How much you need to make to afford a $1 million home (2024)

According to Zillow’s data from February 2024, a typical home is valued at over $1 million in 550 cities across the country. Most of those (210) are in California—where mid-tier homes go for around $775,000 on average. But many are also in New York, New Jersey, Florida, and Massachusetts.

Nationwide, average home prices have oscillated around the $500,000 mark for the last few years, so a $1 million budget might get you a lot more than a mid-tier home in many areas. But no matter where you’re buying, high mortgage rates can make a $1 million home an especially difficult purchase.

How much income do I need to afford a $1 million house?

Assuming you’re getting a mortgage, your income will only be one of the factors that lenders consider.

If you have excellent credit, lots of savings, and don’t have any other debts, you might be able to buy a $1 million home if your gross (pre-tax) annual household income is around $150,000 or higher. However, this hypothetical assumes you put 20% down, get a 6.75% interest rate on a 30-year fixed-rate loan, and can qualify and are comfortable with a debt-to-income (DTI) ratio of 50%.

A 36% DTI is a more reasonable and realistic level. If you keep all the other factors the same, your gross annual income would need to be around $210,000 to buy a $1 million home. Or, if you want to stay within the recommended 26% ratio, you’d have to earn about $290,000 or more.

What affects a mortgage’s income requirements?

Lenders don’t consider your income in isolation. Many factors can affect your eligibility, interest rates, and borrowing limit. And the factors are often interdependent. For example, your income requirement could depend on the maximum DTI you can qualify for, and the maximum DTI might depend on your credit score.

Here are some of the common factors that lenders consider:

• Debt-to-income (DTI ratio): A comparison of your monthly income and debt payments. The more debt you have—housing or otherwise—the higher your income will need to be.
• Down payment: The less you put down, the more you have to borrow, which affects your DTI. If you put less than 20% down, you may also need to pay for private mortgage insurance (PMI), which will increase your monthly housing costs.
• Credit scores: Your credit scores can affect your eligibility, interest rate, maximum DTI, and required down payment. A higher credit score can help you qualify for a loan with a lower interest rate and less stringent requirements.
• Interest rate: The loan’s interest rate will impact your monthly payment, which affects your DTI. A lower interest rate will lead to lower housing costs, which means you’ll need less income to qualify.
• Savings and investments: Lenders may consider how much money you have in savings, investments, and retirement accounts. Large loans may require you to have six to 12 months’ worth of liquid assets, although the amount might depend on your down payment, credit score, and whether you’re buying a primary residence or second home.

Can a single person afford a $1 million house?

A single person can afford a $1 million house if they have a high enough income. The U.S. Bureau of Labor Statistics lists over 20 jobs that have an annual mean wage of $200,000 or more, which could potentially be enough to afford a $1 million house on a single person’s income. Most are types of doctors, but there are also other careers and businesses that have a high earning potential.

What should a couple’s combined income be to buy a $1 million house?

The income requirement doesn’t necessarily change if you’re buying a home on your own or with a partner. Having a combined income might make buying a $1 million house easier, but lenders will also consider both peoples’ credit scores and debts.

The 28/36 rule for mortgage payments and other debt

The 28/36 rule provides some guidelines for how much of your monthly income should go toward housing and debt payments.

• Keep housing costs under 28% of your income: The first number, 28, refers to a recommendation to keep your monthly PITI (principle, interest, taxes, and insurance) expenses under 28% of your gross monthly income. It’s sometimes called the front-end ratio or housing ratio.
• Keep debt payments under 36% of your income: The second number, 36, is a recommendation to keep your housing expenses and monthly debt payments under 36% of your gross monthly income. It’s also called the back-end ratio or DTI.

The 28/36 rule is often more of a guideline than a strict rule, although having a DTI of 36% or lower might be a requirement in some cases. But even if it’s not required, you can use it to see how much income you’d need to buy a $1 million house while maintaining a reasonable budget.

Here are a few approximate examples of how much your gross monthly income would need to be to buy a $1 million house with a 20% down payment (an $800,000 loan), various interest rates, and other debt payments. The monthly payments include estimates based on a 30-year loan, 1.2% property tax rate, and $1,500 annual home insurance premium.

In the first four scenarios, the front-end ratio is the limiting factor. However, as the non-housing monthly debt payments increased to $3,000, your income would need to increase by several thousand dollars each month to keep the back-end ratio under 36%.

Do I need a jumbo mortgage to buy a $1 million house?

A jumbo mortgage is a mortgage loan with a balance that’s over the “conforming” loan limit. Such loans allow you to borrow a lot of money, but they may require a higher credit score, lower DTI, more reserves, and larger down payment than conventional (non-government-backed) conforming loans.

