What Salary Do I Need to Afford a 600k House?

Purchasing a home requires understanding the financial commitments beyond the initial transaction. Determining the salary needed to afford a $600,000 house involves evaluating ongoing expenses and lender requirements. A financial assessment helps prospective buyers understand their true affordability.

Deconstructing the $600,000 Home Cost

The primary component of a home’s monthly cost is the principal and interest (P&I) payment on the mortgage loan. This payment is directly influenced by the loan amount, the interest rate, and the loan term. For a $600,000 home, the actual loan amount depends on the buyer’s down payment.

As of late August 2025, average rates for a 30-year fixed mortgage are around 6.5%, while a 15-year fixed mortgage might be closer to 5.7%. A longer loan term, such as a 30-year mortgage, generally results in lower monthly principal and interest payments compared to a 15-year mortgage. However, a 15-year term accrues less total interest over the life of the loan.

The amortization schedule dictates how the principal and interest are paid down over the loan’s duration. Early in the loan term, a larger portion of the monthly payment goes towards interest. As the loan matures, more of each payment is allocated to reducing the principal balance. This gradual shift means building equity in the home accelerates in later years.

For example, a $480,000 loan (assuming a 20% down payment on a $600,000 home) at a 6.5% interest rate over 30 years would have a principal and interest payment of approximately $3,034 per month. If the same $480,000 loan were on a 15-year term at 5.7%, the monthly principal and interest payment would be roughly $3,978. These figures show how loan terms and interest rates shape the core monthly housing expense.

Beyond Principal and Interest: Other Monthly Housing Expenses

Beyond the principal and interest, several other monthly expenses contribute to the total cost of homeownership. Property taxes are a significant recurring cost, varying widely by location. These taxes are assessed by local governments based on the home’s value, contributing to local services. While a national average effective property tax rate is around 0.90% of a home’s value, specific rates can range from below 0.3% to over 2%. For a $600,000 home, annual property taxes could range from $3,000 to $12,000 or more, translating to $250 to $1,000+ per month.

Homeowner’s insurance is another mandatory expense that protects against damage to the property from covered perils. Lenders require this insurance to safeguard their investment. The cost of homeowner’s insurance varies based on factors like the home’s location, age, construction type, and chosen coverage. The national average cost for homeowner’s insurance on a $300,000 dwelling is around $2,400 per year. A reasonable estimate for a $600,000 home might be $250 to $350 per month, though this can differ substantially.

Private Mortgage Insurance (PMI) is an additional cost for borrowers who make a down payment of less than 20% on a conventional loan. This insurance protects the lender against default risk. PMI rates typically range from 0.5% to 1.5% of the original loan amount annually. For instance, if a buyer puts down 10% on a $600,000 home, borrowing $540,000, PMI at 0.8% would add approximately $360 per month. Homeowners Association (HOA) fees are also a consideration for properties within planned communities or condominiums. These fees cover the maintenance of common areas and shared amenities, and they can range from under $100 to several hundred dollars monthly.

The Importance of Your Down Payment

The down payment is the initial sum of money a buyer pays upfront towards the purchase price of a home. This amount directly reduces the principal loan amount, which in turn lowers the monthly mortgage payment. A larger down payment also decreases the loan-to-value (LTV) ratio, representing the amount borrowed compared to the home’s appraised value.

Common down payment percentages include 5%, 10%, or 20% of the home’s purchase price. A 20% down payment is often considered ideal for conventional loans because it typically eliminates the requirement for Private Mortgage Insurance (PMI). For a $600,000 home, a 20% down payment would be $120,000. This would result in a loan amount of $480,000, avoiding PMI.

Conversely, a smaller down payment, such as 5% ($30,000 on a $600,000 home), would mean borrowing $570,000. This larger loan amount increases the monthly principal and interest payment. A down payment less than 20% almost always triggers the need for PMI, adding an extra monthly cost.

Lender Considerations and Your Debt-to-Income Ratio

Lenders assess a borrower’s financial capacity to repay a mortgage through various metrics, with the Debt-to-Income (DTI) ratio being a primary consideration. The DTI ratio compares an applicant’s total monthly debt payments to their gross monthly income. This ratio helps lenders determine if a borrower has sufficient income remaining after covering existing debts to manage a new mortgage payment.

There are two main types of DTI ratios: the front-end ratio and the back-end ratio. The front-end ratio, also known as the housing ratio, focuses solely on housing-related costs, including the estimated monthly mortgage payment (principal, interest, property taxes, insurance, and any HOA fees). For conventional loans, lenders prefer this ratio to be at or below 28% of gross monthly income. For FHA loans, the front-end ratio limit is commonly set at 31%.

The back-end DTI ratio is more comprehensive, encompassing all monthly debt obligations, including prospective housing costs, credit card minimum payments, student loan payments, and auto loan payments. Conventional lenders generally look for a back-end DTI of 36% or less, though some may approve up to 45% or even 50% for borrowers with strong credit scores. FHA loans typically allow a higher back-end DTI, often up to 43%, with some flexibility to go as high as 50% or 57% under specific circumstances. Lenders use gross income, which is income before taxes and deductions, when calculating DTI.

Calculating Your Required Salary

To estimate the gross annual salary needed for a $600,000 home, aggregate all potential monthly housing expenses and existing debt obligations. Begin by calculating the estimated principal and interest payment based on a chosen loan term and current interest rates, assuming a particular down payment. For a $600,000 home with a 10% down payment ($60,000), the loan amount would be $540,000. At a 6.5% interest rate over 30 years, the principal and interest would be approximately $3,414 per month.

Next, add estimates for property taxes, homeowner’s insurance, and, if applicable, Private Mortgage Insurance (PMI) and HOA fees. Using earlier estimates, property taxes could be around $500 per month (1% of $600,000 annually), homeowner’s insurance approximately $300 per month, and PMI around $360 per month (0.8% of $540,000 loan amount). This brings the total estimated monthly housing cost to roughly $4,574 ($3,414 P&I + $500 taxes + $300 insurance + $360 PMI).

Then, factor in any other recurring monthly debt payments, such as car loans, student loan payments, or credit card minimums. If these total, for example, $500 per month, the total monthly debt obligations (housing plus other debts) would be $5,074. To work backward to the required gross monthly income, divide this total monthly debt by a target back-end DTI ratio. If a lender requires a maximum back-end DTI of 36%, the calculation would be $5,074 / 0.36, yielding a gross monthly income of approximately $14,094. Multiplying this by 12 months provides the estimated gross annual salary needed: $169,128.