KEY POINTS
- If you were to purchase a $1 million home with a 30-year fixed mortgage and made a down payment of 20%, your monthly payment would be approximately $6,000.
- A Zillow analysis found that 237 cities in the U.S. have starter homes priced at $1 million or higher.
- A jumbo loan may be necessary to secure funding for a home valued at one million dollars.
In the past, purchasing a million-dollar property appeared to be a luxury only achievable by wealthy individuals. However, in certain regions with consistently high housing prices, one might need to pay $1 million or above for a relatively ordinary house. According to a recent study by Zillow, at least 237 cities across the United States require a minimum of $1 million to buy a “starter home,” which is classified as being among the lowest-priced one-third of homes in the area.
Curious about what you are asking. mortgage How much would the payment be for a $1 million house? Let’s analyze the figures.
Obtaining a home loan for a property valued at $1 million.
If you are looking to purchase a $1 million home, you might require a jumbo loan, which are loans that go beyond the annual restrictions established by the Federal Housing Finance Agency (FHFA). For the year 2024, these restrictions are $766,550 for a single-family residence in the majority of the United States, and $1,149,825 in Alaska and Hawaii.
Large loans are not uncommon due to the high cost of housing. Nevertheless, they usually come with more stringent lending criteria. To qualify, you will require a good credit score (typically 680 or above), a low debt-to-income ratio, sufficient savings, and stable income.
You may also need to increase the amount of money you put down. Jumbo loan providers usually ask for a down payment of at least 10%, while some might have requirements as high as 20% or 30%.
How much would the monthly installment be for a $1 million home?
Let’s start by assuming that you put down 20% of the million-dollar home’s price and borrow the remaining $800,000. Additionally, we will assume that you secure a fixed-rate mortgage, meaning that the interest rate will remain constant throughout the loan term.
If you choose to A mortgage with a fixed interest rate for a term of 30 years. : Borrowing $800,000 at an interest rate of 7% APR, which is common for a 30-year mortgage in today’s high-rate market, would result in a monthly payment of approximately $6,046. This payment can be broken down as follows:
- The total amount for principal and interest is $5,322.
- Property taxes amount to $658.
- The cost of homeowners insurance is $66.
If you choose to A mortgage with a fixed interest rate for a duration of 15 years. : If you borrowed $800,000 for 15 years at an annual interest rate of 5.5%, your monthly installment would amount to around $7,261. The monthly payment can be divided as follows:
- The amount of $6,537 is for the principal amount borrowed and the interest.
- The property taxes amount to $658.
- The cost of homeowners insurance is $66.
We utilized a Tampa, Florida ZIP code in our illustration. Taxes on property were also mentioned. insurance that protects individuals who own homes from financial losses due to damage or theft Mortgage payments usually consist of various costs, which can differ greatly based on your location. Additionally, if you purchase a house in a neighborhood with a homeowners association, you will also need to pay membership fees.
Is it within your financial means to purchase a home worth a million dollars?
If you reside in an area with limited options in the price range below $1 million, you might be contemplating whether to purchase a house at this time or delay the decision. Additionally, potential homebuyers are eagerly anticipating a potential interest rate cut by the Federal Reserve during its upcoming meeting in September.
In reality, no one can predict the future of the housing market with certainty. Instead of attempting to forecast the direction of home prices or the actions of the Federal Reserve, base your decision on whether you can afford to purchase a home on your financial circumstances.
A useful rule to keep in mind, which is commonly used by lenders, is that your housing expenses should not surpass 36% of your income, and your total debt payments should not exceed 43%.
Put simply, if you earn $10,000 every month, it is recommended that your housing costs do not go over $3,600. However, if you are currently paying $2,000 monthly for credit card and car debts, it is advisable to keep your housing expenses to $2,300. This way, your total monthly housing and debt payments would stay within the 43% limit.
If you are undecided, calculate the cost of renting a place. In numerous regions, it might be more advantageous to rent rather than purchase a property.
