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You may have heard that 20% is the ideal down payment on a house, but that doesn’t mean you must pony up that amount to become a homeowner. In truth, the average house down payment is a bit smaller. Currently, the median down payment for a house is 19%, according to data from the National Association of Realtors® (NAR).

Here, you’ll learn more about down payments so you can house-hunt like an insider. Getting a sense of what others are paying and how that differs based on geographic area is helpful. We’ll also share how you might access help if you can’t come up with 20%. Armed with this intel, you’ll be better prepared to navigate that major rite of passage: purchasing a home.

Average Down Payment Statistics

As of 2025, the median down payment for a house was 19%, or $81,333 if you consider that the median national home price in 2025 was $428,071, according to Redfin.

This 19% figure shows that the conventional wisdom that you need 20% down to purchase a home is, to a large extent, untrue. In fact, in an April 2024 SoFi survey of prospective homebuyers, many planned to put down far less than 20%. Almost a third of respondents (29%) said they planned to put down 10% or less, and 7% of those surveyed were exploring zero-down-payment options.

A 20% down payment will lower your mortgage amount and monthly payments vs. a smaller down payment, and will allow you to avoid private mortgage insurance (PMI), but it’s not the only game in town.

Average Down Payment on a House for First-Time Buyers

First-time buyers make about 21% (a record low) of all home purchases, and the typical down payment for first-time buyers in the NAR survey was 10%, while repeat buyers’ typical down payment was 23%. (Repeat buyers often have money from the sale of their first residence to put toward the purchase of their next one.)

Down Payment Requirements by Mortgage Loan Type

The amount of money you put down on a home may be governed in part by the type of mortgage loan you choose (and conversely, how much money you have saved for a down payment could dictate the type of mortgage you qualify for). Let’s take a look at the different loan types and their down payment requirements.

Remember that if you are buying your first home or you haven’t purchased a residence in three or more years, you may qualify as a first-time homebuyer and be eligible for special first-time homebuyer programs.

Conventional Loan

This is the kind of loan favored by most buyers, and for first-time homebuyers some conventional home loans can allow for as little as 3% down on a home purchase. A repeat homebuyer might need to put down a bit more — say 5%.

FHA Loan

An FHA loan, acquired through private lenders but guaranteed by the Federal Housing Administration, allows for a 3.5% minimum down payment if the borrower’s credit score is at least 580.

VA Loan and USDA Loan

These loans usually require no down payment, although there are still other hoops to jump through to qualify for one of these loans.

A VA loan, backed by the Department of Veterans Affairs, is for eligible veterans, service members, Reservists, National Guard members, and some surviving spouses. The VA also issues direct loans to Native American veterans or non-Native American veterans married to Native Americans. For a typical VA loan borrower, no down payment is required.

A USDA loan backed by the U.S. Department of Agriculture is for households with low to moderate incomes buying homes in eligible rural areas. The USDA also offers direct subsidized loans for households with low and very low incomes. Typically, a credit score of 640 or higher is needed. While borrowers can make a down payment, one is not required.

Jumbo Loan

A jumbo loan is a loan for an amount over the conforming loan limit, which is set by the Federal Housing Finance Agency (FHFA). In most U.S. counties, the conforming loan limit for a single-family home in 2026 is $832,750. Minimum down payment rules for jumbo loans vary by lender but are generally higher than those for conforming loans. Some lenders require a 10% down payment, and others require as much as 20%.

For all of the above types of mortgage loans, the home being purchased must be a primary residence in order to qualify for the minimum down payment, but a homebuyer can use a conventional or VA loan to purchase a multifamily property with up to four units if one unit will be owner-occupied.

Average Down Payment by Age Group

The latest NAR Home Buyers and Sellers Generational Trends Report breaks down by age the percentage of a home that was financed by homebuyers in 2025.

Older buyers tend to use proceeds from the sale of a previous residence to help fund the new home. Buyers 60 to 69 years old, for instance, put a median of 28% down, the NAR report shows.

