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Key Takeaways
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To afford a $1 million home with a monthly payment of around $5,000, based on 20% down at 6.50% interest, you would need an annual income of at least $215,000.
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Personal factors like credit score, down payment, employment, and the home’s location all affect affordability.
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Housing market trends like supply, interest rates, and government regulations also determine a home’s affordability.
In hot housing markets or parts of the country where homes go for higher price points, a $1 million house might be fairly common. You may not even have many options at lower price points. But how much income do you need to afford the monthly payments on a million-dollar home? We’ve crunched the numbers to show you just how much income you need to be earning each month to make it work.
Monthly Payments for a $1 Million Home
Assuming you’re putting 20% down on the house and borrowing at a 6.50% interest rate (which is where mortgage rates have been hovering for much of 2025), you’ll have a monthly payment of around $5,050. That’s just the payment for your mortgage principal and interest.
The exact price you would pay per month may vary depending on your property taxes, homeowners association (HOA) fees, closing costs, and homeowners insurance. In states like New Jersey, you could end up paying at least $1,000 more on top of your principal and interest thanks to high property taxes and home insurance.
Our mortgage calculator can help with your exact figures:
Annual Income Needed for a $1 Million Home
Lenders follow the 28/36 rule when determining whether or not to approve mortgages. This means that no more than 28% of your gross income should go towards housing, and no more than 36% of your gross income should go towards all your debt, including housing.
So, if you have a $5,050 monthly housing payment and are following the 28/36 rule, you need an annual income of about $215,000, or about $18,000 per month. Keep in mind that your total monthly debt, including your mortgage payment, should be no more than $6,500. This means additional debts such as student loans, auto loans, credit cards, and more should total no more than about $1,450 monthly:
| 28/36 Rule on $215,000 Annual Income | |||
|---|---|---|---|
| Gross Monthly Income | Mortgage Payment (28%) | All Loan Payments (36%) | Non-Mortgage Loan Payments (8%) |
| $18,000 | $5,050 | $6,500 | $1,450 |
Factors That Impact Affordability
Many people assume that your income is one of the biggest factors in determining whether or not a house is affordable, but that’s just one of several factors.
Personal Factors
In addition to your income, lenders also look at you as a borrower. Specifically, they’re checking your:
- Credit score: Your score is one of the first things a lender checks when determining whether to pre-approve you. This score is a reflection of your payment history, debts, credit mix, and more. A high credit score will earn you better interest rates, which can help with affordability.
- Employment: While this is closely linked to income, it’s not quite the same thing since the bulk of your income may come from non-employment sources. Lenders want to see a steady history of employment within the same profession or with the same employer.
- The home’s location: Housing market aside, the property you select will have costs specific to it. For instance, one home in the same city may have significantly higher property taxes, which could make affordability a challenge.
$439,459
The median home purchase cost $439,459 in August 2025, up 1.6% from the year before.
Housing Market Trends
While you can control personal factors to some extent, broader trends in the housing market are harder to control. In addition to mortgage rates, these factors also impact affordability:
- Building costs and home prices: If building material costs increase or regulations surrounding construction change and make it costlier for developers to build homes, the steeper cost is often passed on to the homebuyer. According to the National Association of Home Builders, construction material costs are up 34% since December 2020.
- Home insurance and personal property tax: Home insurance premiums climbed 62% between 2018 and 2024, while personal property taxes grew 19% between 2021 and 2024. These steep increases can make affordability difficult for homeowners throughout the country.
- Housing supply and demand in the area: Estimates vary, but housing experts argue that the U.S. has a housing shortage of 1.5 to 3.7 million units. Although housing supply varies by region, this significant shortage pushes up housing prices, which can strain affordability.
- Government policies and programs: Government regulations can drive up housing costs in markets with tight supply, but many states also offer housing programs designed to assist homebuyers in making a down payment.
The Bottom Line
To determine if you could afford the monthly payments on a $1 million home, create a realistic budget that accurately accounts for your income and all of your expenses. Then, include other factors and expenses that might drive up your housing costs. Ensure that you have a large enough income so you’re comfortably able to pay for all your expenses and needs, not just your housing bill. This way, you can avoid being house poor in your million-dollar home.
