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 should I make to afford a 1 million dollar house? ›
To comfortably afford a home valued at $1 million, financial experts recommend an annual salary between $269,000 and $366,000. This range, however, is subject to variation depending on your: Annual income. Debt-to-income ratio (DTI)
How are people affording million dollar homes? ›
Apply for a jumbo loan
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.
How much money should you have saved to buy a million dollar house? ›
For a $1 million home, you're likely to need a minimum of $200,000 to $300,000 saved for that purpose. But a down payment isn't the only thing to save for. Home buyers have to consider closing costs on their home purchase, too. Closing fees typically start around 2% of the buyer's mortgage loan amount.
How much house can you afford with a 300k salary? ›
Even if you're paying a student loan or car loan, a $300,000 annual income means you can likely afford a home priced around $925,000. An income of $300,000 a year is more than four times the U.S. median household income of $74,580, so it gives you a good head start.
Can I afford a million dollar home with 200k salary? ›
What your salary needs to be to afford a $1 million home. A homebuyer would need to earn nearly $200,000 annually to afford a $1 million mortgage. The number of homes in the United States valued at $1 million or more has steadily increased in recent years.
What is the typical mortgage for a 1 million dollar home? ›
Monthly payments for a $1,000,000 mortgage
| Interest rate | Monthly payment (15 year) | Monthly payment (30 year) |
|---|
| 6.50% | $8,711.07 | $6,320.68 |
| 6.75% | $8,849.09 | $6,485.98 |
| 7.00% | $8,988.28 | $6,653.02 |
| 7.25% | $9,128.63 | $6,821.76 |
5 more rowsAs mentioned, millionaires aren't debt-averse when it comes to buying their homes. While there are certainly plenty of millionaire renters, the wealthy are far more likely to own their homes than the average American. According to one study, 90% of millionaires own their primary residences.
What percentage of people own a million dollar home? ›
Nearly one-in-ten U.S. homes are now worth at least $1 million. Analysis from Redfin has found that 8.2% of homes in America were million-dollar homes as of June 2023, nearing the June 2022 peak of 8.6%.
How is anyone supposed to afford a house? ›
Keep your monthly payment to no more than 25% of your take-home pay. If you're a first-time home buyer, put at least 5–10% down. But 20% or more is even better because you'll avoid paying PMI! Pay for closing costs and moving expenses with cash.
But if you do get a mortgage, Dave Ramsey recommends following the 25% rule—remember, that means never buying a house with a monthly payment that's more than 25% of your monthly take-home pay on a 15-year fixed-rate conventional mortgage.
What income do you need for an $800000 mortgage? ›
Ideally, you should make $208,000 or more a year to comfortably manage an $800,000 home purchase, based on the commonly used 28 percent rule (which states that you shouldn't spend more than 28 percent of your income on housing).
Are you a millionaire if you have a million dollar house? ›
A millionaire is somebody with a net worth of at least $1 million. It's a simple math formula based on your net worth. When what you own (your assets) minus what you owe (your liabilities) equals more than a million dollars, you're a millionaire. That's 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 much house can $3,500 a month buy? ›
A $3,500 per month mortgage in the United States, based on our calculations, will put you in an above-average price range in many cities, or let you at least get a foot in the door in high cost of living areas. That price point is $550,000.
How much income to afford a 1 million dollar house? ›
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 for a 1.5 million house? ›
Using the $7,984 payment (at 7.0%) and the above assumptions, your total housing payment for a $1.5 million home with 20% down would be approximately $10,109 per month. Assuming you have no consumer debt, your monthly income requirement would be about $23,500. This is a salary requirement of about $282,000 per year.
How much house can I afford on a $500,000 salary? ›
Multiply Your Annual Income by 2.5
Multiply this number by 2.5 to estimate the maximum value of the home you can afford.
How much income do I need to afford a 2 million dollar house? ›
Income Multiple: A general rule of thumb is to spend no more than 3 times your gross income on a house. Therefore, to afford a $2 million house, you would need to make at least $667,000 a year [2].