Most younger buyers depend on savings for their down payment. Buyers ages 26 to 34 put down a median of 10%, and those ages 35 to 44, 14%. A fortunate 27% of the younger homebuyers (those age 26-34) received down payment help from a friend or relative.

Percentage of Home Financed

Average Down Payment by State

The average house down payment in any given state is tied to home prices in that location. You can look into the cost of living by state for an overview and then find the median home value in a particular state at a given point in time and estimate what your down payment might be.

The least expensive states in which to buy a home? Iowa, Ohio, Oklahoma, West Virginia, and Michigan are among them, according to Redfin.

Average Down Payment On a House in California

California, the most populous state and one of the largest by area, is joined by Hawaii and Massachusetts on many lists of the most expensive states in which to buy a house. Redfin shows a median sales price of $792,800 in California in December 2025. A 3% down payment would be $23,784; 10% down, $79,280; and 20% down, $158,560.

Recommended: How to Afford a Down Payment on Your First Home

Source of Down Payment

You’re probably wondering where homebuyers get the money to afford a down payment, especially first-time homebuyers. NAR has polled buyers to probe that question. Not surprisingly, nearly half of buyers (49%) simply say they have saved up the money — which of course isn’t simple at all.

Savings is especially likely to fund a home purchase for those ages 26-34. Almost three-quarters of younger buyers rely on it for their down payment. Older buyers also use savings but are more likely to draw on the sale of a primary residence. This is especially true after age 59.

Other down payment sources include gifts from relatives or friends, sale of stock, a loan or draw from a 401K or pension, or an inheritance. For those who don’t have generational wealth or savings to rely on, first-time homebuyer programs can make home ownership possible.

City, county, and state down payment assistance programs are also out there. They may take the form of grants or second mortgages, some with deferred payments or a forgivable balance.

How Does Your Down Payment Affect Your Monthly Payments?

Curious to see what your potential mortgage would look like based on different down payments? Start with a home affordability calculator to get a feel for how much you’ll need to put down and other expenses.

Or use this mortgage calculator to estimate how much your mortgage payments would be, depending on property value, down payment, interest rate, and repayment term.

Should You Aim for 20% Down?

You’re probably wondering if you should try to put 20% down to get a mortgage loan? Here are some things to consider:

If Your Down Payment Is 20% or More

Putting down at least 20% has benefits:

•  You won’t have to pay for mortgage insurance: If you put down 20% or more with a conventional loan, you won’t be required to pay for PMI, which protects the lender if you were to stop making payments.

•  Your loan terms may be better: Lenders look at an applicant’s credit history, employment stability, income, debt-to-income ratio, and savings. They’ll calculate the loan-to-value (LTV) ratio, or what percentage of the home’s purchase price will be covered by the mortgage.

Lenders often provide a better rate to borrowers who have an LTV ratio of 80% or lower — in other words, at least a 20% down payment — because they consider them less of a risk.

•  You have instant equity in the property: You borrowed less than you could have, which translates to a lower mortgage payment, less interest paid over the life of the loan, and the potential later to take out a home equity loan.

Recommended: What Do I Need to Buy a House?

If Your Down Payment Is Less Than 20%

If your down payment will be less than 20%, you now know that you’ll have plenty of company. (In SoFi’s survey, 14% of would-be buyers said not having an adequate down payment was their primary challenge.) Consider these ways to optimize the situation:

•  A government loan could be the answer: FHA loans are popular with some first-time buyers because of the lenient credit requirements. The down payment for an FHA loan is just 3.5% if you have a credit score of 580 or more. Just know that upfront and monthly mortgage insurance premiums (MIP) always accompany FHA loans, and remain for the life of the loan if the down payment is under 10%. If you put 10% or more down, you’ll pay MIP for 11 years.

•  You may be able to improve your loan terms: If you can’t pull together 20% for a down payment, you can still help yourself by showing lenders that you’re a good risk. You’ll likely need a FICO® score of at least 620 for a conventional loan. If you have that and other positive factors, you may qualify for a more attractive interest rate or better terms.

