The subject line for my blog is a common topic that lenders use for consumer blogs for search engine optimization (or “SEO” – or an entity’s efforts to draw readers to its website).
And, here is the answer to the question: You need anywhere from $100,000 to $300,000 in income to buy a $1 million dollar home right now.
The reason there is so much variance is because there are so many factors that impact qualification, including:
Let’s look at financing types to start with. Most competitive jumbo lenders limit total debt ratios (all monthly debt payments divided by gross monthly income) to 43%, while Fannie Mae limits debt ratios to 50%. So, if you are in a “high-cost area” where Fannie Mae loan limits are in excess of $1 million, you will qualify for a $1 million home more easily than those who do not live in a “high-cost area” and will thus have to get jumbo financing instead.
So, let’s use a $1 million purchase with 10% down and an 8% interest rate as an example.
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So, if a borrower has to get jumbo financing, her annual income would need to be about $230,000 if she has NO consumer debt payments.
If a borrower is able to get conforming (Fannie Mae) financing, her annual income would need to be about $200,000, if she has NO consumer debt payments.
If you throw a $500 car payment in the mix, the jumbo income requirement jumps to $244,000 and the conforming income requirement jumps to $210,000.
In 2021, we were qualifying borrowers for $1 million homes with as little as $100,000 in income when rates were under 3% and as long as borrowers had 25% or more for a down payment.
My broader point is that there are so many factors behind a qualification that there is never one answer when it comes to the minimum income necessary for any type of purchase.
This is also a reminder of why it is so important for borrowers to get the assistance of a qualified lender when estimating what it will actually take to qualify.