So you've got your eye on a $600k house? Wow, that's a big step and we've got to discuss what that means financially. Understanding the amount of money you need to earn and save is extremely important. This is because a mortgage on a home worth $600,000 or more is not a small amount.
Mortgage lenders advise not spending over 28% of your monthly income before taxes on housing costs. This is known as the front-end ratio. Now, the down payment is typically somewhere between 5-20% of the total price of the house.
So for this $600k house, you'd have to save somewhere from $30,000 to $120,000! Remember, the more you put down at the start, the less you have to pay each month.
Continue reading to learn more about how to afford a mortgage a $600,000 home, or apply for a pre-approval. A mortgage pre-approval allows you to understand how much you're likely to get approved for. It can be a great first step to help you decide if a home worth $600k or more is the right decision for you.
How much income do I need to afford a $600k house?
A home worth $600,000 or more needs enough income to pay for the mortgage and other expenses. It's a big financial responsibility. The money you need can vary depending on factors like yourmortgage rate and the initial down payment.
Generally, banks want your mortgage payments to be less than 28% of your income before taxes. This includes property taxes and insurance.
If you put down 20% on a home worth $600,000 with a 30-year, fixed-rate mortgage at 7%, your principal plus interest is $3,193. This means that you need a monthly income of about $11,404.
Keep in mind, it's a good idea to discuss a commitment like this with a financial advisor.
How much of a down payment do I need for a $600k home?
So, how much do you think you need for a down payment on a $600k house? Well, it can vary a lot! It really depends on the mortgage you pick and your own money situation.
Some mortgage options let you put down less. Just remember, that might mean you have to pay extra for private mortgage insurance.
Your paycheck plays a huge part too when you're trying to buy a $600k house. Experts advise that your monthly mortgage payment should not be more than 28% of your pre-tax income. This payment includes the loan, interest, taxes, and insurance.
For a $600k house, especially if you're not putting a lot down, you'll probably need a pretty hefty paycheck to afford the monthly payments. Consulting a mortgage advisor or financial planner can provide a better understanding of your affordable options.
What does a 20% down payment option look like for a $600k house?
Whether or not you can afford this mortgage is determined by various factors. These factors include your other debts, the lender's debt-to-income ratio requirements, and the mortgage's interest rate.
For a $600,000 mortgage, a 20% down payment is $120,000. Unless you have that much cash on hand, you may need to cash in investments or sell property to help get you to 20%.
What does a 15% down payment option look like for a $600k house?
A 15% down payment on a home worth $600,000 is $90,000.
A larger down payment reduces overall mortgage borrowing, payments, and interest. Aim to keep mortgage payments under 28% of your gross monthly income.
The principal, interest and property mortgage insurance on $600,000 house with a 15% down payment and a 30-year, fixed-rate mortgage with 7% rate would cost $3,662. To afford this, you would need a monthly income of about $13,079 or an annual income of about $157,000.
What does a 10% down payment option look like for a $600k house?
A 10% down payment on a $600,000 house would be $60,000, but you'd still need financing for the remaining $540,000. This financed amount determines the monthly mortgage payments, not the house's total cost.
What does a 5% down payment option look like for a $600k house?
A 5% down payment on a $600,000 house would be $30,000, but you'd still need financing for the remaining $570,000. The principal, interest, and property mortgage insurance would cost about $4,061 with a 5% down payment. You'd need a monthly income of about $14,504 to make this affordable.
KEY TIPS TO USE TO AFFORD A $600K MORTGAGE
Income
Increase your income sources to afford a larger house budget.Credit Score
Maintain a good credit score for a better chance of loan approval. Double-check your report for any items that you may need removed or adjusted before starting the application process.Down Payment
Save for a substantial down paymentto reduce the loan amount and monthly payments.Government Loan Options
Consider getting a FHA loan, which requires a lower down payment. Think about a VA loan if you're a veteran or the spouse of a veteran who meets the requirements.Limit Spending
Stick to the recommendation of not spending more than 28% of your income on housing costs. Also, set a realistic budget and stick to it when home shopping.Budget for Additional Costs
Consider additional costs such as property taxes, insurance, and maintenance in your budget.
How can I apply for a mortgage on a home worth $600k?
Do you already have a home in the $600k range that you've had your eye on? If you're ready to apply for a mortgage pre-approval, Guaranteed Rate is here to help. You can apply online for a pre-approval and get a response in as little as a day.
Mortgage pre-approval is a common first step that most homebuyers take. With pre-approval, you can show sellers that you're serious and know how much you're likely to be approved for. Start your pre-approval today to get a better idea if that home worth $600,000 or more is attainable.
