This Is How Much You Need to Make to Comfortably Afford a $1 Million Home

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With mortgage rates finally showing signs of easing after a prolonged period of steep increases, many prospective homebuyers are wondering if now is the right time to make their move—especially for high-end properties.

For those eyeing homes priced in the $1 million range, the slight dip in rates offers some relief, but it’s still essential to approach such a purchase with a clear understanding of the financial commitment involved. Even with rates softening, you’ll need a solid income to comfortably afford this investment.

So, just how much do you need to make to afford a $1 million house in today’s market? Let’s break it down.

Don't Stretch Yourself Too Thin

The "28% rule" is a widely accepted guideline that suggests you should spend no more than 28% of your gross monthly income on housing costs, including mortgage payments, property taxes, and insurance.

This rule helps ensure you have enough left over for other expenses like debt payments, savings, and discretionary spending. However, with rising living costs and economic uncertainties, some financial experts recommend a more conservative approach, here at 24/7 Wall St., we like to suggest capping housing expenses at 22%.

By keeping your housing costs lower, you provide yourself with a larger financial cushion to handle unexpected expenses, invest more in savings or retirement, and avoid feeling "house poor." This extra margin of safety is prudent and helps ensure you don't stretch yourself too thin.

So, How Much Do You Need?

For the purpose of this scenario, let's assume you want to buy a house in Nashville, TN and your mortgage broker is able to lock you in at 6.2% 30-year mortgage rate.

We also need to factor in Nashville's typical property tax rate of 0.95% and homeowners insurance of approximately $1,200 per year.

Using our more conservative figure of 22%, atotal monthly payment, including mortgage, taxes, and insurance, would be about $5,791, meaning someone would need to bring in an annual income of roughly $315,000 to comfortably afford this home without overextending their budget.

What If Rates Drop?

While we still have a long way to go before we get to 4% mortgage rates again, it's possible it happens again. If that does happen, the total monthly payment for the $1 million home (including mortgage, property taxes, and insurance) would decrease. In this case, you would only need to earn approximately $250,000 annually to afford the home while keeping housing costs with that 22% guideline.

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