What Salary Do You Need To Afford A $1 Million Dollar Home?

Can You Really Afford A Million Dollar Home?

Have you ever wondered how some people can afford million-dollar homes? In this article, we’ll break down the salary needed to afford a $1 million dollar home, and even explore what it takes to afford up to a $1.5 million or $2 million dollar property.

What is the Salary to Afford a $1 Million Dollar Home?

The first thing you need to know is that the salary to afford a $1 million dollar home isn’t just about the purchase price. You’ll also need to consider closing costs, property taxes, homeowners insurance, and possibly even private mortgage insurance (PMI).

Here’s a rough breakdown:

• Annual Household Salary: At least $250,000*
• Down Payment: This will vary depending on the loan limits in the county you are buying a home in – but assume anywhere from 3.5%-20%.
• Monthly Mortgage Payment: Approximately $4,000 (based on current interest rates)
• Property Taxes: Varies by location, but let’s estimate $12,000 per year
• Homeowners Insurance: Around $1,200 per year

*Remember, these are just estimates. Your actual needs may vary based on your credit score, the state of the real estate market, and other factors. Reach out to a mortgage expert at JVM Lending for a customized home purchase scenario and an outline of your potential costs. 

You can utilize the affordability calculator below to see what is within your threshold.

How Do Interest Rates Affect Affordability?

Interest rates play a major role when it comes to buying a home. Fixed-rate mortgages are generally the go-to for most homebuyers because they offer stability. However, even a small change in interest rates can significantly impact your monthly mortgage payment and the overall cost of your million-dollar home.

For example, a 1% increase in interest rates could raise your monthly payment by hundreds of dollars. So, it’s crucial to keep an eye on interest rates when you are ready to buy a home.

What About a $1.5 Million Dollar Home?

Dreaming bigger? The salary to afford a 1.5 million dollar home will, of course, be higher. You’ll likely need an annual salary of at least $300,000 to $400,000.*

Your down payment would also increase to around $300,000, and your monthly mortgage payment could be in the ballpark of $6,000. Don’t forget to factor in higher property taxes and homeowners insurance as well.

*Remember, these are just estimates. Your actual needs may vary based on your credit score, the state of the real estate market, and other factors. Reach out to a mortgage expert at JVM Lending for a customized home purchase scenario and an outline of your potential costs. 

Can I Afford a $2 Million Dollar Home?

If you’re setting your sights even higher, the salary to afford a $2 million dollar home would be around $450,000 to $500,000 per year.* Your down payment would be a whopping $400,000, and your monthly mortgage payment could be around $8,000 or more. Again, property taxes and homeowners insurance will be higher, so make sure to budget for those.

*Remember, these are just estimates. Your actual needs may vary based on your credit score, the state of the real estate market, and other factors. Reach out to a mortgage expert at JVM Lending for a customized home purchase scenario and an outline of your potential costs.

How Do Loan Limits Affect Your Home Purchase?

You might be thinking, “I’ve got the salary to afford a $1 million dollar home, so I’m all set, right?” Not quite. Another crucial factor to consider is the loan limit, which can vary by state and even by county. These limits are set by government-sponsored entities like Fannie Mae and Freddie Mac, and they can significantly impact your home purchase.

What Are Loan Limits?

Loan limits are the maximum amount that you can borrow for a mortgage, and they’re set based on the median home prices in a particular area. For example, in areas with lower real estate prices, the loan limits might be considerably less than in high-cost areas like San Francisco or New York City.

Why Do Loan Limits Matter?

Here’s the kicker: If the home you’re eyeing exceeds the loan limit in your area, you’ll be stepping into “jumbo loan” territory. Jumbo loans come with their own set of rules, including higher interest rates and more stringent credit score requirements. You might also need a larger down payment.

What Can I Do If My Dream Home Exceeds the Loan Limit?

If the million-dollar home you’re interested in exceeds the loan limit, you have a few options:

1. Increase Your Down Payment: By putting down more money upfront, you can bring the loan amount within the limit.
2. Opt for a Jumbo Loan: If you have a high credit score and sufficient income, you might qualify for a jumbo loan. Just be prepared for higher interest rates.
3. Consider a Different Location: Sometimes, moving your search to a neighboring county with higher loan limits can make all the difference.
4. Split Your Loan: Some people opt for a “piggyback” loan, which involves taking out a second mortgage to cover the amount that exceeds the loan limit. However, this can be risky and could lead to higher overall costs.

Loan limits add another layer to consider in your journey to owning a million-dollar home, but with the right planning, it doesn’t have to be a roadblock. We have mortgage experts available to help answer any questions you might have about the loan limits in the area you are thinking of purchasing a home.

Frequently Asked Questions: Quick Answers to Your Burning Questions

What’s the Minimum Credit Score Needed?

A good credit score can make a world of difference. For a million-dollar home, aim for a credit score of at least 720 to secure the best interest rates.

Do I Need Private Mortgage Insurance (PMI)?

If your down payment is less than 20% of the home purchase price, you’ll likely need to pay for PMI, which could add hundreds to your monthly payment.

What Should My Household Income Be?

Your household income (the total income of whoever is applying for and signing/co-signing the loan documents) should ideally be high enough to comfortably cover all home-related expenses, including the mortgage, property taxes, and insurance, while still allowing for savings and other living expenses.

Can I Use Gift Money for the Down Payment?

Yes, you can use gift money towards your down payment, but there are specific rules and documentation required. Make sure to consult with our team for details.

Ready to Make Your Million-Dollar Dream a Reality? JVM Lending is Your Trusted Partner

By now, you should have a better understanding of the salary requirements and financial considerations involved in purchasing a million-dollar home. Whether you’re eyeing a $1 million, $1.5 million, or even a $2 million property, it’s crucial to have a clear financial plan and a trusted mortgage lender by your side – which is where JVM Lending comes in.

With our expertise in navigating the complexities of high-value mortgages, we’ve helped thousands of buyers purchase their dream home. Our team at JVM Lending is committed to providing personalized solutions that align with your financial goals, ensuring that you’re well-equipped to make this significant investment.

Get in touch with our team at JVM Lending today to see what you can truly afford. Let’s make your dream home more than just a dream—let’s make it your reality.

Ready to take the next step? Contact JVM Lending now at (855) 855-4491 or [email protected] to embark on this exciting journey together!