FAQs
The principal, interest and property mortgage insurance on $600,000 house with a 15% down payment and a 30-year, fixed-rate mortgage with 7% rate would cost $3,662. To afford this, you would need a monthly income of about $13,079 or an annual income of about $157,000.
How much income do you need to qualify for a $500000 home loan? ›
In today's climate, the income required to purchase a $500,000 home varies greatly based on personal finances, down payment amount, and interest rate. However, assuming a market rate of 7% and a 10% down payment, your household income would need to be about $128,000 to afford a $500,000 home.
How much monthly payment for a 600K house? ›
If you're thinking of applying for a $600K mortgage, here's the bottom line: The monthly payment on this mortgage at a 7% annual percentage rate (APR) for 30 years works out to be $3,991.81. If you would rather finance with a 15-year mortgage, the monthly payment would be $5,392.97.
How much should I make to afford a 700k house? ›
That makes your total annual housing bill $50,400. Now apply the common rule of thumb that you shouldn't spend more than about a third of your income on housing. The $50,400 figure, multiplied by three, comes to $151,200 — that is the minimum salary you'd need in order to afford this home purchase.
What credit score do you need for a 600k house? ›
Mortgage lenders typically want to see a score of 620 or better before approving a conventional mortgage. There are government-insured mortgages if your score is lower, and if your score is 760 or higher you'll qualify for the best interest rates.
How much house can I afford if I make $36,000 a year? ›
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.
How much do you need to make to afford a 750K house? ›
To afford a $750K home with a 10% down payment ($712.5K Loan Amount), you need to make at least $125K. To afford a $1M home with a 20% down payment ($800K Loan Amount), you need to make at least $140K.
How much should you put down on a house? ›
Typically, mortgage lenders want you to put 20 percent down on a home purchase because it lowers their lending risk. It's also a rule that most programs charge mortgage insurance if you put less than 20 percent down (though some loans avoid this). But it's not a rule that you must put 20 percent down.
How much can I get approved for home loan based on income? ›
A lender might still qualify you for a mortgage of as much as: Some lenders — including FHA lenders — will qualify you for a mortgage if you'll spend up to 31% of your pretax income on housing and up to 43% on total debt payments.
Are interest rates going down in 2024? ›
While the Fed had hinted at several rate drops in 2024, they haven't occurred yet, as stubborn inflation and other factors have delayed them.
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.
How to pay off a mortgage faster? ›
Here are some ways you can pay off your mortgage faster:
- Refinance your mortgage. ...
- Make extra mortgage payments. ...
- Make one extra mortgage payment each year. ...
- Round up your mortgage payments. ...
- Try the dollar-a-month plan. ...
- Use unexpected income.
What income is required for a 600k mortgage? To afford a house that costs $600,000 with a 20 percent down payment (equal to $120,000), you will need to earn just under $90,000 per year before tax. The monthly mortgage payment would be approximately $2,089 in this scenario. (This is an estimated example.)
What credit score do I need to buy a 700k house? ›
Most mortgages, including conventional loans, require a credit score of 620 or higher. It's possible to get an FHA loan with a credit score as low as 500, but many lenders require higher scores. Borrowers with higher credit scores get better rates and terms than those with low scores.
How much is a downpayment on a $700000 house? ›
Putting down the standard 20% can help you avoid paying mortgage insurance and interest and could save you thousands of dollars. So you can expect to pay between $21,000 and $140,000 as a down payment on a $700,000 purchase. Keep in mind, besides the down payment amount, you will also have to factor in closing costs.
Can I afford a 500k house on 100k salary? ›
The 30% rule for home buyers
If your annual salary is $100,000, the 30% rule means you should spend around $2,500 per month on your house payment. With a 10% down payment and a 6% fixed interest rate, you could likely afford a home worth around $350,000 to $400,000 (depending on the cost of taxes and home insurance).
Can I afford a 500k house if I make 200K? ›
A mortgage on 200k salary, using the 2.5 rule, means you could afford $500,000 ($200,00 x 2.5). With a 4.5 percent interest rate and a 30-year term, your monthly payment would be $2533 and you'd pay $912,034 over the life of the mortgage due to interest.
Can I afford a 250k house on 50K salary? ›
You can generally afford a home for between $180,000 and $250,000 (perhaps nearly $300,000) on a $50K salary. But your specific home buying budget will depend on your credit score, debt-to-income ratio, and down payment size.
How much income to afford a 550K house? ›
As a general guideline, it's often recommended to limit your housing expenditure to no more than about one-third of your income. And so, to determine approximately how much income you would need to afford a $550K home purchase, triple $42,000: You'd need an annual income of at least $126,000.