•  You can eventually cancel PMI: Lenders are required to automatically cancel PMI when the loan balance gets to 78% LTV of the original value of the home. You also can ask your lender to cancel PMI on the date when the principal balance of your mortgage falls to 80% of the original home value.

Dream Home Quiz

The Takeaway

The average down payment on a house is currently 19% of the home’s purchase price, which usually means mortgage insurance and higher payments for the buyer. But buyers who put less than 20% down on a house unlock the door to homeownership every day. If you want to join them, you can be helped along by low down payments for first-time homebuyers, as well as government loans, down payment assistance, and other programs.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is 10% down payment enough for a house?

Yes. More than a third of all buyers put down 10% or even less to buy a home. Lower down payments are especially common among younger and/or first-time homebuyers.

What is the minimum you should put down on a house?

Conventional wisdom says the minimum down payment is 20%, but most buyers put down less. Younger buyers and first-time homebuyers, especially, often put down far less and some home loans allow you to finance 97% or even 100% of the home’s cost.

What factors can affect my down payment requirements?

The amount of down payment you’ll need to come up with depends on your loan type, credit history and credit score, the cost of the property you’re buying, and whether you are a first-time homebuyer.

What are the pros and cons of putting down less than 20% on a house?

Putting down less than 20% on a house might allow you to buy a home sooner. It might also permit you to set aside money for renovations or to pay off other debts. The disadvantage is that those who put down less than 20% usually have to pay for private mortgage insurance which adds to their monthly costs. (Those with FHA loans who put down less than 20% will pay a mortgage insurance premium.)

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q126-074

If you’re planning to take out a $700,000 mortgage, you’re going to need an annual income of around $180,000 – $200,000.

Because a loan this size typically results in a sizable monthly payment, lenders look closely at not only your income, but also your debt levels, credit history, and down payment to determine what you can afford. Using common affordability guidelines can help you estimate how much you might need to earn to comfortably support a mortgage at this price point.

Income Needed for a $700,000 Mortgage

While there’s no set income level required for a $700,000 mortgage loan, a mortgage that large is likely to have a hefty monthly payment, which means you’ll need some decent cash flow to be able to make it work.

One rule of thumb states that your housing costs should be no more than 30% of your gross monthly income — that is, your income before taxes or any other deductions. We can use this rule to estimate how much income you need to make a $700,000 mortgage payment feasible.

How Much Do You Need to Make to Get a $700K Mortgage?

Let’s start by using a mortgage calculator to get a rough estimate of how much money per month a $700,000 mortgage will cost.

To create an example, we’ll assume the property value is $750,000, and that you start out with a $50,000 down payment. We’ll assume a 7% interest rate and 30-year loan term.

Plugging those numbers into the calculator, you’ll see that the estimated monthly payment comes out to about $4,657 per month. To make our 30% rule above even simpler, we can multiply that total by three to get a low-end ballpark income that’s appropriate for a payment that large. That figure comes to around $170,000 per year. Keep in mind, though, that this figure doesn’t include taxes and insurance, which can add an appreciable amount to that monthly bill.

And if you’re putting down a smaller down payment, you’ll also have to pay private mortgage insurance (PMI). Add all that to the mix and you’re looking at an annual income requirement that is closer to $180,000 – $200,000.

Recommended: The Best Affordable Places to Live by State

What Determines How Much House You Can Afford?

Income is obviously an important part of what qualifies you for a mortgage. After all, lenders are interested in your being able to repay the loan over time. However, your ability to earn enough money to support the payment is only one factor that goes into their overall assessment. While each lender has its own specific requirements and criteria, they all look at similar factors.

