How Much Income Do I Need to Buy a $900k House?

Buying a $900,000 home involves more than just the purchase price. It requires careful consideration of income, upfront cash, and ongoing expenses to ensure long-term affordability.

Understanding Mortgage Qualification

Lenders evaluate a borrower’s financial capacity to determine mortgage eligibility and the maximum loan amount, primarily using the Debt-to-Income (DTI) ratio. This ratio compares a borrower’s total monthly debt payments to their gross monthly income, helping lenders gauge their ability to manage additional debt.

Lenders typically consider two DTI ratios: the front-end, or housing ratio, which focuses on housing costs (principal, interest, property taxes, and homeowner’s insurance), and the more comprehensive back-end ratio. The back-end ratio includes all recurring monthly debt obligations, such as car loans, student loans, and credit card minimums, in addition to housing expenses. Lenders commonly prefer a back-end DTI of 36% or less, though some programs may approve ratios up to 43% or even 50% for applicants with strong compensating factors.

To illustrate the income required for a $900,000 home, consider a scenario with a 20% down payment, resulting in a $720,000 mortgage. With a 30-year fixed-rate mortgage at an average rate of 6.66% (early August 2025), the principal and interest (P&I) payment would be approximately $4,600 per month. Assuming an additional $500 per month for other recurring debts like car or student loans, total monthly debt obligations would be $5,100.

Using a back-end DTI threshold of 36%, the required gross monthly income would be approximately $14,167 ($5,100 / 0.36), translating to an estimated gross annual income of about $170,000. For a higher DTI threshold of 43%, the required gross monthly income would be around $11,860 ($5,100 / 0.43), leading to an annual income of approximately $142,320. These calculations demonstrate how DTI directly influences the income needed to qualify for a mortgage.

Credit scores influence mortgage qualification; a higher score generally leads to a lower interest rate, reducing the monthly principal and interest payment and required income. A stable employment history is also important for lenders, demonstrating a consistent income stream. While a strong credit profile can sometimes offset a slightly higher DTI, managing existing debt directly improves the DTI ratio and enhances mortgage eligibility.

Essential Upfront Costs

Acquiring a $900,000 home involves substantial cash outlays paid before taking possession. These upfront costs are separate from ongoing monthly mortgage payments and represent a significant initial financial commitment. Preparing for these expenses is as important as understanding mortgage income requirements.

The down payment is one of the largest upfront costs, representing a percentage of the home’s purchase price paid at sale, directly reducing the amount borrowed. For a $900,000 home, common down payment percentages include 5% ($45,000), 10% ($90,000), and 20% ($180,000). A down payment of less than 20% typically necessitates private mortgage insurance (PMI).

Closing costs are another significant upfront expense, encompassing various fees charged by lenders and third parties to finalize the mortgage and transfer ownership. These costs usually range from 2% to 5% of the total loan amount. For a $720,000 loan (after a 20% down payment), closing costs could range from $14,400 to $36,000. Examples include loan origination, appraisal, title insurance, attorney, and recording fees.

Buyers also prepay certain expenses to establish an escrow account at closing, often including a portion of annual property taxes and homeowner’s insurance premiums. These prepaid amounts ensure sufficient funds are available to cover future tax and insurance obligations.

Ongoing Homeownership Expenses

Owning a $900,000 home involves recurring expenses beyond the mortgage principal and interest. These ongoing costs contribute to the total monthly financial commitment and should be factored into an affordability assessment. Understanding these expenses helps homeowners budget effectively and avoid unexpected financial strain.

Property taxes constitute a significant ongoing cost, calculated based on the home’s assessed value and local tax rate. These taxes vary considerably by location, with effective rates across the United States ranging from less than 0.5% to over 2% of the home’s value annually. For a $900,000 home, annual property taxes could range from $4,500 to $18,000 or more, translating to monthly payments of $375 to $1,500.

Homeowner’s insurance is another mandatory expense, protecting against perils like fire, theft, and natural disasters. Average costs in the U.S. range from approximately $176 to $200 per month, varying by coverage, location, and home characteristics. Private Mortgage Insurance (PMI) is an additional monthly cost if the down payment is less than 20%. PMI typically ranges from 0.46% to 1.5% of the original loan amount annually, meaning $276 to $900 per month for a $720,000 loan. PMI can be removed once sufficient equity is established.

Utility costs are a regular consideration, encompassing electricity, natural gas, water, sewer, trash, internet, and cable services. For a home around 2,500 square feet, monthly utility bills typically range from $200 to $400, or higher depending on usage and local rates.

Homeowners should budget for maintenance and repairs, an inherent part of property ownership. A common guideline suggests setting aside 1% to 4% of the home’s value annually for maintenance. For a $900,000 home, this translates to an estimated $9,000 to $36,000 per year, or $750 to $3,000 monthly, to cover routine upkeep and unexpected issues. Some properties are also part of Homeowners Associations (HOAs) and require monthly HOA fees, which vary widely based on services and amenities.