If you’re looking to buy a home right now, you know that in many markets, supply is challenging, and it’s driven home prices higher. The median home price is well under $600,000, but that may not be the case in some higher-cost areas. You may wonder about the income needed to afford a $600K mortgage.
The mortgage you can afford is dependent on a number of factors that we’ll get into throughout this article. As you read on, keep a couple of things in mind: Buying a home at any price is exciting. Also, even if you can’t afford the home of your dreams right now, there’s no reason to think you can’t get there down the line.
Purchasing a $600,000 home is a major financial commitment that requires careful consideration As home prices continue rising across the country, more buyers are looking in this price range, but it’s important to take a close look at your budget to determine if you can realistically afford a house at this level
How Much Income Do You Need for a $600K Home?
When considering a $600,000 home purchase the first question to ask is how much income do I need to afford a house at this price point?
According to experts, you generally want to spend no more than 28% of your gross monthly income on housing costs. This includes your mortgage payment, property taxes, insurance, and HOA fees if applicable.
As a baseline, here’s the income needed to afford a $600K house:
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With 20% Down Payment: Approximately $133,200 annual income. This assumes a 30-year mortgage at 6.5% interest.
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With 10% Down Payment: Approximately $156,000 annual income due to the higher mortgage amount.
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With 3% Down Payment: Around $171,600 annual income. The lower down payment increases monthly costs.
Of course, factors like your interest rate, location, and other debts impact exact affordability. But in general, you need an income of at least $130K-170K to comfortably afford a $600K home. Anything lower starts to stretch the budget.
Calculating Precise Affordability
While those income ranges provide a ballpark idea, you can calculate a more precise affordability estimate using these steps:
1. Estimate total monthly housing costs
- Mortgage payment (principal + interest)
- Property taxes
- Homeowners insurance
- HOA fees
- Any other housing expenses
2. Multiply total by 0.28 (28% of income)
3. Divide result by 0.28
This shows the gross monthly income needed to afford the total housing costs while staying under 28% of income.
For example, if total estimated housing costs are $3,500 per month:
- $3,500 x 0.28 = $980
- $980 / 0.28 = $3,500 gross monthly income needed
This method provides a more tailored view of your personal affordability based on the specifics of the home and your financial situation.
Factors That Impact Affordability
When determining affordability, keep these key factors in mind:
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Down payment amount – The more you put down upfront, the lower your mortgage amount and monthly costs.
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Interest rate – Even a small rate difference greatly impacts your payment over a 30-year loan. Shop for the lowest rate you can qualify for.
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Loan type – Options like adjustable-rate mortgages (ARMs) have lower initial payments but greater long-term risk. Know the tradeoffs.
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Credit score – A higher score qualifies you for better mortgage rates, saving significantly over time.
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Debts – If you have high monthly debts, it lowers the amount you can put toward housing.
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Property taxes/insurance – These costs vary by location and home type, impacting your total payment.
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HOAs – Monthly HOA fees must be factored in when they apply.
Carefully calculating affordability based on your unique financial situation prevents you from overextending your budget on a $600K+ home.
Options to Improve Affordability
If you’re slightly short of the income needed for a $600K home, you may still have options to make it work:
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Lower down payment – Programs like FHA loans allow down payments as low as 3.5%. This reduces your upfront costs significantly, though your mortgage amount rises.
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Buy with a partner – Combining incomes with a partner or spouse improves overall affordability.
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State/local down payment programs – Many areas offer grants and low-interest loans to assist with the down payment.
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Mortgage rate shopping – Be sure to compare rates from multiple lenders to find the lowest possible rate and payment. Just a 0.25% difference in APR saves over $60 per month.
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Points to buy down rate – Paying points upfront further reduces your interest rate over the life of the loan.
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Extend loan term – Going up to a 40-year mortgage term cuts the monthly payment, though you pay more interest overall.
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Regional differences – A $600K budget goes further in some real estate markets than others. Location makes a difference.
Key Takeaways
While buying a $600,000 home may seem out of reach, it can be affordable with the right income, down payment, and mortgage program. Crunching the numbers and utilizing affordability strategies allows you to make the dream of homeownership at this price point a reality. The keys are understanding your budget, mortgage options, and the housing market to find a home you can comfortably afford over the long-term.
