Buying a home is one of the biggest financial decisions you’ll ever make. If you’re earning a $100K salary and eyeing a $600K house, it’s natural to wonder: Can I really afford this? While the dream of homeownership is exciting, it’s crucial to evaluate your finances carefully before diving in. This guide breaks down everything you need to consider to determine if a $600,000 home fits within your budget.
Understanding the 28/36 Rule
What Is the 28/36 Rule?
The 28/36 rule is a commonly used guideline in personal finance and mortgage lending. It helps determine how much of your income should go toward housing and total debt:
- 28% of your gross monthly income should go toward housing expenses (mortgage, insurance, taxes).
- 36% should be the max for all debt payments combined (housing + car loans, credit cards, student loans, etc.).
How It Applies to a $100K Salary
On a $100K salary, your gross monthly income is about $8,333. Based on the 28% rule:
- Max housing costs: $2,333/month
- Max total debt payments: $3,000/month
If the monthly mortgage on a $600K house exceeds these limits, you might be stretching your budget too thin.
Estimating the Mortgage on a $600K House
Down Payment Considerations
To purchase a $600K home, lenders typically expect a down payment of 10%-20%. Here are the common scenarios:
- 20% down ($120,000): Avoid PMI (private mortgage insurance)
- 10% down ($60,000): Pay PMI until reaching 20% equity
Monthly Mortgage Estimate
Assuming a 6.5% interest rate on a 30-year loan and 20% down, your estimated monthly mortgage would be:
- Loan amount: $480,000
- Monthly payment: ~$3,037 (principal + interest only)
Adding property taxes, homeowners insurance, and PMI (if applicable), total monthly housing costs could reach $3,500 or more.
That’s significantly higher than the $2,333 recommended by the 28% rule.
Other Costs to Consider
Property Taxes & Insurance
- Property taxes: Vary by location, but a common estimate is 1.25% of home value/year
- Homeowners insurance: Averages around $1,000-$1,500/year
Maintenance & Repairs
Homeownership comes with ongoing costs. A good rule of thumb:
- 1%-2% of home value annually for maintenance
- On a $600K home, that’s $6,000-$12,000/year
PMI (Private Mortgage Insurance)
If you put down less than 20%, expect to pay PMI, which could add $100-$300/month to your mortgage.
Debt and Lifestyle Factors
Existing Debts
Do you have:
- Student loans?
- Car payments?
- Credit card debt?
These eat into your allowable 36% debt-to-income ratio. If your total debt obligations are already high, affording a $600K house becomes less feasible.
Lifestyle & Savings Goals
Don’t forget about:
- Retirement contributions
- Emergency fund
- Travel or hobbies
- Family expenses (childcare, tuition, etc.)
Owning a home shouldn’t mean sacrificing your financial security or lifestyle.
How to Improve Affordability
Increase Your Down Payment
- Reduces monthly payments
- Eliminates PMI if you hit 20%
Pay Down Existing Debt
- Frees up more income for your mortgage
- Improves your debt-to-income ratio
Consider a Less Expensive Home
- A $400K–$500K home may align better with your salary
Explore First-Time Homebuyer Programs
- Lower down payments
- Reduced interest rates
- Grants and assistance
Final Verdict: Is a $600K Home Realistic on a $100K Salary?
It’s possible, but risky. Unless you have minimal debt, a large down payment, or additional income, a $600K home may strain your budget. The 28/36 rule suggests you’d be overextending yourself, especially when factoring in taxes, insurance, and maintenance.
A smarter approach? Use this insight to reassess your budget and possibly aim for a lower-priced home that offers financial breathing room.
Andre Cuevas provides career insights, job search strategies, and professional advice to help individuals navigate the job market and achieve their career goals.