What Mortgage Lenders Look For

Some of the factors lenders consider when qualifying a borrower for a mortgage include:

•   Income

•   Job stability

•   Credit history and credit score

•   Existing debt

•   Existing assets, such as bank and investment accounts

•   Money available for down payment

To verify all this information, your mortgage loan officer will likely ask for documentation such as your tax returns, W-2s, pay stubs, bank statements, and potentially more. Speak with your loan officer directly to learn exactly what you’ll need to submit as part of the mortgage preapproval process.

What Is a Good Debt-to-Income Ratio?

Let’s take a closer look at one very important part of your mortgage application: your debt-to-income (DTI) ratio. This important measurement is expressed as a percentage, and shows lenders how the debt you already carry compares to your available monthly income. It’s calculated by dividing your monthly debts over your gross monthly income.

While, again, specific requirements vary, most lenders require a DTI of 36% or lower, though in some cases borrowers can be qualified with a DTI of up to 50%. Generally speaking, though, the lower your DTI, the better; even if you can qualify with a higher amount of debt, it’ll be more difficult to make your monthly payments.

$700,000 Mortgage Breakdown Examples

As we’ve seen above, in order to qualify for a $700,000 mortgage, you’ll likely need a household income of at least about $180,000 per year — although again, whether or not you qualify will depend on many factors aside from your income, like your credit score and existing level of debt.

One way to get a good sense of how much house you can afford at your current income level is to use a home affordability calculator. With this calculator, you can include costs like homeowners insurance and property taxes, along with your income and existing debts. The calculator will spit out an estimate of how much house you can afford given all these circumstances — but remember, again, that this is only an estimate and not a guarantee.

Pros and Cons of a $700,000 Mortgage

Like any financial product (and anything in life), a $700,000 mortgage has both drawbacks and benefits to consider. Here are a few to keep in mind.

How Much Will You Need for a Down Payment?

A 20% down payment is recommended to avoid private mortgage insurance, but on a property listed for $700,000, that’s a decent chunk to save up ($140,000).

However, these days, even conventional loans allow some first-time borrowers to put down as little as 3% on their home purchase — which, in this case, comes out to a far more reasonable $21,000. Borrowers who put down less than 20% will likely be required to pay PMI, which can add a few hundred dollars a month to your mortgage payment. Still, for those who have the cash flow to support this additional cost, it can be a worthy trade for earlier access to homeownership.

Can You Buy a $700K Home With No Money Down?

Some mortgage programs do allow borrowers to take out a mortgage with no money down — though you may have to meet certain eligibility requirements to qualify. For example, government-backed loans from the U.S. Veterans Administration (VA) and U.S. Department of Agriculture (USDA) loans don’t have a minimum required down payment, though these are only available to service members, veterans, and their families or to those looking in designated rural areas, respectively.

Is a $700K Mortgage With No Down Payment a Good Idea?

Even if you do qualify for a $700,000 mortgage with no down payment, it may not be the best idea financially speaking. Along with potentially being on the hook for the additional expense of mortgage insurance, you’ll start out with very low equity in your new investment, and your monthly payments may be substantially higher than they would be otherwise.

Can You Buy a $700K Home With a Small Down Payment?

Your ability to qualify for a mortgage is multifactorial, and the size of your down payment is only one of the many pieces mortgage lenders will consider. If the rest of your application is solid, a lender may qualify you for a $700,000 mortgage with a down payment as low as 3% ($21,000) if you’re a first-time homebuyer. Again, though, the only way to know for sure is to actually apply.

How to Improve Your Chances of Approval

If you’re struggling to qualify for a $700K mortgage, there are steps you can take to improve your qualifications as a borrower.

Pay Off Debt

It may be one of the most common tips to qualify for a mortgage — but it’s for good reason. Having even a small amount of debt can seriously impact your buying power, so paying off what you can and lowering your DTI can go a long way toward making a larger mortgage possible.

Look into First-Time Homebuyer Programs

If you’re a first-time buyer, it’s worth looking into first-time buyer programs that may be able to help you with your down payment or qualify you for a mortgage when you might otherwise not. One of the best-known first-time homebuyer programs is the FHA mortgage, which is backed by the Federal Housing Administration and may help you qualify even with a lower credit score.

