So you've got your eye on a $600k house? Wow, that's a big step and we've got to discuss what that means financially. Understanding the amount of money you need to earn and save is extremely important. This is because a mortgage on a home worth $600,000 or more is not a small amount.
Mortgage lenders advise not spending over 28% of your monthly income before taxes on housing costs. This is known as the front-end ratio. Now, the down payment is typically somewhere between 5-20% of the total price of the house.
So for this $600k house, you'd have to save somewhere from $30,000 to $120,000! Remember, the more you put down at the start, the less you have to pay each month.
Continue reading to learn more about how to afford a mortgage a $600,000 home, or apply for a pre-approval. A mortgage pre-approval allows you to understand how much you're likely to get approved for. It can be a great first step to help you decide if a home worth $600k or more is the right decision for you.
How much income do I need to afford a $600k house?
A home worth $600,000 or more needs enough income to pay for the mortgage and other expenses. It's a big financial responsibility. The money you need can vary depending on factors like yourmortgage rate and the initial down payment.
Generally, banks want your mortgage payments to be less than 28% of your income before taxes. This includes property taxes and insurance.
If you put down 20% on a home worth $600,000 with a 30-year, fixed-rate mortgage at 7%, your principal plus interest is $3,193. This means that you need a monthly income of about $11,404.
Keep in mind, it's a good idea to discuss a commitment like this with a financial advisor.
How much of a down payment do I need for a $600k home?
So, how much do you think you need for a down payment on a $600k house? Well, it can vary a lot! It really depends on the mortgage you pick and your own money situation.
Some mortgage options let you put down less. Just remember, that might mean you have to pay extra for private mortgage insurance.
Your paycheck plays a huge part too when you're trying to buy a $600k house. Experts advise that your monthly mortgage payment should not be more than 28% of your pre-tax income. This payment includes the loan, interest, taxes, and insurance.
For a $600k house, especially if you're not putting a lot down, you'll probably need a pretty hefty paycheck to afford the monthly payments. Consulting a mortgage advisor or financial planner can provide a better understanding of your affordable options.
What does a 20% down payment option look like for a $600k house?
Whether or not you can afford this mortgage is determined by various factors. These factors include your other debts, the lender's debt-to-income ratio requirements, and the mortgage's interest rate.
For a $600,000 mortgage, a 20% down payment is $120,000. Unless you have that much cash on hand, you may need to cash in investments or sell property to help get you to 20%.
What does a 15% down payment option look like for a $600k house?
A 15% down payment on a home worth $600,000 is $90,000.
A larger down payment reduces overall mortgage borrowing, payments, and interest. Aim to keep mortgage payments under 28% of your gross monthly income.
The principal, interest and property mortgage insurance on $600,000 house with a 15% down payment and a 30-year, fixed-rate mortgage with 7% rate would cost $3,662. To afford this, you would need a monthly income of about $13,079 or an annual income of about $157,000.
What does a 10% down payment option look like for a $600k house?
A 10% down payment on a $600,000 house would be $60,000, but you'd still need financing for the remaining $540,000. This financed amount determines the monthly mortgage payments, not the house's total cost.
What does a 5% down payment option look like for a $600k house?
A 5% down payment on a $600,000 house would be $30,000, but you'd still need financing for the remaining $570,000. The principal, interest, and property mortgage insurance would cost about $4,061 with a 5% down payment. You'd need a monthly income of about $14,504 to make this affordable.
KEY TIPS TO USE TO AFFORD A $600K MORTGAGE
Income
Increase your income sources to afford a larger house budget.Credit Score
Maintain a good credit score for a better chance of loan approval. Double-check your report for any items that you may need removed or adjusted before starting the application process.Down Payment
Save for a substantial down paymentto reduce the loan amount and monthly payments.Government Loan Options
Consider getting a FHA loan, which requires a lower down payment. Think about a VA loan if you're a veteran or the spouse of a veteran who meets the requirements.Limit Spending
Stick to the recommendation of not spending more than 28% of your income on housing costs. Also, set a realistic budget and stick to it when home shopping.Budget for Additional Costs
Consider additional costs such as property taxes, insurance, and maintenance in your budget.
How can I apply for a mortgage on a home worth $600k?
Do you already have a home in the $600k range that you've had your eye on? If you're ready to apply for a mortgage pre-approval, Guaranteed Rate is here to help. You can apply online for a pre-approval and get a response in as little as a day.
Mortgage pre-approval is a common first step that most homebuyers take. With pre-approval, you can show sellers that you're serious and know how much you're likely to be approved for. Start your pre-approval today to get a better idea if that home worth $600,000 or more is attainable.
