Down payment on a $1 million home
Most jumbo mortgages require a 20–30% down payment. For a million-dollar home, that translates to $200,000–300,000. Note that criteria will vary by lender. You may be able to secure a jumbo mortgage with a smaller down payment, depending on your overall financial situation.
Closing costs on a $1 million house
On average, you can expect closing costs to total between 2% to 5% of the purchase price of the home, depending on your lender.
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)
Here's what a monthly mortgage payment would look like on a $1 million home assuming the same caveats as above: 15-year mortgage at 5.53%: $6,549.41 per month. 30-year mortgage at 6.16%: $4,879.01 per month.
To afford an $800,000 house, you typically need an annual income between $200,000 to $260,000, depending on your financial situation, down payment, credit score, and current market conditions. However, this is a general range, and your specific circumstances will determine the exact income required.
Current mortgage interest rates in California. As of Monday, January 13, 2025, current interest rates in California are 7.33% for a 30-year fixed mortgage and 6.61% for a 15-year fixed mortgage.
On a $70,000 salary using a 50% DTI, you could potentially afford a house worth between $200,000 to $250,000, depending on your specific financial situation.
You'll likely need an annual salary of at least $250,000 to finance a $1 million dollar home with a 30-year mortgage, assuming a 20% down payment and low escrow costs. The income required to purchase a million-dollar home varies based on your location, loan amount, mortgage rate and other affordability considerations.
With a $45,000 annual salary, you could potentially afford a house priced between $135,000 to $180,000, depending on your financial situation, credit score, and current market conditions. However, this range can vary significantly based on several factors we'll discuss.
Government Assistance
For example, California has the CalHFA program available to qualified low-income buyers. The program provides grants and loans to eligible borrowers, and the money can either directly subsidize part of a down payment, or cover the entire thing, depending on certain factors.
Therefore, to purchase a home worth a million dollars, you'd generally need a hefty $200,000 for the down payment. However, different mortgage programs could affect the down payment amount. For example, some such as conventional jumbo loan programs can allow for down payment options that start as low as 10%.
Challenges Agents Face When Selling a Million Dollar House
Only a few people can afford to pay such a high amount for a property. So, the target clients are usually wealthy people. Since the client pool is small, finding prospective buyers becomes arduous for real estate agents.
We've gone through some of the most common fees that make up your total closing costs. You can generally expect the total to be between 1 and 5% of the price you are paying to buy your home. Payment for closing costs can sometimes be financed with your loan, in which case it will be subject to interest charges.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.
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.
When it comes to defining a “good” salary, there's no one magic number. The Bureau of Labor Statistics (BLS) reported that the average salary in the U.S. is $65,470, as of May 2023. Based on this data point, $70K a year is a good salary for a single person — one that puts you above the national average.
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.
If you make $70,000 a year, your hourly salary would be $33.65.
Today's rates seem high compared with the recent 2% rates of the pandemic era. But experts say getting below 3% on a 30-year fixed mortgage is unlikely without a severe economic downturn.
Reduce your loan term
Making the equivalent of two extra mortgage payments per year, for example, will knock off 9 years and 4 months from the total term of your loan. A shorter mortgage term also means that you'll own your house outright sooner.