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An annual salary of $130,000 puts you far above the national median household income, which according to the most recent Census data is $74,580. However, high mortgage rates are putting a damper on affordability, and your homebuying mileage will vary greatly based on the cost of living and home-price range in your desired area. Read on to learn more about how much house you can afford with a $130K salary — without stretching yourself too thin.
The 28/36 rule
When you’re trying to figure out how much house you can afford, the 28/36 rule is a good place to start. This rule of thumb, used by many lenders, recommends that you spend no more than 28 percent of your income on housing costs, and no more than 36 percent on your total debt payments. That includes housing, as well as car payments, credit card bills, student loans and any other debts you may have.
Let’s see how this rule applies to a $130,000 salary:
- $130K annually breaks down to $10,833 per month
- 28 percent of $10,833 is $3,033, ideally the maximum you’d spend on housing costs per month
- Bankrate’s mortgage calculator shows that, with a 20 percent down payment on a 30-year loan at an interest rate of 7 percent, a monthly payment of $3,033 could land you a house costing up to $475,000. The monthly principal and interest payments in this scenario come to $2,528, which gives you about $500 of leeway to account for property taxes, homeowners insurance premiums and HOA fees, which all vary based on your location.
Don’t forget that, on top of these monthly payments, you’ll also need substantial savings: enough to cover the down payment and closing costs for your $475,000 house upfront, plus regular maintenance and upkeep once you own it. And make sure your other debt, plus these housing costs, don’t exceed that 36 percent mark.
How much house can you afford?
Applying the 28/36 rule, a $130,000 annual earner should keep housing costs below $3,033. However, there are many other factors besides just your income that shape how much house you can comfortably afford.
- Credit score: A strong credit score is important when you apply for a home loan. Lenders use credit scores to evaluate how risky of a borrower you are, so you’ll get a more competitive rate with a better score. A lower interest rate can lower your monthly payment significantly —for example, the difference between a $320,000 loan at 7 percent and the same loan at 6 percent is $209 a month in principal and interest.
- Debt-to-income ratio: You want your DTI, the percentage of your income that goes towards debt payments, to be as low as possible when you apply for a mortgage. Ideally, lenders want it to be under 36 percent (the second number in the 28/36 rule), though some lenders may accept slightly higher DTIs.
- Down payment amount: Conventional wisdom recommends a 20 percent down payment with a home purchase, and that is the threshold that will save you from having to pay PMI, or private mortgage insurance. For a $475,000 purchase, 20 percent comes to a hefty $95,000. However, you can take out a mortgage with much less down, especially if your credit score is high. Just keep in mind that doing so will result in a larger loan with more principal and interest to be paid back over time.
- Savings: Relatedly, how big is your savings account? Do you have enough to cover the down payment, plus the ongoing costs of homeownership and a rainy day fund in case of emergencies? Lenders will want to know.
- Housing market trends: Finally, your housing budget will go a lot further in some markets than others. Some areas might be prohibitively expensive for even your high $130,000 salary, and some will afford you a modest condo rather than a spacious single-family home.
Home financing options
There are many ways to finance a home purchase. But first, get preapproved for a mortgage. Doing so will give you a solid estimate of what your budget should be, and it’s also an important step towards showing sellers that you’re serious.
Down payment and credit score requirements vary, so when you’re ready to buy, it’s important to shop around and find the best mortgage loan for you. Common options include:
- Conventional: Qualified borrowers can secure this most popular home loan type with as little as 3 percent down and a minimum credit score of 620.
- FHA: Designed to be accessible, FHA loans can be had for as little as 3.5 percent down with a 580 credit score, if you qualify.
- VA: If you’re an active military service member, surviving spouse or veteran, you might be eligible for a VA loan.
- USDA: USDA loans are designed for low- and moderate-income borrowers in qualifying rural areas — with your high income, it’s unlikely that you’d be eligible.
First-time home buyer programs
If you’re feeling daunted by the thought of a large down payment, you may qualify for a financial assistance program designed to help, especially if you’re a first-time homebuyer. These programs typically provide grants and low-interest or forgivable loans, but your high income may disqualify you.
Get started
Ready to start your homebuying journey? Your first step should be to find an experienced local real estate agent who can guide you to a smooth transaction. Ask for recommendations from friends and family and consult online reviews, then interview at least three candidates before you make a decision. The right agent can help you buy the best house possible on your $130,000 salary.
