How much house can I afford on $40,000 a year?
A home up to about
$122,998
On $40,000 a year, you could afford a home up to about $122,998 with a 20% down payment of $24,600. The mortgage payment would be about $671 a month, or $933 with property tax and home insurance.
- Down payment
- $24,600
- Mortgage
- $98,398
- Payment a month
- $671
What it costs each month
| Mortgage payment | $671 |
| Property tax | $113 |
| Home insurance | $150 |
| Total | $933 |
|---|
How your down payment changes it
| Saved for a down payment | Home up to | Mortgage | Payment a month |
|---|---|---|---|
| $5,030 (5%) | $100,598 | $95,568 | $651 |
| $10,550 (10%) | $105,497 | $94,947 | $647 |
| $24,600 (20%) | $122,998 | $98,398 | $671 |
How it’s worked out
Lenders usually keep housing costs (mortgage, property tax, insurance and PMI) under 28% of your gross income, and all your debt payments under 36%. On $40,000, that's $933 a month for housing.
Assumes no other debts, 1.1% property tax, $1,800 a year home insurance and 0.5% PMI below 20% down, using the 28/36 guideline. Freddie Mac’s average 30-year fixed rate was 7.24% on 29 October 2026.
- Uses the 28/36 guideline: housing costs (mortgage, property tax, insurance, PMI and HOA fees) up to 28% of gross income, and all debt payments up to 36%. Lenders can approve higher ratios, so this is a comfortable limit rather than the most you could be lent.
- Assumes all your savings go towards the down payment. Closing costs, usually a few percent of the price, are extra.
- PMI is charged while your down payment is under 20%.
Frequently asked questions
How much house can I afford on $40,000 a year?
On $40,000 a year, you could afford a home up to about $122,998 with a 20% down payment of $24,600. The mortgage payment would be about $671 a month, or $933 with property tax and home insurance.
How much down payment do I need on $40,000?
With $5,030 saved, you could buy a home up to about $100,598. With $10,550 saved, you could buy a home up to about $105,497. With $24,600 saved, you could buy a home up to about $122,998.