FAQs
Add the total monthly debt and divide by 45%. So for this borrower with $900 in monthly debt, to qualify for a single family home purchase of $600,000 with 3% down payment, 730 credit score, taxes of $12,750, insurance of $1,080, and PMI of $267, they will need $13,978 of monthly income.
How much income do you need to buy a 600K house? ›
The principal, interest and property mortgage insurance on $600,000 house with a 15% down payment and a 30-year, fixed-rate mortgage with 7% rate would cost $3,662. To afford this, you would need a monthly income of about $13,079 or an annual income of about $157,000.
How much is the monthly payment for a 600K mortgage? ›
If you're thinking of applying for a $600K mortgage, here's the bottom line: The monthly payment on this mortgage at a 7% annual percentage rate (APR) for 30 years works out to be $3,991.81. If you would rather finance with a 15-year mortgage, the monthly payment would be $5,392.97.
How much income do you need to qualify for a $500 000 home loan? ›
Since many lenders don't want more than 28% of a person's income to go toward their mortgage debt, borrowers will generally need an annual combined household income of at least $120,000 to buy a $500,000 house.
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.
What credit score do you need for a 600k house? ›
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.
What income do I need to afford a $550K house? ›
Income to afford a $550K house
Now, let's apply that rule to an annual income of $126,000. A $126,000 salary breaks down to $10,500 per month. Limiting housing costs to 28 percent of your monthly income would cap your mortgage payments at $2,940.
Are interest rates going down in 2024? ›
Will mortgage rates go down—and stay there? The general consensus among industry professionals is that mortgage rates will slowly decline in the last quarter of 2024. The projected declines have shrunk, though, in recent months. At the start of the year, for instance, Fannie Mae predicted rates would drop to 5.8%.
How much house can I afford with $10,000 down? ›
If you have a conventional loan, $800 in monthly debt obligations and a $10,000 down payment, you can afford a home that's around $250,000 in today's interest rate environment.
How much is a 700 000 mortgage per month? ›
The exact monthly payment for a $700,000 mortgage will depend on the interest rate and the loan term. The payment for a $700,000 30-year mortgage with a 6% interest rate is approximately $4,200. For a 15-year loan with the same interest rate, the monthly payment is around $5,900.
Typically, mortgage lenders want you to put 20 percent down on a home purchase because it lowers their lending risk. It's also a rule that most programs charge mortgage insurance if you put less than 20 percent down (though some loans avoid this). But it's not a rule that you must put 20 percent down.
How much down payment for a 700k house? ›
Use Bankrate's mortgage calculator to figure out how much you need to make to afford a $700,000 home: Assuming a 30-year fixed mortgage and a 20 percent down payment of $140,000, at an interest rate of 6.5 percent, your monthly principal and interest payment would be $3,539.
What credit score is needed for a $500,000 house? ›
It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.
Can someone who makes 40k a year afford a house? ›
How much house can I afford with 40,000 a year? With a $40,000 annual salary, you should be able to afford a home that is between $100,000 and $160,000. The final amount that a bank is willing to offer will depend on your financial history and current credit score.
Can a single person live on $36,000 a year? ›
If you want to have a minimalist lifestyle, 36k/year is more then enough. If you want a home, family, car, insurance and some "toys", it's not going to be enough, at least in a majority of places in the U.S. But again, the term "decent" is pretty objective.
Can I buy a home making 36k a year? ›
If you make $3,000 a month ($36,000 a year), your DTI with an FHA loan should be no more than $1,290 ($3,000 x 0.43) — which means you can afford a house with a monthly payment that is no more than $900 ($3,000 x 0.31). FHA loans typically allow for a lower down payment and credit score if certain requirements are met.
Can I afford a 500K house if I make 200K? ›
A mortgage on 200k salary, using the 2.5 rule, means you could afford $500,000 ($200,00 x 2.5). With a 4.5 percent interest rate and a 30-year term, your monthly payment would be $2533 and you'd pay $912,034 over the life of the mortgage due to interest.
Can I afford a 250k house on 50K salary? ›
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.
What income is needed for a 750K mortgage? ›
Income to afford a $750K house
That equates to a monthly income of $14,400, with 28 percent of that amounting to $4,032. So $4,032 is the maximum you should spend on monthly housing costs, including principal, interest, property taxes, insurance premiums and any HOA fees. That's less than the $4,800 estimated above.
How much do I need to make for a 650k mortgage? ›
Based on the current average for a down payment, and the current U.S. average interest rate on a 30-year fixed mortgage you would need to be earning $126,479 per year before taxes to be able to afford a $650,000 home.