Build Up Credit

Along with lowering your overall debt, building up your credit score can also help you qualify for a lower interest rate — which, over the course of a 30-year loan, can translate to big savings. Even a percentage point difference could save you thousands of dollars in the long run, so taking the time to repair or strengthen your credit today may be a well-placed effort.

Start Budgeting

If you don’t yet have a budget, the time before you purchase a home is a great time to start one. After all, homeownership usually comes with its own slate of expenses, from repairs to maintenance items and more, so ensuring you know where your money is going will help you prepare to meet those financial needs.

Alternatives to Conventional Mortgage Loans

While conventional mortgages are the most common — and one of the most affordable options for those who qualify — there are different types of mortgage loans to consider.

For example, as discussed, if you’re a first-time homebuyer, you may be able to qualify for an FHA loan from the Federal Housing Administration, which helps buyers qualify with lower credit scores than a conventional loan requires.

USDA and VA loans are also viable options for those looking in rural areas or who are (or are married to) service members or veterans.

The Takeaway

Qualifying for a $700,000 mortgage generally means having a solid income, often in the range of about $180,000 to $200,000 per year, assuming typical interest rates, down payments, and acceptable debt levels. However, income alone doesn’t tell the whole story — lenders also consider your credit history, debt-to-income ratio, job stability, and available assets when determining what you can afford.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much income do I need for a $700K mortgage?

While there’s no one set income level that will automatically qualify you for a $700,000 mortgage, using the rule of thumb that your housing payment should be no more than a third of your gross monthly income, you’ll likely need somewhere between $180,000 and $200,000 per year to qualify, depending on other factors like your interest rate.

What is the monthly payment on a $700K mortgage?

Specific payment amounts depend on a wide range of factors including the interest rate you qualify for, the property taxes in your location, and the size of your down payment. In an example where you’re purchasing a $750,000 home with a $50,000 down payment at a 7% interest rate, your monthly payment would be close to $4,700 before insurance or taxes.

Can I afford a million-dollar home if I make $100K?

How much money you make is only one factor that qualifies you for a mortgage — no matter its size. That said, because of the size of the monthly payment of a large mortgage, a $100,000 salary likely wouldn’t be enough to get you into a million-dollar home (unless you had a substantial down payment).

Photo credit: iStock/DMP

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q126-091

Even in a hot real estate market, it’s possible to learn how to buy a house with no money down. Zero-down home loans aren’t available everywhere and to every borrower, but if you do qualify and can find an area with a zero-down mortgage, homeownership could be much more attainable.

Here’s exactly what you need to know about how to buy a house with no money down.

Can You Buy a House With No Money Down?

It is possible to buy a house with no money down in certain situations. Some government-backed loans, such as VA and USDA mortgages, offer 0% down options for eligible borrowers. Buyers may also use down payment assistance programs or seller concessions, though credit, income, and eligibility requirements still apply.

Recommended: First-Time Homebuyer Programs and Loans

How to Buy a House With No Money

There are a few avenues you can take to get a mortgage loan and buy a home with no money down, including:

•   Buy a home with a VA or USDA loan. These loans, from the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture, do not require a down payment.

•   Receive assistance for your down payment or closing costs from a state or local program or a family member.

•   Receive a lender credit.

•   Ask for a seller concession.

Note: SoFi does not offer USDA loans at this time. However, SoFi does offer FHA, VA, and conventional loan options.

USDA Loan

A USDA loan requires no money down and is intended for buyers in rural areas. There are two ways the U.S. Department of Agriculture loans money:

•   Single-family housing direct loans

•   Single-family housing guaranteed program

The direct loans are issued by the USDA and come with a 33-year term for low- and very-low-income households. (Very-low-income applicants may stretch the repayment term to 38 years.) The guaranteed program is run through approved lenders with a 30-year fixed rate for low- to moderate-income households.

