Have you ever wondered what kind of income to afford a $2 million dollar house you might need? It might be more than you think, or it could be less depending on your estimation. I did a little research to find the answer for you.
What Income Do You Need to Buy a $2 Million Dollar House?
Your income is just the beginning when it comes to buying a $2 million dollar house. There is a lot more involved and a lot more money needed than just your income.
Even so, the quick answer for you is you will need an income of at least $280,000 a year.
Here’s a quick chart that shows you all the expenses and what you need salary-wise to buy a house for a million dollars and up to four million. I’ll go into the break down next.
First things first. All of these numbers assume you have really good credit and basically no debt. If you have so-so credit, you won’t be able to borrow the money to buy a $2 million dollar home. That’s just the breaks.
Secondly, even if you have good credit you won’t be able to buy this expensive of a house if you have a lot of debt. I suppose it might be possible, but you would need a much bigger income than $280,000.
With that in mind, let’s look at the numbers for someone with good credit and no debt.
Additional Considerations When Buying a $2 Million Dollar Home
Let’s check out all the money, besides your salary, that you will have to come up with to buy a $2,000,000 dollar home.
Your Down Payment
If you are planning on purchasing a less expensive home you might be able to get away with 15 percent down. That’s not true when it comes to something this expensive.
You will be required to put down 20 percent and possibly more. You won’t be able to get a regular mortgage. You will have to get what’s called a jumbo mortgage and the requirements to get one of these is a bit more difficult than a typical home mortgage.
So, you’re looking at a minimum of having to put $400,000 dollars down. You will need to have that in the bank and ready to go.
The funny thing about down payments is that lenders want to see that you not only have the money for the downpayment but exactly where you got it from.
Did you sell some stocks to get the money? Have you been saving for the last 10 years? Was it a loan from a family member?
The lender will look very closely at this. They will want to see that you had a legitimate way to come up with the money and didn’t get it through a loan or really even as a gift.
Your Closing Costs
Something else you will need to keep in mind and have ready is money for closing costs. The seller certainly pays a lot of this, but you can be responsible for some of it as well.
Closing costs tend to run between 1.5 percent and 4.5 percent. On the chart above, I went somewhere in the middle at 2.5 percent.
You will also have to pay for an inspection of this home and have an appraisal done as well.
On my very cheap, small home, the inspection was $300 and the appraisal was $250 dollars. For a home this expensive they would be quite a bit more and most likely in the thousands of dollars each.
The seller pays the realtor’s fees but if you are working for a buyer’s agent there may be costs associated with that.
For your $2 million dollar home, you should expect closing costs of around $50,000 give or take a few thousand.
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Your Mortgage Payment
Woo hoo, you got the house! That’s great. Now you have to start paying your mortgage each and every month after month after month…
Most mortgages of this size are going to be for 30 years.
On a 2 million dollar home, you can expect to pay around $10,000 per month.
Keep in mind, your mortgage payment also includes taxes and insurance. Even so, over your 30-year mortgage, your 2 million dollar house will cost you about 3.6 million dollars.
Hopefully, it will go up in value over those years as well, so you will come out ahead.
Of course, if you can come up with a bigger downpayment than 20 percent your monthly mortgage payments will be a lot less.
Also, if you can handle a 15-year mortgage your monthly payments will be a lot higher, but you will end up paying a lot less interest and in the end save a lot of money.
Keeping Your House Clean
Money is a funny thing. In some parts of the country, a 2 million dollar house would be a huge place, maybe 10,000 square feet or more.
In other parts of the country, it might be a 1,000 square foot, 1 bedroom condo.
If it’s a small condo, there is a good chance you can keep it clean yourself.
On the other hand, if you live in a part of the country where a 2 million dollar home is 10,000 square feet or more, you’re going to need some help.
Depending on where you are, you could be paying anywhere from $25 dollars per hour to $75 dollars per hour for house cleaning.
If you are having someone live in, then you are looking at a lot more money. You might need to pay someone $2,000 plus per month as well as benefits.
Keeping your very large house clean is an expense you can’t overlook unless you want to be spending all of your free time cleaning or live in a dirty house.
Your Lawn Care
Again, depending on where you live you could have no yard with a 2 million dollar house or you could have extensive grounds that require constant care.
Don’t forget, there is also trimming of trees and shrubs, planting flowers, and so on. If you have to take care of your own yard then you know what I mean.
Just take that times about 1,000 and you will understand the expense you’re looking at for a home with extensive grounds.
If you’re wondering if you can afford a 2 million dollar home or even a less expensive one, you can find out with this free mortgage calculator.
Not to mention, if you’re looking for a lender, check out Lending Tree. They’re online and can get you an answer very quickly.
How Much do You Have to Make to Afford a $1 Million Dollar Home?
On the low end, you will need to make $140,000 per year to afford a million-dollar home. You will also have to have great credit and no debt.
If you have additional debt, you will need to make more money and as much as $200,000.
Don’t forget the downpayment which will be around $200,000 and your monthly mortgage of about $5,000.
How Much Do You Need to Make to Afford a $3 Million Dollar House?
To afford a $3,000,000 dollar house you will need to make at least $340,000 a year. You could need more depending on your financial situation.
You will also need to have available enough money to make a $600,000 downpayment and $15,000 a month mortgage payments.
How Much Money Do You Have to Make to Afford a $5 Million Dollar Home?
If you want to purchase a $5 million dollar home you will need to be able to make a downpayment of $1 million dollars.
Your mortgage will be about $25,000 dollars per month.
You will also need to cover any closing costs you might have, so you should be prepared to have an additional $125,000 on hand.
Don’t forget the maintenance, lawn care, and cleaning service costs. You should add an additional $10,000 per month minimum for those.
To Sum it All Up:
The thought of buying a 2 million dollar house is pretty exciting. The reality is maybe a little less so. If you have the $280,000 salary and can come up with a $400,000 downpayment you’re halfway home. Even so, the upkeep and maintenance are going to take a big bite out of your wallet.