The Federal Housing Finance Agency (FHFA) sets the loan limits each year, which are based on the area and number of units in the property. For 2024, the conforming loan limit for single-unit properties was $766,550 in most of the U.S. However, in high-cost areas, the loan limit increases to as much as $1,149,825.

Considering the conforming loan limits, you could buy a $1 million home without a jumbo loan if you put at least $233,500 down (a 23.35% down payment). In some high-cost areas, you might be able to buy a $1 million home with a much lower down payment.

How much should a down payment on a $1 million house be?

The down payment requirement on a $1 million house could depend on the type of loan you want to get and other eligibility factors, such as your credit score.

For a conventional loan, you may want to aim for a 20% down payment to avoid paying for private mortgage insurance (PMI). If you put less than 20% down, you may need to pay the insurance premium, which helps protect the lender (not you) and is in addition to your homeowner’s policy.

With certain loans—VA loans being the primary example—it might be possible to buy a $1 million home without a down payment. Other government-backed loan programs, such as FHA loans, may also be available with a low down payment, such as 3.5%.

While there may be some lower or no down payment options if you qualify for a down payment assistance (DPA) program, we should note those are often targeted at helping lower income homebuyers.

Historical charts of sales prices for houses sold in the U.S.

The median sale price for houses in the U.S. is much lower than $1 million. Unlike the average sale price, it’s never even crossed the $500,000 mark. However, median prices have increased over time, and they may continue to climb in many areas.

Let’s take a look at historical charts from the Federal Reserve Bank of St. Louis (FRED).

History of median home sales price

History of average home sales price

Although a $1 million home might be your dream house, also consider how much income you’d need for a more average home—such as a $400,000 home, $500,000 home, or $600,000 home.

Where in the U.S. do houses cost $1 million?

The Zillow analysis from February 2024 we referenced at the start of this article found that typical homes are worth $1 million or more in 550 cities.

Most of these are in California (210), New York (66), New Jersey (49), Florida (32), Massachusetts (31), Colorado (21), Washington, (18), Hawaii (17), Texas (14), and Maryland (10).

Many of these cities also share metro areas, and the five metro areas with the most cities are New York (106), San Francisco (69), Los Angeles (63), Boston (23), and San Jose (18).

What are the potential risks of buying a $1 million house?

A $1 million house is a major purchase, and it can come with some direct risks and potentially hidden costs:

• You could wind up house poor: You might find yourself living in a wonderful home, but your housing expenses could eat up most of your monthly budget. As a result, you won’t have much left over to build your savings, cover emergencies, or have fun.
• There may be percentage-based expenses: There may be closing costs that are based on a percentage of the sale amount, such as transfer taxes and mortgage origination fees. Some ongoing costs, such as property taxes, can also depend on the home’s value. And your home insurance costs may also depend, in part, on how much it would cost to repair or rebuild your home.
• You might have high maintenance costs: The ongoing maintenance for a $1 million home may be much higher than what you’d have to spend on a lower-cost home. Although, the costs also depend on where you live and home’s age and condition.

You may also find your day-to-day living expenses start to creep up if the home is located in an affluent neighborhood.

Can you negotiate the price of a $1 million house?

Regardless of the list price, you can always attempt to negotiate when making an offer on a home. If you’re working with an experienced real estate agent who knows the area, they can help you understand what’s realistic.

In some cases, you might be able to buy the home for under $1 million or get concessions from the seller that decrease your total cost—especially if the home has been listed for a while or the seller needs to sell it quickly. However, if you’re looking at homes in neighborhoods where $1 million is standard, you might not have a lot of negotiating power.

Current mortgage interest rates

Mortgage rates can change daily—sometimes several times each day. Keeping an eye on average mortgage rates can help you understand how much you’ll likely be able to offer when buying a home. However, the rate you receive can depend on various factors, including your down payment, credit scores, and the type of mortgage.

Chart of mortgage rate trends

Mortgage rates have been much higher in 2024 than at any point since 2008. Although high rates can make buying a $1 million home more expensive, rate drops won’t necessarily help. In some areas, home prices may even increase as rates drop and demand picks up.

Here’s how rates have trended over the past few months.

The takeaway

Although $1 million homes are far from the norm in most parts of the country, they are becoming an increasingly common sight. A household would need to have a minimum income of about $150,000 to purchase a $1 million home, but that assumes they’re in a great financial position and will put half of their income toward housing expenses.

A more realistic income for a $1 million home that doesn’t leave you strapped for cash is around $210,000 to $270,000. It’s still a big range, but when you’re borrowing so much money, even a small change in interest rates can have a big effect on where your monthly payment lands—so it’s better to leave yourself a little wiggle room rather than buying at the absolute top of your price range.

Frequently asked questions