Wednesday, February 1, 2023 / by Adam Donaldson-Moxley
How much do you need to make to afford a Million dollar home?
The number of homes in the United States valued at $1 million or more has steadily increased in recent years. A February 2022 report from Redfin showed that a record 8.2% of U.S. homes (or 6 million homes) were valued at $1 million or more. That figure was nearly double the number of homes with such a steep price tag prior to the pandemic.
If you’re a homebuyer in the market for a property in that costly ballpark, it’s important to have a clear understanding of what your annual salary needs to be to comfortably afford the mortgage payment.
While many factors ultimately impact the answer to that question—including the amount of your down payment, as well as your debt levels and mortgage interest rate—here’s a general guide to how much you need to earn to purchase a $1 million home.
By Kammer’s estimate, the monthly payment for a $1 million home would be somewhere in the neighborhood of $6,256—a figure that’s based on the homebuyer coming to the table with a 20% downpayment and taking out a 30-year, fixed-rate mortgage. That monthly mortgage payment estimate is also based on the current national average interest rate of 6.46%, a property tax rate of 1.25%, and a homeowners’ insurance expense of $200 per month.
In order to qualify for a mortgage in this scenario, you would need to make between $195,000 and $210,000 annually or $16,300 per month in gross W-2 income, says Kammer.
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