How Much Do You Need to Make to Buy a $1.5 Million House?

Purchasing a $1.5 million home involves a complex interplay of financial factors. The income required depends on various interconnected elements that influence mortgage eligibility and overall financial capacity. This article breaks down these components.

Understanding Key Financial Indicators

A substantial down payment is typically the initial financial requirement for a high-value home. A minimum of 20% of the purchase price is common for homes over $1 million, which helps reduce the loan amount and avoid private mortgage insurance (PMI). A larger down payment also favorably impacts the loan-to-value (LTV) ratio, signaling lower risk to lenders and securing more attractive loan terms.

Your credit score plays a significant role in determining the interest rate offered by lenders and, consequently, the total cost of your loan. A strong credit score, generally considered to be 740 or higher, can unlock the most competitive rates and favorable mortgage terms. Scores below this range might result in higher interest rates, increasing monthly payments.

Lenders also heavily scrutinize your debt-to-income (DTI) ratio, which compares your total monthly debt payments to your gross monthly income. This ratio is often divided into a “front-end” ratio for housing expenses and a “back-end” ratio for all monthly debt obligations. A widely cited guideline is the 28/36 rule, suggesting that housing costs should not exceed 28% of gross income, and total debt should remain below 36%.

While the 28/36 rule serves as a benchmark, lenders may approve higher DTI ratios, sometimes up to 43% or even 50%. This is especially true if a borrower possesses other compensating factors like substantial cash reserves or an excellent credit history. Prevailing interest rates directly impact the size of your monthly mortgage payment, and even slight fluctuations can significantly alter affordability over the typical 30-year loan term.

A mortgage payment typically comprises four main components, collectively known as PITI: Principal, Interest, Taxes, and Insurance. Principal and interest directly relate to the loan amount and interest rate. Property taxes are levied by local authorities based on the home’s assessed value, while homeowner’s insurance protects against property damage and liability. Both taxes and insurance are ongoing and included in the monthly escrow payment.

Calculating Your Income Threshold

To determine the estimated income needed for a $1.5 million home, first calculate the potential mortgage amount. Assuming a 20% down payment, this equates to $300,000 ($1,500,000 x 0.20), leaving a $1.2 million mortgage loan.

Using a 30-year fixed mortgage with an average interest rate of approximately 6.63% as of August 2025, the estimated monthly principal and interest payment for a $1.2 million loan is calculated. For every $100,000 borrowed at this rate, the monthly P&I is roughly $640. Therefore, a $1.2 million loan would result in an estimated monthly P&I of around $7,680 ($12 x $640).

Beyond the principal and interest, property taxes and homeowner’s insurance must be factored into the total monthly housing cost (PITI). Property taxes vary significantly by location, but a national effective rate is around 0.90% of the home’s value annually. For a $1.5 million home, this could mean approximately $13,500 per year ($1,125 per month). Homeowner’s insurance for a $1.5 million dwelling can range from $7,500 to $10,000 annually ($625 to $833 per month).

Adding these estimated costs, the total monthly housing expense (PITI) for a $1.5 million home with a $1.2 million mortgage could be approximately $9,430 to $9,638 ($7,680 P&I + $1,125 property taxes + $625-$833 insurance). To work backward to the required gross monthly income, a common lender’s front-end DTI threshold of 28% can be applied. Dividing the estimated monthly housing cost by 0.28 suggests a required gross monthly income of approximately $33,679 to $34,421, equating to an annual income of about $404,148 to $413,052.

Considering a more flexible DTI threshold, such as a back-end ratio of 36% for total debt, the required income could be lower if other debts are minimal. If the full 36% is applied solely to the housing cost in the absence of other significant debts, the required monthly income would be around $26,194 to $26,772, or an annual income of $314,328 to $321,264.

Initial and Ongoing Costs of Ownership

Beyond the monthly mortgage payments, prospective homeowners must prepare for significant upfront expenses known as closing costs. These typically range from 2% to 5% of the loan or purchase price. For a $1.2 million mortgage on a $1.5 million home, closing costs could amount to between $24,000 and $60,000, covering items such as loan origination fees, appraisal fees, title insurance, and recording fees.

Property taxes are a continuous financial commitment throughout homeownership. The amount varies significantly by jurisdiction, with some areas having substantially higher rates than the national average.

Homeowner’s insurance is another ongoing expense protecting the property and owner from various perils. Mortgage lenders typically require a homeowner’s insurance policy. This annual premium covers damages from fire, theft, and natural disasters.

For properties within certain communities, Homeowners Association (HOA) fees are an additional, regular expense. These fees contribute to the maintenance and management of common areas, amenities, and services provided by the association, such as landscaping, security, or recreational facilities. HOA fees can vary widely and represent a non-negotiable part of ownership in such communities.

Budgeting for ongoing maintenance and repairs is a prudent financial practice. These costs are variable and can include routine upkeep, unexpected repairs to major systems like HVAC or plumbing, and potential upgrades.