When it comes to how much do you have to take a year to afford a $500,000 house, it really has to do with a lot more than your salary. Even so, a quick answer is $87,000 a year. Actually, though, your salary is just one factor when it comes to determining whether or not you will be able to buy that dream house.

## Salary Needed to Buy a $500,000 House

As I mentioned, you can buy a $500,000 house on an $87,000 dollar salary, but that is the bare minimum.

To be comfortable and enjoy other aspects of life such as travel, dining out, and shopping, you will want to make well over $87,000. An income of $100,000 to $120,000 per year is going to make paying for the house less stressful and allow you more disposable income.

The bank will feel better about lending you the money as well.

## Other Factors That Play Into Whether You Can Buy a $500,000 House

So, you have the salary to afford the house and that’s a great start, but unfortunately, it is just a start.

There are other factors that come into play if you are going to buy a house of any dollar amount.

### Downpayment

It goes without saying that your lender will require a downpayment. Most banks look for 20 percent down. That means if you are buying a $500,000 dollar house you will need to have $100,000 to put down.

Depending on your credit score and the situation, some lenders will accept 15 and even 10 percent down. So, that’s a downpayment of $50,000 to $75,000 dollars.

That sounds great until you find out that if you put down less than 20 percent, lenders will require you to purchase private mortgage insurance (PMI.)

Private mortgage insurance protects your bank if you default on the loan.

### How Much is PMI on a $500,000 House?

The cost of private mortgage insurance for $500,000 depends on the terms of the loan and how much your downpayment is.

Even so, you can expect to pay between $200 to $600 per month on top of your monthly mortgage.

While it might seem like a good idea to put a smaller downpayment on your house, you will end up spending more money each month that could have gone to paying off your house.

### Debt to Income Ratio

Something else your lender is going to look at is your debt-to-income ratio. They calculate this number in two different ways.

The first valuation is pretty much exactly what it sounds like. They look at all of your income before taxes and all of your debt (think credit cards, personal loans, student loans, car loans) and determine how much debt you have compared to how much income.

For example, let’s say you make $6,000 per month. You have a car loan, a couple of credit cards, and a student loan and you make monthly payments on them for a total of $2,000.

That means your debt-to-income ratio would be 33 percent. ($2,000 / $6,000 = 33%)

Lenders are typically looking for a debt-to-income ratio of 36 percent or less.

That means if your monthly debt payments are over 36 percent of your income you will need to reduce your debts before you will be able to get a mortgage.

The second debt-to-income ratio determines how much of your monthly income would go to paying your mortgage.

So, let’s continue with the example of a $6,000 monthly income. If your new mortgage payment is going to be $2,000 that means 33 percent of your monthly income will go towards paying your mortgage payment.

Lenders want to see this percentage at around 30 percent. If it is much higher than that, you may not be able to buy the house you want and would have to consider a cheaper home.

If you are making that $87,000 figure we talked about at the beginning of this article and you purchased a $500,000 home with a $100,000 downpayment, your debt-to-income ratio for the percent of your monthly income that would go towards paying your mortgage would be 28 percent.

### Mortgage Costs for a $500,000 Home

The cost of your mortgage will depend on all of what we discussed above.

On a 30 year loan at 4.5 percent interest and with a downpayment of $100,000 you can expect to be paying about $2027 a month for your mortgage payment.

Of course, if your credit isn’t great or you have a lower downpayment, that figure could go up.

### Credit Score

Credit scores are always an important factor when buying a house. If you have a credit score of 850, great! You’re good to go. If your credit isn’t that spectacular, don’t fear.

The average credit score most lenders are looking for is between 700 and 740. Some lenders will even go as low as 620 but plan on having to make a larger downpayment.

If your credit score is lower, you should also work at paying off some debt before you try to buy a house. This will help your debt-to-income ratio and make it easier to be approved.

### Can You Really Afford a $500,000 House?

So, let’s say you are approved for a mortgage for a $500,000 dollar house. That’s great, but stop for a moment and ask yourself can you really afford this house?

Yes, you have the money to make the monthly payments, but that’s not all that life is about.

Think about your lifestyle and how you see yourself living your life for the next 30 years.

Do you want to travel? Do you enjoy going to expensive restaurants? Do you like to drive expensive cars?

All of that might be tough to do if you have a huge mortgage payment. You might not have enough money left over each month to live the lifestyle that you want.

Not to mention, you will want to save for retirement and college funds for the kids.

One last thing you need to look at is job security. While no one can know for sure what will happen in the future, you need to consider just how secure your job is 5…10…15 years down the line.

A $500,000 dollar house is great, but you don’t want it to take over the rest of your life or put you into a bind if something happened to your income.

**You might also enjoy:**

Income to Afford a $2 Million Dollar House

How to Afford a $10 Million Dollar House

Jobs to Afford a Million Dollar House

How to Afford Living in California

How to Afford Living in Boston

### How Much House Can I Afford Calculator

If you’re wondering how much house you can afford, here is a great free calculator that is easy to use and will give you all the information you need.

You just put a few numbers in, and it will give you your debt-to-income ratio, how expensive of a house you can afford, and the payment on that house.

If you are wondering if renting makes more sense to you than buying, here’s a free calculator that will help you see which would be more expensive for you over thirty years.

*Related Questions:*

### How Much Do I Need to Make to Buy a $200K House?

To buy a $200,000 house you would need to make $37,000 and make a downpayment of $40,000.

Your monthly mortgage payment would be $881 if you secured a 4.5 percent interest rate for a 30-year mortgage.

### How Much Do You Have to Make to Afford a $300,000 House?

To buy a $300,000 house you would need to make $52,000 and make a downpayment of $60,000.

Your monthly mortgage payment would be $1,216 if you secured a 4.5 percent interest rate for a 30-year mortgage.

### How Much Do You Have to Make a Year to Afford a $400,000 House?

To buy a $400,000 house you would need to make $67,000 and make a downpayment of $80,000.

Your monthly mortgage payment would be $1,621 if you secured a 4.5 percent interest rate for a 30-year mortgage.

### How Much Do You Have to Make to Afford a $600,000 Dollar House?

To buy a $600,000 house you would need to make $104,000 and make a downpayment of $80,000.

Your monthly mortgage payment would be $2,432 if you secured a 4.5 percent interest rate for a 30-year mortgage.

### Salary to Afford $700K House?

To buy a $700,000 house you would need to make $122,000 and make a downpayment of $140,000.

Your monthly mortgage payment would be $2,837 if you secured a 4.5 percent interest rate for a 30-year mortgage.

**To Sum it All Up:**

If you want to be able to afford a $500,000 dollar house, you will need to make at least $87,000 per year or more. You will also need a $100,000 downpayment, a credit score in the 700’s, and a debt-to-income ratio below 33 percent.