FAQs
The 28/36 rule
Is $130,000 a good household income? ›
Put another way, if you're making less than $43,350 in your household, you are probably considered a low-income family. If you're making between $43,350 and $130,000, you're considered middle class. If you're earning $130,000 and above, you're likely considered upper class.
Is $130k salary good? ›
$130,000 is the 75th percentile. Salaries above this are outliers. $143,000 is the 90th percentile.
How much house can I buy with 125k salary? ›
Using NAR's 25 percent metric, at the current mortgage rate (6.66 percent in late March), “buyers earning $125,000 a year can purchase a home up to $510,000 if they put 20 percent down,” Evangelou says. “However, if they put 10 percent down, they can afford to purchase a home for up to $450,000.”
How much house can I afford with a 120k salary? ›
So, assuming you have enough to cover that down payment plus more left over for upkeep and emergencies — and also assuming your other monthly debts don't take you over that 36 percent figure — you should be able to afford a home of $470,000 on your salary.
How much house can I afford with 130k? ›
28 percent of $10,833 is $3,033, ideally the maximum you'd spend on housing costs per month. Bankrate's mortgage calculator shows that, with a 20 percent down payment on a 30-year loan at an interest rate of 7 percent, a monthly payment of $3,033 could land you a house costing up to $475,000.
What percentage of Americans make $130000 a year? ›
The Associated Press, quoting figures released from the recent Census Bureau report, published an article last week revealing what the top-earning 20% of Americans make in income. They found that the top 20% of all Americans earn over $130,000 in income.
How much is 130k a year hourly? ›
How much is your salary? $130,000 yearly is how much per hour? If you make $130,000 per year, your hourly salary would be $62.50.
Is 135k a high salary? ›
It's not at all a bad salary, it's actually a great salary but because of how many places do pay this well, places shouldn't have sky-high expectations of working six day weeks or constant crunch.
How common is 100k salary? ›
Over one-third of American families earn $100,000 or more
The U.S. Census Bureau found that 37.1% of U.S. households earned at least $100,000 in 2022. Here's a more detailed breakdown of six-figure income brackets and the percentage of households in each one: $100,000 to $149,999: 16.9% $150,000 to $199,999: 8.7%
Let's apply the 28/36 rule to your $140K salary to see how much you should be spending on housing costs: $140,000 / 12 = $11,667 (gross monthly income) $11,667 x 0.28 = $3,267 (the most you should spend on housing costs each month) $11,667 x 0.36 = $4,200 (the most you should spend on total debt each month)
Can I buy a 300k house with 100k salary? ›
Using this calculation, a person making $100k annually could purchase a home between $3-$400k purchase price. The 28/36 rule: Most lenders want a borrower's total debt load to be below 36% of their pre-tax income.
How much house can I afford with a 150k salary? ›
$150k income should be able get you a $700k mortgage with that $350k down on a $1M property. There are a handful of 3bd/2ba homes in Pasadena for less than $1M. A $700k mortgage with $300k down on a $1M property will cost you about $3k in mortgage and interest with a fixed 30 year.
What income is needed for a 400k mortgage? ›
What income is required for a 400k mortgage? To afford a $400,000 house, borrowers need $55,600 in cash to put 10 percent down. With a 30-year mortgage, your monthly income should be at least $8200 and your monthly payments on existing debt should not exceed $981.
How much house can I afford if I make $110 000 a year? ›
If you earn $110,000 in gross income, that's approximately $9,166 each month. Applying the rule, this means your monthly housing payment should not exceed $2,566, which is 28 percent of your gross monthly income.
Can a family live on 100k a year? ›
For most individuals and small families, the answer to “Is $100,000 a good salary?” is a resounding “yes.” Cost of living and family size can affect how far $100,000 will go, but generally speaking, you can live comfortably on $100,000 a year.
What is considered a good household income? ›
“Good income is relative to the average household income in America, which is $78,000 right now.” Real median household income in the U.S. was $78,250 in 2019 and fell to $74,580 in 2022, according to the Census Bureau. "You're not a bad person. You're not a horrible income earner.
Is a family income of 350k good? ›
In a heartland or southern city, earning $350,000 a year is considered rich. After $19,000 in 401(k) retirement contributions, you're left with $331,000 in gross income, or roughly $231,700 in after tax income using a 30% effective tax rate. In 2024, the maximum 401(k) employee contribution is $23,000 per person.
What household income is considered rich? ›
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
What is considered high income family salary? ›
In 2020, according to Pew Research Center analysis, the median for upper income households was around $220,000 and the median for middle income households was slightly above $90,000.
