How Much House Can I Afford in California?
National affordability rules of thumb carry over to California, but the costs around the mortgage don't. Here's how to size a budget that holds up after closing.
A common guideline is to keep housing costs under 28% of gross income and all debts under 36%. With 20% down and an example 6.5% rate, a $750,000 California home costs about $4,681 a month including property tax and insurance, which works out to roughly $200,594 a year of income with no other debts. California adds costs many calculators skip: supplemental tax bills, Mello-Roos and earthquake insurance.
The 28/36 guideline
Lenders look at two ratios. The housing ratio compares your full monthly housing cost (mortgage, property tax, insurance and HOA dues) with your gross monthly income; the traditional guideline is 28%. The total debt ratio adds car payments, student loans and card minimums; the guideline is 36%. Whichever limit is lower sets your budget.
These are guidelines, not law. Fannie Mae, which buys a large share of U.S. mortgages, caps total debt at 36% for manually underwritten loans and allows up to 45% with strong credit and cash reserves, or 50% for loans approved through its automated system. It doesn't set a separate housing-only ratio. A lender approving you for more doesn't mean the payment will be comfortable, so many buyers budget to the conservative numbers anyway.
California costs other calculators miss
- Property tax by county. Prop 13 sets the base at 1% of assessed value, but voter-approved bonds push countywide averages from 1% (Modoc) to 1.248% (Kern) for fiscal year 2024-25. Individual parcels vary even within a county.
- Mello-Roos. Many newer neighborhoods sit in a Community Facilities District that levies a special tax for schools, roads or parks, on top of the regular property tax. It can add hundreds or thousands of dollars a year and run for decades. The seller has to disclose it.
- The supplemental tax bill. Your purchase triggers a reassessment, but your first regular bill still reflects the seller's value. The county sends one or two supplemental bills for the difference, prorated from the month after you close. For example, buying a home assessed at $300,000 for $750,000 in July at a 1.181% rate produces a bill of about $4,889, and it's often not covered by escrow.
- Earthquake insurance. Standard homeowners policies exclude earthquake damage. A separate policy is optional, but if you want one, it belongs in the monthly budget.
Income needed for common prices
The table uses one set of example assumptions: 20% down, a 30-year loan at 6.5% (an example rate, not a market quote), Los Angeles County's average 1.181% property tax rate, $1,800 a year of home insurance, no HOA or Mello-Roos, and no other debts. Income is the gross annual income that keeps the payment at 28%.
| Home price | Down payment | Monthly payment | Income needed |
|---|---|---|---|
| $500,000 | $100,000 | $3,170 | $135,872 |
| $750,000 | $150,000 | $4,681 | $200,594 |
| $1,000,000 | $200,000 | $6,191 | $265,316 |
| $1,500,000 | $300,000 | $9,211 | $394,760 |
Each $100 a month of other debt, HOA dues or Mello-Roos lowers the price you can afford by far more than $100, because it comes out of the same budget that would otherwise go to the mortgage. Rates move the numbers a lot too; run your own quote through the calculator.
What the ratios leave out
Lender ratios only look at income and debt payments. They don't know about the rest of your budget, so it's worth checking a few things before you settle on a price:
- Maintenance and repairs. Renters call the landlord; owners pay. Older California homes often need roof, plumbing, electrical or foundation work, and seismic retrofits can be expensive.
- Utilities. A house usually costs more to heat, cool and water than an apartment, and California's residential electricity rates are high, especially on summer afternoons under time-of-use plans.
- Commute. A cheaper home farther out can cost more once gas, tolls or transit and time are counted.
- Savings after closing. Plan to keep an emergency fund after the down payment, closing costs and the supplemental tax bill, rather than going in with nothing left.
Down payment and PMI
Twenty percent down isn't required, but it changes the math. With less than 20% down, conventional loans usually add private mortgage insurance, and the loan itself is bigger. On the $750,000 example, putting 10% down instead of 20% raises the monthly payment from about $4,681 to $5,436 (assuming PMI of 0.5% of the loan a year, which varies by lender and credit), and the income needed from about $200,594 to $232,964.
Remember the cash you need beyond the down payment: closing costs, any transfer taxes (some California cities add their own on top of the county's), and reserves for the supplemental bill.
Prop 13 after you buy
Prop 13 doesn't lower your tax when you buy; the purchase resets the assessed value to what you paid. What it does is keep that value from rising more than 2% a year while you own the home, unless you add new construction. That makes California property tax unusually predictable after the first year, and it's why long-time owners often pay far less than new neighbors in identical homes.
Run your numbers
Our California Home Affordability Calculator works backward from your income and debts to a price, using your county's tax rate and optional Mello-Roos, HOA, earthquake insurance and PMI, and estimates your supplemental tax bill. The property tax calculator and transfer tax calculator cover the rest of the closing picture.
Frequently Asked Questions
How much house can I afford on a $100,000 salary in California?
With no other debts, 20% down, an example 6.5% 30-year rate, a 1.181% property tax rate and $1,800 a year of insurance, about $361,000. Debts, HOA dues or Mello-Roos lower that; a bigger down payment raises it.
What is the 28/36 rule?
A common lending guideline: keep housing costs (mortgage, property tax, insurance, HOA) under 28% of gross monthly income, and all debt payments under 36%. Fannie Mae's actual limit is on total debt only: 36% for manually underwritten loans, up to 45% with strong credit and reserves, and 50% for loans approved through its automated system.
Do I need 20% down to buy a house in California?
No. Many loans allow less, but below 20% down a conventional loan usually adds private mortgage insurance until you build enough equity. Putting less down also means a bigger loan and a higher monthly payment, so you can afford less house on the same income.
What costs do California homebuyers forget?
Supplemental property tax bills after closing, Mello-Roos special taxes in newer neighborhoods, HOA dues, and earthquake insurance, which standard homeowners policies don't cover. Property tax rates also vary by county and by parcel.
Does Prop 13 lower my property tax when I buy?
No. Buying triggers a reassessment to the purchase price. Prop 13 helps after that: your assessed value can rise by no more than 2% a year until the home changes ownership again or you add new construction.
This article is for general information only and is not financial advice or a loan offer. Rates, lender standards and your parcel's tax rate change the answer. Get a pre-approval before you shop.