Per a request from an agent, here are some estimates of the income necessary to buy a $1 million home in California and a $450,000 home in Texas.
We used $1 million for California because that is close to the median home price in all too many towns and cities (and interestingly, it is much lower than high-end areas like Palo Alto, where the median list price is over $3 million and $1 million can’t buy a dog house).
We used $450,000 for Texas because you can actually find nice homes for $450,000 in TX, and because the FHA loan limit for the DFW area is only $450,800.
We made some very conservative assumptions too, so it is important to remember that the numbers below are just estimates – as rates, property taxes, consumer debt levels, and loan program requirements will vary.
We assumed that there will be no consumer debt (because we often advise paying it off and putting less down) and that all buyers will be owner-occupants; and we used very conservative (slightly above market) interest assumptions for “no points” loans to allow for some movement in rates.
Remember too that property taxes are much higher in Texas – so the California estimates won’t directly translate to Texas (slightly more income will be required to buy a $1 million home in Texas).
And finally, the income estimates are for “Household Income,” meaning that the income can come from multiple parties as long as they will all be on title.
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Income Necessary for a $1 Million Home (California)
3.5% DOWN FHA FINANCING:
$230,000 per year**
15% DOWN CONVENTIONAL FINANCING:
$200,000 per year**
20% DOWN CONVENTIONAL FINANCING:
$185,000 per year**
Income Necessary for a $450,000 Home (Texas)
3.5% DOWN FHA FINANCING:
$117,000 per year**
10% DOWN CONVENTIONAL FINANCING:
$100,000 per year**
20% DOWN CONVENTIONAL FINANCING:
$95,000 per year**
**All numbers are conservative estimates and based on the interest rate environment of mid-October 2023. If anyone is reading this blog at a later date and would like updated and/or more detailed estimates, please contact us and we will happily provide them.
Following the 28/36 rule, you should be able to afford the monthly principal and interest payments on a home purchase of that size with a salary of about $108,000. But keep in mind that figure does not include maintenance and upkeep once you own the home, or the upfront expenses of closing costs and a down payment.
If you want a $450,000 mortgage, the exact income you need will vary based on the interest rate, loan term and other factors. But, in general, around 28% of your monthly income can go towards a mortgage payment. If your mortgage payment is around $3,000, you'd need to earn around $100,000 per year.
What annual salary do you need to afford a million-dollar house? To comfortably afford a home valued at $1 million, financial experts recommend an annual salary between $269,000 and $366,000.
How much income you need to buy a house in a specific price range largely depends on the type of loan you're applying for, where you live and other factors. For example, at current mortgage rates, borrowers with an FHA loan and a 10% down payment would need to earn about $70,000 a year to afford a $400,000 house.
Putting down the standard 20% can help you avoid paying mortgage insurance and interest and could save you thousands of dollars. So you can expect to pay between $13,500 and $90,000 as a down payment on a $450,000 purchase. Keep in mind, besides the down payment amount, you will also have to factor in closing costs.
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.
If your annual salary is $100,000, the 30% rule means you should spend around $2,500 per month on your house payment. With a 10% down payment and a 6% fixed interest rate, you could likely afford a home worth around $350,000 to $400,000 (depending on the cost of taxes and home insurance).
You can generally afford a home for between $180,000 and $250,000 (perhaps nearly $300,000) on a $50K salary. But your specific home buying budget will depend on your credit score, debt-to-income ratio, and down payment size.
However, for a [million-dollar home], they are often going to do two loans.They're going to do a conventional loan, and then do an equity loan so that they can afford it.” She adds, “If the loan amount goes over a million, like over a million four, then they would have to get a jumbo loan.”
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.
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.
What credit score do you need to get a mortgage? Mortgage lenders typically want to see a score of 620 or better before approving a conventional mortgage. There are government-insured mortgages if your score is lower, and if your score is 760 or higher you'll qualify for the best interest rates.
To finance a 450k mortgage, you'll need to earn roughly $135,000 – $140,000 each year. We calculated the amount of money you'll need for a 450k mortgage based on a payment of 24% of your monthly income. Your monthly income should be around $11,500 in your instance. A 450k mortgage has a monthly payment of $2,769.
With a $450,000 mortgage and an APR of 6%, you'd pay $3,797.36 per month for a 15-year loan and $2,697.98 for a 30-year loan. Keep in mind that these amounts only include principal and interest. In many cases, your monthly payment will also include other expenses, too.
Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000. Based on these numbers, your monthly mortgage payment would be around $2,470.
How much house can I afford on $50K a year? You can generally afford a home for between $180,000 and $250,000 (perhaps nearly $300,000) on a $50K salary. But your specific home buying budget will depend on your credit score, debt-to-income ratio, and down payment size.
That leaves $331 per month to account for property taxes, homeowners insurance premiums and potential HOA fees to get you up to approximately $2,100 per month, following the 28/36 rule. So, following this rule, you should be able to afford a home of about $350,000.
Using the 28% to 30% rule, your ideal maximum monthly payment shouldn't exceed $1,866 and $2,000. With that being said, if you're getting a 30-year fixed-rate mortgage with a 6% interest rate, you can likely afford a home valued up to $263,000 (including property taxes and insurance, and assuming a 5% down payment).
Introduction: My name is Allyn Kozey, I am a outstanding, colorful, adventurous, encouraging, zealous, tender, helpful person who loves writing and wants to share my knowledge and understanding with you.
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