Can I Afford a $400k House on a $120k Salary?
The honest cash-flow breakdown most calculators won't give you.
My wife and I spent about two years asking this exact question. We'd open a mortgage calculator, punch in numbers, and get back something like "you're approved for up to $480,000!" — which felt great for about 30 seconds until we realized that number had nothing to do with our actual monthly life.
Getting approved for a mortgage and comfortably affording a mortgage are two very different things.
So let's actually answer it. Not with a bank's math, but with yours.
The Quick Answer
For a household earning $120,000 per year, buying a $400,000 home is possible — but for many households it will feel tight.
Here's why the one-size answer doesn't work: two families can both earn $120k and have completely different financial realities. One has no car payments, low expenses, and $60k saved. The other has two car loans, daycare, and $15k in savings. Same salary, completely different answer.
That's what most house affordability calculators miss.
Monthly Payment on a $400k House
Assuming a typical purchase scenario:
Home price: $400,000
Down payment: 10% ($40,000) → loan amount of $360,000
Interest rate: 7%
Loan type: 30-year fixed
Your principal + interest payment: roughly $2,395/month
Add in the costs most calculators forget:
Property taxes (~1.2% annually): ~$400/month
Homeowner's insurance: ~$150/month
PMI (under 20% down): ~$150/month
Estimated total monthly housing cost: ~$3,095
What $120k Actually Puts in Your Pocket
$120,000 gross is not $120,000 to spend. After federal taxes, state taxes, Social Security, and Medicare, most households in this range take home somewhere between $7,200 and $7,800/month — depending heavily on your state.
We'll use $7,500/month as a reasonable middle estimate.
The Cash Flow That Really Matters
Amount | |
|---|---|
Monthly take-home | $7,500 |
Housing payment | -$3,095 |
Left for everything else | $4,405 |
Now subtract your actual life:
Expense | Typical range |
|---|---|
Car payment(s) | $400–$800 |
Groceries | $600–$900 |
Utilities | $200–$350 |
Internet + subscriptions | $150–$200 |
Health insurance | $300–$600 |
Gas + transportation | $200–$300 |
Total | $1,850–$3,150 |
That leaves somewhere between $1,255 and $2,555/month in breathing room — before childcare, student loans, eating out, or anything unexpected.
That number is what actually determines if you can afford this house.
The 28% Rule — And Why It's Not the Whole Story
You've probably heard the guideline: keep housing under 28% of gross income. On $120k, that's $2,800/month.
Our estimated payment of $3,095 is already above that.
But the 28% rule doesn't account for your full picture. A household with minimal debt and healthy savings can comfortably handle 32–35%. A household juggling car loans and daycare might struggle at 25%.
The ratio matters. But your actual monthly surplus is what tells the real story.
When a $400k Home on $120k Works
It's usually a safe decision when:
✓ You have 3–6 months of expenses saved after the down payment
✓ Other monthly debt payments are under $500
✓ Housing stays under 35% of take-home pay
✓ You'd still have $1,000+/month left after all expenses
When It Starts Becoming Risky
It becomes a stretch when:
✗ The down payment drains most of your savings
✗ You have $600+ in other monthly debt payments
✗ You're in a high-tax state that significantly reduces take-home
✗ Childcare or other large expenses are coming soon
Why Your State Matters More Than Most Calculators Show
This is the variable almost nobody talks about.
A $120k salary in Texas or Florida often results in $500–$800 more per month in take-home pay than the same salary in California, New York, or Connecticut — simply because of state income tax differences.
That difference alone can determine whether a $3,095 mortgage payment feels comfortable or stressful.
Most affordability calculators ignore this entirely. Ours doesn't.
Run Your Own Numbers in 2 Minutes
Every household is different. Your actual answer depends on your income, your expenses, your savings, and where you live.
We built Can We Afford This? specifically for this. Enter your income and current expenses, pick the home price, and get an instant cash-flow analysis showing:
How much breathing room you'd have each month
Your housing-to-income ratio
How many months of emergency runway you'd have left after closing
No signup. No email. Takes about 2 minutes.
The Bottom Line
Can you afford a $400k house on a $120k salary? Maybe — but the mortgage approval isn't the answer you need.
The real question is: after your housing payment, taxes, and everything your life costs, how much is left? Is that enough to sleep at night, handle a broken furnace, and still feel like you're building something?
That's the question worth answering before you make an offer.
More Scenarios Worth Running
Can We Afford This? is a free family financial scenario simulator. Run your numbers at canweaffordthis.com.