The Short Answer
On a $120,000 salary, the 28/36 rule caps your total housing payment at about $2,800 a month. At Freddie Mac's average 30-year fixed rate of 7.24% (week of October 29, 2026), with 10% down and no other monthly debts, that buys a home of about $358,000.
Here is the maximum price for the most common down payment choices, using the national average property tax rate of 0.89%:
| Loan | Max home price | Down payment | Closing costs* | Cash needed |
|---|---|---|---|---|
| FHA, 3.5% down | $334,000 | $11,690 | $10,020 | $21,710 |
| Conventional, 5% down | $342,000 | $17,100 | $10,260 | $27,360 |
| Conventional, 10% down | $358,000 | $35,800 | $10,740 | $46,540 |
| Conventional, 20% down | $418,000 | $83,600 | $12,540 | $96,140 |
Each option comes with a total monthly payment of about $2,800. *Closing costs estimated at 3% of the price; they typically run 2% to 5%.
For context, $120,000 is well above the median U.S. household income, which was $87,460 in 2025 according to the Census Bureau. The median home listed for sale in the U.S. was priced at $419,250 in September 2026 (Realtor.com); under the same assumptions it takes about $141,000 a year to afford it. Our state-by-state affordability report shows the income needed everywhere.
How the Math Works
Lenders look at two ratios, both based on gross (pre-tax) income:
- Front-end ratio (28%): housing costs (principal, interest, property taxes, homeowners insurance and mortgage insurance) should stay under 28% of gross monthly income. On $120,000, or $10,000 a month, that is $2,800.
- Back-end ratio (36%): housing plus every other debt payment (car loans, student loans, credit card minimums) should stay under 36%, or $3,600 a month.
Here is how the payment breaks down on a $358,000 home with 10% down:
| Cost | Per month |
|---|---|
| Principal and interest | $2,195 ($322,000 loan at 7.24%) |
| Property taxes | $266 (0.89% a year) |
| Homeowners insurance | $179 (0.6% a year) |
| Private mortgage insurance | $161 (0.6% of the loan a year) |
| Total | $2,801 |
Principal and interest take about 78% of the payment; taxes, insurance and PMI take the rest. The home affordability calculator explains the 28/36 rule in detail.
Your Other Debts: The $800 Threshold
The 36% rule leaves room for $800 a month of other debt payments ($3,600 minus $2,800) before it starts to shrink your housing budget. Above that line, every extra $100 of monthly debt lowers the home you can afford by about $13,000.
| Other monthly debts | Max housing payment | Max home price (10% down) |
|---|---|---|
| $0 | $2,800 | $358,000 |
| $600 | $2,800 | $358,000 |
| $900 | $2,700 | $345,000 |
| $1,200 | $2,400 | $307,000 |
| $1,500 | $2,100 | $268,000 |
At this income the threshold is larger, but two car payments or a large student loan can still cross it. Paying down a car loan or a card balance before you apply can do more for your budget than a bigger down payment.
Should You Put 20% Down?
At this income a 20% down payment is more within reach, and it changes the math: the same $2,800 payment supports about $418,000 with 20% down instead of $358,000 with 10% down, because there is no PMI and the loan is smaller. The cost is cash: about $96,140 at closing instead of $46,540.
With 10% down, private mortgage insurance adds about $1,932 a year until you reach 20% equity. If you expect to stay for years, a smaller loan also means less interest; compare scenarios with the mortgage payment calculator.
State by State: Where $120K Reaches the Typical Listing
We compared the maximum price on a $120,000 salary (10% down, no other debt, each state's own property tax rate) with the median listing price in every state in September 2026.
The budget reaches the median listing in 16 of the 50 states. It falls short by the most in Hawaii, California and Massachusetts, by more than $340,000.
| State | Median listing price | Property tax rate | Max price on $120K | Difference |
|---|---|---|---|---|
| West Virginia | $259,997 | 0.52% | $373,000 | +$113,000 |
| Louisiana | $270,000 | 0.53% | $372,000 | +$102,000 |
| Mississippi | $292,250 | 0.65% | $367,000 | +$75,000 |
| Oklahoma | $296,643 | 0.75% | $363,000 | +$66,000 |
| Indiana | $299,000 | 0.74% | $364,000 | +$65,000 |
| Ohio | $284,000 | 1.22% | $346,000 | +$62,000 |
| Missouri | $300,000 | 0.79% | $362,000 | +$62,000 |
| Iowa | $284,900 | 1.29% | $343,000 | +$58,000 |
| Kentucky | $307,775 | 0.71% | $365,000 | +$57,000 |
| Arkansas | $318,743 | 0.52% | $373,000 | +$54,000 |
| Alabama | $325,000 | 0.38% | $378,000 | +$53,000 |
| Kansas | $296,000 | 1.25% | $345,000 | +$49,000 |
| Michigan | $299,900 | 1.18% | $347,000 | +$47,000 |
| Pennsylvania | $309,000 | 1.16% | $348,000 | +$39,000 |
| South Carolina | $359,945 | 0.45% | $376,000 | +$16,000 |
| Nebraska | $335,000 | 1.42% | $339,000 | +$4,000 |
| Illinois | $324,950 | 1.92% | $322,000 | −$3,000 |
| Texas | $355,765 | 1.31% | $342,000 | −$13,000 |
| North Dakota | $370,700 | 0.96% | $355,000 | −$15,000 |
