How Much Income Is Needed for a $1 Million House?

Owning a $1 million home is a significant financial milestone, but the income required is not a fixed figure. Factors such as your down payment, existing debt, creditworthiness, and prevailing interest rates all play a substantial role in determining how much income a lender will consider sufficient.

Calculating the Core Mortgage Payment

The principal and interest (P&I) portion of a mortgage payment forms the foundation of your monthly housing expense. For a $1 million home, assuming a 20% down payment, the loan amount would be $800,000. With an average 30-year fixed mortgage interest rate around 6.66% as of August 2025, the monthly principal and interest payment on an $800,000 loan would be approximately $5,120.

Lenders assess a borrower’s income to ensure they can comfortably cover this P&I amount. A general guideline is that this core housing payment should not exceed a certain percentage of your gross monthly income, though this is a starting point before other debts are considered. This figure represents only one component of the total monthly housing cost.

Factors Affecting Your Borrowing Capacity

Several factors influence the maximum loan amount a borrower can secure and the income lenders require. A larger down payment significantly reduces the loan amount, lowering the required income. For a $1 million home, a 20% down payment ($200,000) can help avoid Private Mortgage Insurance (PMI) and result in a lower monthly payment. Conversely, a smaller down payment increases the loan amount and often necessitates PMI, which adds to the monthly cost and demands higher income to qualify. PMI typically ranges from 0.46% to 1.5% of the original loan amount annually.

Your debt-to-income (DTI) ratio is another measure lenders use to assess your ability to manage monthly payments. This ratio compares your total monthly debt obligations, including the proposed housing payment, to your gross monthly income. While some conventional loans may allow DTI ratios up to 50% with strong credit, a common limit for many loans is around 43% or less. Existing debts like car loans, student loans, and credit card balances reduce the income available for a mortgage payment, making it harder to qualify for a large loan unless your overall income is substantially higher.

A strong credit score also directly impacts the interest rate you receive, affecting your monthly payments and required income. Borrowers with excellent credit scores (740 or higher) typically secure the most favorable interest rates and loan terms. A lower credit score (minimum 620 for conventional loans or 700 for jumbo loans) can lead to a higher interest rate, increasing the monthly payment and the gross income needed to qualify. Even a small difference in the interest rate can result in thousands of dollars more or less paid over the life of a 30-year mortgage.

Additional Homeownership Expenses

Owning a $1 million home involves other substantial ongoing costs beyond the principal and interest payment. Property taxes, for example, are a significant housing expense that varies by location. While often escrowed into the monthly mortgage payment, these taxes require adequate income.

Homeowners insurance is another escrowed cost, protecting against unforeseen damages. Its cost varies based on the home’s value, location, and coverage, with average annual costs for $300,000 dwelling coverage around $2,110 to $2,397 per year, but can be higher for more expensive homes. For properties within managed communities, Homeowners Association (HOA) fees add to monthly expenses, covering common area maintenance and amenities. These fees can range from $100 to over $1,000 per month, depending on the property type and services provided.

Maintaining a high-value home also entails higher ongoing maintenance and repair costs. Financial advisors suggest budgeting approximately 1% of the home’s value annually for maintenance, which for a $1 million home is $10,000 per year, or about $833 per month. These costs are not typically included in the mortgage payment but are a necessary part of homeownership that a borrower’s income must accommodate.

Specific Lender Requirements and Initial Costs

Purchasing a $1 million home frequently necessitates a jumbo loan, as the amount typically exceeds the conforming loan limits set by federal housing agencies. For 2025, the baseline conforming loan limit for a single-unit property is $806,500 in most areas, increasing to $1,209,750 in high-cost regions. Jumbo loans, which exceed these limits, come with stricter qualification criteria due to the higher risk involved for lenders. These often include higher credit score requirements (sometimes 720 or higher) and lower debt-to-income ratio limits (typically 43% or less).

Lenders providing jumbo loans also commonly require borrowers to demonstrate substantial liquid cash reserves after covering the down payment and closing costs. These reserves, often equivalent to 6 to 12 months of mortgage payments, ensure the borrower can manage payments in case of financial disruptions.

Beyond the down payment, borrowers must also account for closing costs, which are upfront expenses paid at the close of the transaction. These costs typically range from 2% to 5% of the loan amount, covering fees for appraisal, title insurance, loan origination, and attorney services. For an $800,000 loan, this could mean an additional $16,000 to $40,000. These initial costs are a financial hurdle that the borrower’s overall financial capacity must support to acquire a $1 million home.