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.
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.