| South Dakota | $375,000 | 1.02% | $353,000 | −$22,000 |
| Georgia | $389,750 | 0.74% | $363,000 | −$26,000 |
| Minnesota | $379,900 | 1.02% | $353,000 | −$27,000 |
| North Carolina | $400,000 | 0.61% | $369,000 | −$31,000 |
| New Mexico | $399,475 | 0.63% | $368,000 | −$32,000 |
| Wisconsin | $389,900 | 1.25% | $345,000 | −$45,000 |
| Florida | $409,950 | 0.75% | $363,000 | −$47,000 |
| Tennessee | $429,450 | 0.45% | $376,000 | −$54,000 |
| Maryland | $425,000 | 0.95% | $356,000 | −$69,000 |
| Alaska | $435,000 | 1.06% | $352,000 | −$83,000 |
| Arizona | $459,900 | 0.43% | $376,000 | −$84,000 |
| Virginia | $455,953 | 0.71% | $365,000 | −$91,000 |
| Maine | $450,000 | 0.91% | $357,000 | −$93,000 |
| Nevada | $480,000 | 0.47% | $375,000 | −$105,000 |
| Delaware | $484,998 | 0.47% | $375,000 | −$110,000 |
| Wyoming | $496,500 | 0.57% | $370,000 | −$126,000 |
| Vermont | $499,450 | 1.42% | $339,000 | −$161,000 |
| Oregon | $550,000 | 0.78% | $362,000 | −$188,000 |
| Colorado | $564,000 | 0.49% | $374,000 | −$190,000 |
| Connecticut | $522,500 | 1.66% | $331,000 | −$192,000 |
| Utah | $579,000 | 0.49% | $374,000 | −$205,000 |
| Idaho | $593,000 | 0.43% | $376,000 | −$217,000 |
| Rhode Island | $569,900 | 1.07% | $351,000 | −$219,000 |
| New Jersey | $559,500 | 1.89% | $323,000 | −$236,000 |
| New Hampshire | $590,000 | 1.46% | $337,000 | −$253,000 |
| New York | $605,000 | 1.45% | $338,000 | −$267,000 |
| Montana | $635,000 | 0.69% | $366,000 | −$269,000 |
| Washington | $639,475 | 0.79% | $362,000 | −$278,000 |
| Hawaii | $732,450 | 0.27% | $383,000 | −$349,000 |
| California | $725,000 | 0.71% | $365,000 | −$360,000 |
| Massachusetts | $714,250 | 1.00% | $354,000 | −$361,000 |
With 20% down the budget rises by about $60,000, enough for the median listing in 27 states.
Median listing prices cover every home for sale, including large and luxury properties, so plenty of homes sell below the median in every state.
How Mortgage Rates Change Your Budget
Freddie Mac's average 30-year fixed rate was 7.24% in the week of October 29, 2026, compared with 6.17% a year earlier. On a $120,000 salary that difference costs about $32,000 of buying power:
| 30-year fixed rate | Max home price (10% down) |
|---|---|
| 6.00% | $395,000 |
| 6.17% (a year ago) | $390,000 |
| 6.50% | $379,000 |
| 7.24% (now) | $358,000 |
| 7.50% | $351,000 |
Each half-point move in rates shifts the budget by roughly $16,000. Mortgage rates follow longer-term Treasury yields rather than the Federal Reserve's rate directly.
Approved vs. Affordable
Lenders will often approve more than the 28/36 rule suggests: Fannie Mae's automated underwriting can accept total debt-to-income ratios up to 50%. At a 45% ratio with no other debt, a $120,000 salary could qualify for a home of about $575,000, with a housing payment of $4,500 a month.
That is 45% of gross pay and likely more than half of take-home pay. The 28/36 rule is not a legal limit, but it is a sensible ceiling for a budget that still works when the water heater breaks.
Smart Moves at This Income
- Leave room for the rest of your plan. A common guideline is to save about 15% of pre-tax income for retirement and to keep three to six months of expenses in an emergency fund; size yours with the emergency fund calculator.
- Mind the property tax rate. Taxes alone move the budget by about $61,000: roughly $383,000 at Hawaii's 0.27% effective rate versus $322,000 at Illinois's 1.92%. Within your area, compare counties and school districts.
- Shop for the rate. Rates differ from lender to lender; getting several quotes on the same day, and comparing any points you are asked to pay, is the simplest way to lower the payment.
- Budget for upkeep. A common rule of thumb is 1% to 2% of the home's value a year for maintenance and repairs, or $3,580 to $7,160 a year on a $358,000 home.
How We Calculated This
Maximum prices apply the 28/36 rule to gross income, with a 30-year fixed mortgage at 7.24%: Freddie Mac's Primary Mortgage Market Survey average for the week of October 29, 2026. Property taxes use each state's median real estate taxes paid divided by its median home value (U.S. Census Bureau, American Community Survey 2024); the national figure is 0.89%. Homeowners insurance is assumed at 0.6% of the price per year and private mortgage insurance at 0.6% of the loan per year on conventional loans with less than 20% down. FHA figures include HUD's 1.75% upfront premium (financed into the loan) and 0.55% annual premium. Closing costs are estimated at 3% of the price. Median listing prices are Realtor.com's for September 2026. Rates and prices come from FRED (Federal Reserve Bank of St. Louis), tax data from data.census.gov.
These are estimates for a buyer earning $120,000 with no HOA dues. Your insurance quote, credit score, local tax rate and lender will change the result, so run your own numbers in the home affordability calculator.
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