How Much Mortgage Can We Afford With a $100k Salary?

Understanding how much mortgage you can afford is a key step before buying a home. Affordability involves determining a monthly housing payment that comfortably integrates into your financial life without causing strain. While lenders assess your capacity to repay, your personal comfort level with monthly obligations is equally important. This helps ensure homeownership remains a source of stability.

Assessing Your Financial Health

Your personal financial situation determines how much mortgage you can afford. Lenders evaluate your gross income, which is your earnings before taxes. This pre-tax figure forms the basis for calculating your borrowing capacity. Stable employment and a consistent income history are also favorable factors.

Existing debts significantly influence mortgage affordability. Lenders analyze recurring monthly debt payments, including credit cards, car loans, and student loans. Even minimum payments on credit cards are factored in, as they reduce the income available for housing. A lower existing debt burden generally enhances your mortgage affordability.

Your credit score plays a significant role in determining both your eligibility for a mortgage and the interest rate you receive. A higher credit score signals lower risk to lenders, potentially leading to more favorable loan terms and lower interest rates. For conventional loans, many lenders seek a credit score of at least 620. Scores of 670 to 739 are considered good, and scores above 740 often qualify for the most competitive rates.

The size of your down payment and available savings also weigh heavily on affordability. A larger down payment reduces the amount you need to borrow, leading to lower monthly mortgage payments and less interest paid over the loan’s life. Having emergency savings beyond the down payment is prudent, providing a financial buffer for unexpected home-related expenses or changes in income. Lenders view substantial savings as an indicator of financial stability.

External Factors Influencing Affordability

Beyond your personal financial profile, several external factors impact the size of the mortgage you can afford. Current interest rates are a significant variable, directly influencing the monthly mortgage payment. When interest rates rise, the cost of borrowing increases, meaning a smaller loan amount can be afforded for the same monthly payment. As of mid-August 2025, average 30-year fixed mortgage rates have been around 6.62% to 6.68%.

Property taxes constitute a substantial component of monthly housing costs. These taxes are assessed by local governments and included in your monthly mortgage payment through an escrow account. The amount of property tax varies based on the home’s assessed value and local tax rate, directly affecting your overall monthly housing expense.

Homeowner’s insurance is a mandatory expense lenders require to protect their financial interest in the property. This cost is commonly included in your monthly mortgage payment and held in an escrow account. The premium for homeowner’s insurance fluctuates based on factors like the home’s value, location, and potential risks.

Homeowners Association (HOA) fees, if applicable, represent another recurring cost. These fees are paid monthly or annually and cover the maintenance and amenities of common areas within a planned community or condominium. HOA fees are added to your total monthly housing costs, influencing the maximum mortgage amount you can manage.

Mortgage Affordability Calculations

Lenders primarily use the Debt-to-Income (DTI) ratio to assess your capacity to manage a mortgage. This ratio compares your total monthly debt payments to your gross monthly income. There are two main types of DTI ratios: the front-end ratio, which focuses solely on housing expenses, and the back-end ratio, which includes all monthly debt obligations.

The front-end DTI ratio is calculated by dividing your projected monthly housing expenses (principal, interest, property taxes, homeowner’s insurance, and any HOA fees) by your gross monthly income. The back-end DTI ratio is more comprehensive, adding all other monthly debt payments (credit card minimums, car loans, student loans) to your housing expenses before dividing by your gross monthly income.

A common guideline lenders use is the “28/36 rule.” This suggests your front-end DTI should not exceed 28% of your gross monthly income, and your back-end DTI should not exceed 36%. Some lenders may approve higher DTI ratios, often up to 43%, depending on factors like credit score and down payment. Adhering to these thresholds helps ensure you have sufficient income remaining for other living expenses.

The monthly mortgage payment is comprised of four main components, often referred to by the acronym PITI: Principal, Interest, Taxes, and Insurance. Principal reduces the loan amount. Interest is the cost charged by the lender. Taxes represent property taxes collected by local authorities. Insurance covers homeowner’s insurance and, if applicable, private mortgage insurance (PMI). Each element contributes to your total monthly housing expense. Online mortgage affordability calculators can provide estimates based on your financial inputs and current market conditions.

Navigating the Mortgage Application Process

Once you understand your financial health and how affordability is calculated, the next step involves navigating the mortgage application process. Securing a mortgage pre-approval is a significant step before beginning your house hunt. Pre-approval involves a thorough review of your financial information by a lender, including a credit check and verification of your income and assets. This process provides a conditional commitment from the lender for a specific loan amount, demonstrating to sellers that you are a serious and qualified buyer.

Various types of mortgage loans are available, each with distinct features and eligibility requirements. Conventional loans are common, offered by private lenders and often requiring a credit score of at least 620. Government-backed loans, such as those from the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), and U.S. Department of Agriculture (USDA), may offer lower down payment options or more flexible credit requirements for eligible borrowers. The choice of loan type can influence the documentation required and underwriting criteria.

During the formal mortgage application, lenders will request documents to verify your financial standing.

Recent pay stubs (last 30 to 60 days)
W-2 forms (past two years)
Federal tax returns (most recent two years)
Bank statements for checking and savings accounts (last two months)
Additional documents, such as investment account statements or proof of other income sources, may be required depending on your circumstances.

Beyond the down payment, homebuyers should account for closing costs, which are additional fees and expenses due when the property transaction is finalized. These costs can range from 2% to 5% of the home’s purchase price and include fees such as loan origination, appraisal, title insurance, and attorney fees. These expenses are separate from your down payment and must be budgeted for independently. Engaging with qualified mortgage professionals can provide tailored advice and guidance throughout this process.