How much do you need to make to afford a $700k home? This is a question that many potential homebuyers ask themselves when considering purchasing a house in today’s real estate market. With home prices on the rise, it’s important to have a clear understanding of what it takes to afford a $700,000 mortgage.
According to recent data from the National Association of Realtors, the median home price in the United States is currently around $350,000. However, in some areas, like major cities and popular suburbs, the median home price can be much higher. In fact, in some areas, a $700,000 home may be considered average or even below average. So, what does this mean for those looking to purchase a $700k house? Let’s take a closer look at the income needed to afford this type of home and some helpful tips for budgeting for a $700,000 mortgage.
Income Estimates for a $700k House
The amount of income needed to afford a $700,000 home will vary depending on a variety of factors, including location, interest rates, and down payment. However, as a general rule of thumb, most financial experts recommend that your monthly mortgage payment should not exceed 28% of your gross monthly income. This means that to afford a $700,000 mortgage, you would need to make at least $250,000 per year.
Of course, this is just an estimate and the actual amount may be higher or lower depending on your individual financial situation. For example, if you have a large down payment or a low interest rate, you may be able to afford a $700,000 mortgage with a lower income. On the other hand, if you have other debts or expenses, you may need a higher income to comfortably afford a $700k house.
Examples of Income Needed for a $700k House
To better understand the income needed for a $700,000 home, let’s look at a few examples. Keep in mind that these numbers are based on a 30-year fixed-rate mortgage with a 20% down payment and a 3.5% interest rate.
Example 1: John and Sarah are a married couple looking to purchase a $700k house in a popular suburb. They have a combined gross income of $300,000 per year and have saved up a 20% down payment of $140,000. With a 3.5% interest rate, their monthly mortgage payment would be around $2,900. This means that their mortgage payment would be approximately 11% of their gross monthly income, well below the recommended 28%.
Example 2: Mark is a single professional looking to purchase a $700k condo in a major city. He has a gross income of $150,000 per year and has saved up a 20% down payment of $140,000. With a 3.5% interest rate, his monthly mortgage payment would be around $2,900, which is still well below the recommended 28% of his gross monthly income.
Tips for Budgeting for a $700,000 Mortgage
1. Save for a larger down payment: As seen in the examples above, having a larger down payment can significantly lower your monthly mortgage payment and the income needed to afford a $700k house. If you’re not in a rush to purchase a home, consider saving up for a larger down payment to make your mortgage more affordable.
2. Consider a shorter loan term: While a 30-year fixed-rate mortgage is the most common type of home loan, opting for a shorter loan term, such as a 15-year fixed-rate mortgage, can also lower your monthly mortgage payment. Keep in mind that a shorter loan term will also mean higher monthly payments, so make sure to carefully consider your budget before choosing a loan term.
3. Keep your debt-to-income ratio in check: Your debt-to-income ratio is the percentage of your monthly income that goes towards debt payments. Lenders typically prefer a debt-to-income ratio of 36% or lower. So, if you have other debts, such as car payments or student loans, it’s important to keep them under control to ensure you can comfortably afford a $700k mortgage.
4. Don’t forget about other expenses: When budgeting for a $700k house, it’s important to consider other expenses that come with homeownership, such as property taxes,