If you’re earning $75,000 each year, you’re doing a bit better than half the country. According to data from the U.S. Census Bureau, the median household income in 2021 stood at $70,784, so that extra $4,216 puts you in the upper 50 percent of earners. However, frustratingly high inflation is causing everything to cost more, including real estate, so your money won’t go as far as it once did. As you try to determine how much house you can afford on your $75,000 salary, read on for a rundown of key considerations to keep in mind.

Start with the 28/36 rule

So how much of your salary should you be spending on housing costs? Historically, the 28/36 rule has been a guideline that many lenders use to help understand a borrower’s ability to repay a mortgage and other debts. The rule advises spending no more than 28 percent of your income on housing expenses, and no more than 36 percent of your income on total debt payments, including housing.

If you’re making $75,000 each year, your monthly earnings come out to $6,250. To meet the 28 piece of the 28/36 rule, that means your monthly mortgage payment should not exceed $1,750. And for the 36 part, your total monthly debts should not come to more than $2,250.

Of course, buying a home is more complicated than just following a simple rule. Bankrate’s new-home calculator can help you crunch all the numbers to get a deeper, more detailed understanding of how much house you can comfortably afford.

What factors determine how much you can afford?

Obviously your salary is the number one factor in what you can spend on a home. But the amount you can afford is dependent on the rest of your debt as well, including things like car payments and student loans. Here are some other important factors that can have an impact:

Credit score

Your credit score is a reflection of your risks as a borrower. Any lender will look at this number to understand your track record of paying back other debts, which helps them assess your potential for defaulting on the loan. Conventional loans typically require a minimum credit score of 620, but a significantly higher score can help you qualify for significantly lower rates.

“Improving your credit score can make a big difference to monthly payments,” says Libby Cooper, vice president of operations for Zillow Mortgages. “For example, a borrower with an ‘excellent’ credit score — between 740 and 850 — can potentially qualify for a 30-year fixed-rate mortgage with an interest rate upward of 1.5 percentage points better than someone with a ‘fair’ credit score — between 620 and 639. This equates to about a $300 difference in monthly mortgage payments [principal and interest only] and over $100,000 in interest over the life of a 30-year fixed loan, based on the current price of a typical U.S. home [approximately $355,000].”

Down payment

How much of that $75,000 annual salary have you managed to keep in your savings account? Making a bigger down payment lowers the amount of money you need to borrow, thereby shrinking your monthly mortgage payments. For example, consider this breakdown from Bankrate’s mortgage calculator to see how different down payment amounts on a $320,000 home, assuming a 7 percent interest rate, would impact monthly mortgage payments:

Down payment Monthly mortgage payment
$64,000 (20 percent) $1,703
$32,000 (10 percent) $1,916
$9,600 (3 percent) $2,065

With your $75K salary, the 28 percent rule means not spending more than $1,750 per month on housing. So if you don’t want to overextend yourself, you would need to put down 20 percent — or find a cheaper home. (Note that this example does not include other common costs of homeownership, like property taxes and homeowners insurance.)

Loan-to-value ratio

Your loan-to-value ratio (LTV) plays an important role in determining your buying power as well. Lenders like to see a 20 percent down payment for an 80/20 LTV. Smaller down payments will trigger an automatic mortgage insurance premium, meaning you’ll need to budget for another expense: private mortgage insurance.

Debt-to-income ratio

In addition to mortgage debt, you likely have other debt as well, like student loans, car payments and credit cards. Lenders will evaluate your overall debt-to-income (DTI) ratio (that’s ultimately what the 36 in the 28/36 rule refers to) to make sure you aren’t stretching your finances too thin as you attempt to pay off all your loans.

“While most mortgage products will allow up to 40 to 50 percent DTI, it is more favorable to be in the 20 percent range,” says Eileen Derks, senior vice president and head of mortgage at Laurel Road. “This will minimize risk of repayment should unexpected expenses arise or a significant interest rate increase occur on variable-rate credit products. It is best to live within our means and anticipate [that] unexpected expenses will almost always occur over the life of a mortgage loan.”

Know your mortgage options

Fixed-rate, adjustable-rate, conventional, FHA, VA — there are loads of different financing options for buying a home. The best way to figure out how much you can borrow is to get preapproved for a mortgage. A mortgage expert can listen to your needs, review your financial information (pay stubs, tax returns, credit report, etc.) and give you a firm estimate of your buying power. The amount you’re preapproved for indicates the amount the lender is likely to eventually approve you for officially.

Once you find a home and are ready to finalize your mortgage loan, shop around. (You can go with the same lender that preapproved you, but you’re not obligated to.) The interest rate is the biggest headline you’ll notice when looking at different loans, but there are a number of other puzzle pieces that need to fit into place as well. What fees does each lender charge? Will you need to buy mortgage points to qualify for a lower rate? Do certain lenders offer benefits that others don’t?

First-time homebuyer programs and other assistance

If this maze of mathematics has you feeling overwhelmed, don’t worry. There are a number of assistance options specifically designed for first-time homebuyers, both on the federal and local level. There are many down payment assistance programs out there as well. Plus, depending on where you live and the size of your family, your $75,000 annual earnings may actually help you qualify as a low- or moderate-income borrower — a distinction that can put you in the running for low-cost loans and grants for down payment and closing costs.

In addition, depending on what you do for a living, you might be able to qualify for even better borrowing terms. For example, teachers, law enforcement officers, EMTs and firefighters are all eligible for the Department of Housing and Urban Development’s Good Neighbor Next Door program. If you fall into one of those categories, you might be able to buy a home for a very significant discount.

Stay the course until you actually close

You’ve figured out how much you can afford on your $75,000 salary, gone into contract on a new home and secured a mortgage — but your work isn’t quite done yet. Once a lender has approved you based on all your personal financial information, that information needs to stay the same until the day you close. Now is not the time to do anything that might change your circumstances, like buying a new car or opening a new credit card.

“Prospective home buyers should avoid making major financial changes before closing on their home,” Cooper says. “This includes changing or quitting jobs, closing an account to try and remove it from your record or making a major purchase that needs financing, such as a car or new furniture set.”