The subject line for my blog is a common topic that lenders use for consumer blogs for search engine optimization (or “SEO” – or an entity’s efforts to draw readers to its website).
And, here is the answer to the question: You need anywhere from $100,000 to $300,000 in income to buy a $1 million dollar home right now.
The reason there is so much variance is because there are so many factors that impact qualification, including:
- Size of down payment
- Property tax rates
- Homeowners insurance rates
- The type of financing available (conforming, jumbo, non-QM, etc.)
- The interest rate environment
- First-time homebuyer status
- Monthly consumer debt payments
Let’s look at financing types to start with. Most competitive jumbo lenders limit total debt ratios (all monthly debt payments divided by gross monthly income) to 43%, while Fannie Mae limits debt ratios to 50%. So, if you are in a “high-cost area” where Fannie Mae loan limits are in excess of $1 million, you will qualify for a $1 million home more easily than those who do not live in a “high-cost area” and will thus have to get jumbo financing instead.
So, let’s use a $1 million purchase with 10% down and an 8% interest rate as an example.
- Purchase Price: $1,000,000
- Down Payment: $100,000
- Loan Amount: $900,000
- Monthly Property Taxes: $1,250 ($15,000 per year or 1.5% rate)
- Homeowners Insurance: $167 ($2,000 per year)
- Private Mortgage Insurance: $225 ($2,700 per year).
- Monthly Mortgage Payment (Principal & Interest): $6,603 (at 8%)
- TOTAL HOUSING PAYMENT: $8,250 (rounded up)
So, if a borrower has to get jumbo financing, her annual income would need to be about $230,000 if she has NO consumer debt payments.
If a borrower is able to get conforming (Fannie Mae) financing, her annual income would need to be about $200,000, if she has NO consumer debt payments.
If you throw a $500 car payment in the mix, the jumbo income requirement jumps to $244,000 and the conforming income requirement jumps to $210,000.
In 2021, we were qualifying borrowers for $1 million homes with as little as $100,000 in income when rates were under 3% and as long as borrowers had 25% or more for a down payment.
My broader point is that there are so many factors behind a qualification that there is never one answer when it comes to the minimum income necessary for any type of purchase.
This is also a reminder of why it is so important for borrowers to get the assistance of a qualified lender when estimating what it will actually take to qualify.
FAQs
To determine how much money you need to earn annually to afford a one million dollar home based on the 2.5 times your income rule, you simply need to divide $1 million by 2.5. So, this rule suggests you need to earn $400,000 annually to afford a $1 million home.
How much income to afford a 1 million dollar house? ›
A 36% DTI is a more reasonable and realistic level. If you keep all the other factors the same, your gross annual income would need to be around $210,000 to buy a $1 million home. Or, if you want to stay within the recommended 26% ratio, you'd have to earn about $290,000 or more.
Can I buy a million dollar home with 100k salary? ›
And, here is the answer to the question: You need anywhere from $100,000 to $300,000 in income to buy a $1 million dollar home right now. The reason there is so much variance is because there are so many factors that impact qualification, including: Size of down payment. Property tax rates.
How much is a $1 million mortgage payment per month? ›
Removing all variables except a 7% interest rate, a $1 million mortgage payment would be between $6,653 and $8,988 per month. If you're a first time home buyer considering a $1 million mortgage, make sure you understand the true cost of buying and owning a home.
How much income for a 1.5 million house? ›
A large enough down payment can significantly reduce the ongoing costs and make a $300,000 salary enough for a 1.5 million-dollar home. Otherwise, you might be going over some of those recommended limits, such as the 28/36 rule.
What income do you need for an $800000 mortgage? ›
To afford an $800,000 house, you typically need an annual income between $200,000 to $260,000, depending on your financial situation, down payment, credit score, and current market conditions. However, this is a general range, and your specific circ*mstances will determine the exact income required.
What home can I afford with a 200k salary? ›
With a $200,000 annual salary, you could potentially afford a house priced between $600,000 to $1,000,000 or even more, depending on your financial situation, credit score, and current market conditions. However, this is a broad range, and your specific circ*mstances will determine where you fall within it.
How much house can I afford if I make $36,000 a year? ›
On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.
How are people affording these million dollar homes? ›
For many, the key to affording a million-dollar home lies in the equity of their current property. Homeowners can tap into this equity through a sale or a home equity line of credit (HELOC), providing a substantial down payment for their next purchase.
Can I afford a 500K house on 100k salary? ›
That monthly payment comes to $36,000 annually. Applying the 28/36 rule, which states that you shouldn't spend more than around a third of your income on housing, multiply $36,000 by three and you get $108,000. So to afford a $500K house you'd have to make at least $108,000 per year.
If you're in the market for a $1 million home, you're likely wondering how much you need to save for the down payment. Financial advisors often recommend a 20% down payment. Therefore, to purchase a home worth a million dollars, you'd generally need a hefty $200,000 for the down payment.
How to pay off a $1 million dollar mortgage? ›
Here are some ways you can pay off your mortgage faster:
- Refinance your mortgage. ...
- Make extra mortgage payments. ...
- Make one extra mortgage payment each year. ...
- Round up your mortgage payments. ...
- Try the dollar-a-month plan. ...
- Use unexpected income.
Today (April 2020), it's going to be about $7K/month for the mortgage. $10K/month if you add in insurance and property tax. Your mileage may vary - depending on down payment, interest rate, term, insurance and taxes for your particular $2M house.
How much income to afford a 1 million dollar home? ›
To determine how much money you need to earn annually to afford a one million dollar home based on the 2.5 times your income rule, you simply need to divide $1 million by 2.5. So, this rule suggests you need to earn $400,000 annually to afford a $1 million home.
How much do you have to make a year to afford a $1,000,000 house in Canada? ›
Income Needed for $1 Million Mortgage in Canada
| Price of Home | $1 Million | $1.2 Million |
|---|
| Average Income Required | $225,000 | $268,000 |
| Income Range | $200,000 - $250,000 | $240,000 - $295,000 |
Mar 13, 2024
With a $70,000 annual salary and using a 50% DTI, your home buying budget could potentially afford a house priced between $180,000 to $280,000, depending on your financial situation, credit score, and current market conditions. This range is higher than what you might qualify for with more traditional DTI limits.
How are people affording million dollar houses? ›
As Madan noted, when purchasing a high-value property, a jumbo loan may be necessary. These loans exceed the limits set by government-sponsored entities, making them suitable for million-dollar homes. Jumbo loans often require a strong credit score, a low debt-to-income ratio, and, typically, a higher down payment.
What salary do you need to afford a $2 million dollar home? ›
To be able to afford a $2 million house, you'll need to earn over $450,000 a year. You'll also need to have enough money to cover the down payment and closing costs for the home.
How much home can I afford with a 100k salary? ›
Potential home price: Around $300,000
With this combination, you could potentially afford a home priced around $300,000. Let's see what your monthly obligations might look like: Monthly payment: ~$2,300 (including estimated taxes and insurance)