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See what you qualify for
Because there are so many variables that determine how much someone can afford, we recommend checking out our Home Affordability Calculator. You can put in your own information and even reset it as much as you want to change inputs and see how it impacts your affordability. When qualifying you for a loan, lenders look at the following:
- Down payment: One of the biggest factors in determining how much you can afford is how much you put down at closing. The bigger your down payment, the lower your loan amount, which brings down your monthly payment. You may hear lenders refer to this as your loan-to-value ratio (LTV). This merely looks at the size of your loan relative to the value of your home. It’s the inverse of your down payment or equity amount. So if you have a 10% down payment, that’s equivalent to a 90% loan-to-value ratio.
- Closing costs: Closing costs are the fees associated with finalizing your loan. Some are paid to lenders while others go to the title agency or the local government. You may pay your real estate agent as well depending on agreements with them and the seller. Total closing costs are generally 3% – 6% of the purchase price.
- Mortgage loan: The type of mortgage that you qualify for is also important because different loan options have different standards in terms of how much debt you’re allowed to take on when you qualify. The type of interest rate also matters because adjustable-rate mortgages (ARMs) are sometimes qualified based on a higher rate than the initial one you receive to ensure you can handle potential payment changes. Finally, the longer the loan term, the more you’ll be able to afford based on a smaller monthly payment.
- Interest rates: You’ll be able to afford a higher home price at lower interest rates than you could if they were higher because it changes the monthly payment. You can get a fixed- or adjustable-rate mortgage. ARMs have slightly lower initial interest rates than fixed-rate mortgages, but you’re subjecting yourself to market conditions when the rate adjusts up or down.
- Credit score: Your credit score impacts the types of mortgage loans you can qualify for. But along with your down payment, it also has a major effect on the interest rate you get. The higher your score, the lower your rate may be.
- Debt-to-income ratio (DTI): DTI reflects the percentage of your pretax monthly income that goes toward the debt payments you have to make. In some cases, lenders will limit the percentage of income that can go toward your mortgage payment and in others, they only look at your total debt payments. Either way, if you can limit your existing debt when qualifying for a mortgage, you’ll be able to afford a bigger payment.
- Homeowners insurance: Your home is likely your biggest asset, so it’s a good idea to protect it anyway, but lenders will require that you at least have enough coverage to replace or rebuild it in the event of major property damage. You can also add coverage to protect personal property and shield you from liability if someone injures themselves at your home.
- Property taxes: These pay for local roads, public schools and other city services like garbage collection. Homeowners insurance and property taxes are often included as part of your mortgage payment in an escrow account, but even if they aren’t, the costs need to be accounted for.
- Homeowners association (HOA) fees: Depending on the neighborhood, you may be subject to HOA fees that pay for things like exterior maintenance, common areas like a pool or tennis courts, and services not handled by the local government (garbage collection, snow removal, etc.).
- Maintenance: Even in the newest or best-cared-for houses, things eventually break. It’s generally recommended to set aside 1% – 3% of the purchase price every year for maintenance, depending on the age and condition of the home.
- Additional assistance: The down payment is often the most daunting hurdle faced by many first-time home buyers. If you qualify based on income, there are often resources for grants as well as traditional, deferred or forgivable loans functioning as down payment assistance (DPA) from lenders or local authorities.
- Location: While this doesn’t impact the size of your budget, you may find that your dollars go further in some places and buy you less in others. You may be able to buy a colonial in one of the cheaper states to buy a house and find the same budget gets you nowhere in Boston.
How To Know How Much House You Can Afford
FAQ
How much do you have to make to afford a 600K house?
To comfortably afford a $600k mortgage, you’ll likely need an annual income between $150,000 to $200,000, depending on your specific financial situation and the terms of your mortgage. Remember, just because you can qualify for a loan doesn’t mean you should stretch your budget to the maximum.
Can I afford a 500k house on 100K salary?
At $100K income, you can get an $450K mortgage. You will need a bigger down payment. Work on a budget and see if you can keep up with all the payments. It would be very tight.
How much do you need to make to afford a $650K home?
At a 45% debt-to-income ratio, you’d need to make $13K/month or $156K/year Takeaway: If you’re aiming for a $650K home in 2025, start preparing NOW! Always talk to a lender first to know what you qualify for.
How much is a 600K mortgage payment per month?
… for a $600K mortgage, here’s the bottom line: The monthly payment on this mortgage at a 7% annual percentage rate (APR) for 30 years works out to be $3,991.81