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

Wondering if a $1 million home is within your budget? Whether it’s a luxurious mansion or a high-rise condo, this price point opens up many possibilities. However, how much you can afford depends on many key factors, especially how much money you bring home.

You might need a jumbo loan for a home this expensive, depending on the price and your down payment. In some high-cost areas, like Alaska and Hawaii, the conforming loan limit (CLL) for 2024 —set by the Federal Housing Finance Agency (FHFA)—is $1,149,825. This means in those locations, you might still qualify for a regular loan instead of a jumbo one.

So, what salary do you need to afford a $1 million home? Let’s break it down.

The Answer: $250,000 or More Per Year

What Factors Determine How Much You Can Afford?

Being able to afford a $1 million home is about more than just your income. Expenses like property taxes, HOA fees, insurance and other debts can have a big impact on your budget. Even if you're comfortable with a certain mortgage payment, lenders ultimately have the final say in approving your loan.

When deciding what you can afford, lenders look at several key factors:

• Savings: Many lenders require a 20% down payment, but it's important that this lump sum doesn't drain your savings. You'll need enough left over for other expenses like closing costs, emergencies, and unexpected repairs.
• Credit score: Your credit score affects how much you can borrow and the interest rate you qualify for. You'll likely need a score of at least 620 to qualify, but a score in the mid-700s may help you secure a lower rate and save money over time.
• DTI (debt-to-income ratio): Your DTI shows how much debt you have compared to your income. Most lenders prefer a DTI of 43% or less. For example, if you make $250,000 annually, your total monthly debt payments shouldn't exceed $8,960.
• Ongoing expenses: Owning a home comes with ongoing costs like mortgage payments, maintenance, insurance and HOA fees. That's why it's just as important to make sure you establish a budget for ongoing home costs and set aside some extra savings for emergencies like a roof repair.

Remember that affording a $1 million home isn't just about qualifying for a loan — it's about finding what works for your budget and lifestyle. Just because you can afford it doesn't always mean it's the right choice.

What Percentage Of My Income Should Go To My Mortgage?

A helpful guideline to figure out how much of your income should go toward your mortgage is the 28/36 rule. When using the rule you aim to use no more than:

• 28% of your gross income should go toward housing costs like your mortgage, property taxes, and insurance.
• 36% of your gross income should cover all debts, including your housing costs, credit card payments, car loans, and other debts.

For example, if you make $250,000 a year, the 28/36 rule would mean you should spend no more than $5,833 per month on housing and your total debt payments shouldn’t exceed $7,500 per month.

The 28/36 rule is a great starting point, but it’s not one-size-fits-all. You may need to adjust these percentages to match your expenses and financial goals. The key is finding a balance that works for you so you can make confident decisions that fit your situation.

$1M Mortgage Examples

Here are two examples that show how interest rates and other factors can change what you’ll pay for a $1 million home:

Example 1: Lower Interest Rate

• Annual Income: $250,000
• Home Price: $1 million
• Down Payment: 20% ($200,000)
• Loan Amount: $800,000
• Interest Rate: 5%
• Loan Term: 30 years

Breakdown:

• Monthly mortgage payment (principal + interest): $4,295
• Taxes and insurance (estimated): $250
• Total monthly housing cost: $4,545

This leaves you with $2,955 leftover for other debts to stay within the 36% rule.

Example 2: Higher Interest Rate

• Annual Income: $250,000
• Home Price: $1 million
• Down Payment: 20% ($200,000)
• Loan Amount: $800,000
• Interest Rate: 8.5%
• Loan Term: 30 years

Breakdown:

• Monthly mortgage payment (principal + interest): $6,151
• Taxes and insurance (estimated): $250
• Total monthly housing cost: $6,401

This leaves you with $1,099 leftover for other debts to stay within the 36% rule.

To get a clearer picture of what salary you need for a $1 million home, tools like the Rocket Mortgage® Home Affordability Calculator can help. It factors in your income, location, down payment, debt and credit score to give you a clearer picture.

Plus, it breaks everything down so you know what to focus on when planning for your dream home.

How Much Down Payment Do I Need For A $1M Home?

A down payment is the money you pay upfront when you buy a home. It’s usually shown as a percentage of the home’s price. The amount you need can depend on the lender and type of loan, but for most conventional loans, 20% is the ideal amount. So, if you’re buying a $1 million home, you’ll usually need to put down at least 20%, which is $200,000.

Remember that the more you put down, the less you need to borrow, which can help you qualify for a better loan and potentially a lower interest rate — saving you money in the long run.

Some loans, like VA loans, allow you to buy a home with no down payment. There are also down payment assistance programs (DPAs) that provide low or no down payment options, but these programs are typically designed for lower-income buyers who meet specific qualifications.

What Is A 20% Down Payment On A $1M House?

• $200,000.

What Is A 15% Down Payment On A $1M House?

• $150,000.

What Is A 10% Down Payment On A $1M House?

• $100,000.

What Is A 5% Down Payment On A $1M House?

• $50,000.

Mortgage Types For A $1 Million Home

The type of loan you'll need for a $1 million home depends on something called conforming loan limits. These limits are the maximum loan amounts set by the government.

In most states, the conforming loan limit for 2024 is $766,550. Loans below this amount are usually considered conventional loans. However, in some areas, the limit can go up to $1,149,825.

Do I Need A Jumbo Loan To Buy A $1 Million Home?

If you need to borrow more than these limits, you'll usually need a jumbo loan, which is designed for higher-priced homes.

Since you’re borrowing a larger amount, jumbo loans have stricter requirements because they aren’t backed by the government like some other loans. Similar to conventional home loans, jumbo loans can have either a fixed interest rate or an adjustable rate (ARM), giving you flexibility to fit your budget and financial needs. The main difference between the two types of loans is the amount you’re borrowing.

Jumbo Loan Requirements

When qualifying for a jumbo loan, here's what lenders usually want to see:

• Credit score: Most lenders want a credit score of at least 680, but some may require it to be as high as 760, depending on the loan type.
• Down payment: You can typically expect to put 20% down. However, some lenders may accept less.
• Debt-to-income (DTI) ratio: Usually, jumbo lenders want you to have a DTI below 43%. To qualify for a Jumbo Smart loan from Rocket Mortgage, your monthly debts (including your new loan) shouldn’t take up more than 45% of your income.
• Savings: In some cases, you may also need to show you have enough savings or assets to handle unexpected costs.

The Bottom Line: Your Salary Isn’t the Only Thing to Consider for a $1 Million Home

Buying a $1 million home is an exciting milestone, but it’s also a big commitment. While your salary is important, it’s just a piece of the home affordability puzzle. Like owning any other home, you also have to account for ongoing expenses like property taxes, maintenance, and insurance — costs that can add up quickly if you’re not financially prepared.

That said, before making the leap into $1 million homeownership, take the time to look closely at your finances so you can make a confident purchasing decision.