budget for buying a home, it will be good for you because if you make aeries to get lower interest rates, and otherwise, if you save a quality budget, then your credit scores will also increase. Before buying a home, it's best to review your budget and financial health; otherwise, permanently save your money for buying a house and having good financial health after purchasing a house.

The 30% Rule In Housing Affordability

The 30% rule is most important in housing affordability because, according to this rule, never spend more than 30% of your monthly income on rants. If you follow this rule, you will be able to save more money and make your financial health more healthy. There are several factors, like never spending more than you earn, your expenses, your life goal, location for buying a house, etc. Always keep your costs under 30% of your gross salary, which will help you save more money.

Understanding Mortgage Pre-Approval On A Higher Income

Pre-approval is the most common way, and it's essential because applying for pre-approval before buying a house ensures that you are a serious buyer. Applying for pre-approval helps you to determine your monthly income, your financial condition, and how much interest rate you can afford. If you find some incredible lenders and apply pre-approval with them, you will get a low-interest rate on a mortgage or interest rate. Otherwise, it will also show you serious buyers, and if your monthly income is good and you have low expenses, then you should go for pre-approval.

Exploring Mortgage And Interest Rate Options

There are two common types of mortgage and you will get different interest on both of these types.

Fixed mortgage:

According to fixed mortgages, you have to pay a higher amount before buying a house, but the benefit of paying a higher amount before purchasing a house is that you will get low-interest rates. When you pay a higher amount, you will get a fixed interest rate for 30 years or maybe for a lifetime, and your interest rate will always remain the same if the house market price increases.

Adjustable mortgage:

According to adjustable mortgages, you must pay a lower amount before purchasing a home, but you will have to pay higher interest rates after buying a home. Otherwise, the interest rates will change every six months.

Maximizing Your Down Payment

With a good monthly salary, you can save more for a down payment, and it's perfect to maximize your down payment. Always remember if you pay a higher down payment before purchasing a home, you will get lower interest rates, but if you spend a higher down payment before purchasing a home, you have to pay a higher interest rate after buying a home. Otherwise, if you have an excellent monthly income but expenses are high, reduce your expenses and save your money for the down payment. A down payment is 20% of the house's total price.

The Impact Of Credit On Your Home Buying Power

There is a significant impact of credit scores on your buying power because credit scores represent your financial condition. If you have a higher credit score, you will have to pay low interest rates, and if you have a low credit score, there are two situations: you will get a high interest rate or be disqualified for a loan. If you have a good gross income, then always keep in mind to reduce your expenses, save your money, and ensure your credit scores will be high. If you have a low score, you can apply for another program like FHA in which you will get a loan with a low score like 580.

Future-Proofing Your Home Purchase

Investor and home buyers always go for long-term home purchasing because if you have a good income with low expenses, you should go with long-term purchasing. However, with a good income, you can buy a home in a good location, increasing your house price after some years. Always keep in mind that buying a home in a good location is beneficial because, in the long term, you may get low-interest rates. However, the house's resale value will increase with time, and you can sell the house at a high price if you want.

Additional Costs For High-Income Buyers

There are several costs for all home buyers, like maintenance, taxes, etc., but for high-income buyers, there are some different additional costs. The high-income buyer should pay more property taxes or high-interest rates and have a well-maintained luxury lifestyle. The high-income buyer always goes for the best house in the best location, and the maintenance cost is much higher because high-income buyers must maintain the house for luxury lift style and higher resale value.

Lifestyle And Real Estate Investment

The lifestyle matters the most because if someone has a high income per year, that person will ensure which house and location is best according to his lifestyle. High-income investors always invest money in real estate for future planning because they have a high income and want a luxurious lifestyle. They buy a beautiful house in a good location to maintain their luxury lifestyle and for home resale value. Somehow, they always make sure that the house's resale always rises, and after a couple of years, they get a benefit that is the biggest reason high-income individuals invest money in real estate.

Planning For The Future

If you earn $120,000 per year, you can afford a good house in a good location. However, you must reduce your monthly expenses to buy a good home, and it’s the best investment for the future because if you buy a home in a good location and always maintain your home, then the resale value of the home will increase according to property prices. It will help you secure your future because when you have a good house in an incredible location, you can quickly sell the house at a higher price after some years. Always remember, if you earn a handsome amount per year, then always reduce your expenses before buying a house and ensure you will get low-interest rates. And for that, keep your credit score high and pay a higher down payment before purchasing a house.


If someone earns a good amount per year, like $120,000 per year, that person can buy a good house in the best location. For purchasing a home, several factors must be followed, like reducing monthly expenses, always trying to save money, paying higher down payments, going with fixed mortgages, always keeping your credit scores high, etc. You must follow all these factors to buy a home in a good location according to your lifestyle and must keep that house well-maintained for resale value. Before buying, always calculate your budget according to the 28/36 rule. It will help you know your extra expenses and know that you must save your money by reducing additional expenses.

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