VA Loan

A VA loan guaranteed by the U.S. Department of Veterans Affairs is a zero down payment mortgage with low interest rates for qualified veterans, active-duty service members, certain reservists and National Guard members, and surviving spouses. Most borrowers pay a one-time funding fee, which can be rolled into the loan. Lenders can be more flexible with credit scores, mortgage amounts, and debt-to-income ratios.

Down Payment and Closing Cost Assistance Programs

Many city and state agencies offer different mortgage types and down payment assistance to buyers, especially low- to moderate-income homebuyers, first-time homebuyers, veterans, and people buying in federally targeted areas.

The terms vary. Sometimes the assistance for a down payment is in the form of a second mortgage that is repaid over time. Other terms include deferred payments that are only due if the property is sold, loans that are forgivable if the property is occupied by an owner for a specified amount of time, and even grants.

HUD, the U.S. Department of Housing and Urban Development, steers homebuyers to city, state, and nonprofit programs that offer down payment assistance.

Down Payment Gift From a Family Member

A down payment gift from a family member can also help you buy a house with no money down. The main thing to remember about a down payment gift from a family member is that the money must be properly documented with a gift letter. Your lender will likely provide a template to make sure you have all the crucial elements included.

Lender Credits

Lender credits are what you get when you agree to pay a higher interest rate in return for some money that the lender contributes toward your closing costs. The more lender credits you receive, the higher your rate will be. With some lenders, you can cover your closing costs entirely with lender credits. This is a common practice when refinancing a loan.

Seller Concessions

One strategy real estate agents have used is to ask for a credit from the seller, to be contributed toward the buyer’s closing costs. Making an offer above asking price in tandem with the seller concessions makes this option more palatable for sellers in a competitive housing market.

Recommended: Home Loan Help Center

The Takeaway

Buying a house with no money down takes some research, but could be well worth your time. With a VA or USDA loan, down payment assistance, gift money, or lender credits, it is possible to obtain a no money down mortgage. Qualifying first-time buyers can also still catch a break with a conventional mortgage loan — some lenders will let you put just 3% down.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Can cash gifts be used as a down payment?

Yes, but certain rules must be followed for the gift to be documented by the lender, usually in the form of a gift letter.

Are there any homebuyer grants?

Sometimes, but they’re usually reserved for first-time buyers, veterans, or people buying homes in federally targeted areas. You might start a search for assistance with your state housing finance agency or HUD and then look for city and county programs.

What are down payment assistance programs?

Down payment assistance programs help homebuyers afford down payments and sometimes closing costs as well. This is done in the form of grants and loans, and can vary by location.

What credit score do I need to buy a house with no money down?

For a zero down mortgage backed by the USDA or VA, lenders are advised to look at a borrower’s situation case by case. Approved USDA loan lenders usually require a minimum credit score of 640, though the department itself doesn’t have a credit score requirement.

Most VA loan lenders will want to see a credit score above 620, but again, the VA does not have a minimum credit score. Applicants may qualify with a score below 620 when debt, income, and the ability to shoulder future mortgage payments are given a close look.

Down payment assistance programs often require a minimum credit score of 620.

Photo credit: iStock/Paperkites

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q126-082

Buying a multifamily home — like a duplex, triplex, or fourplex — can be a smart way to enter the housing market while generating rental income and building long-term wealth. Unlike single-family homes, these properties offer multiple units under one roof, allowing owners to live in one unit and rent out the others or manage the entire property as an investment.

Understanding the unique financing, management responsibilities, and potential cash-flow benefits is key before taking the leap into multifamily ownership.

What Is a Multifamily Property?

Multifamily property consists of multiple units in a single building. This includes duplexes, triplexes, fourplexes, condominium buildings, student housing, apartment complexes, age-restricted communities, low-income housing, and townhomes. The units in a full multifamily housing property must have separate entrances, kitchens, bathrooms, and utility meters.

Individual investors may tend to gravitate toward two- to four-unit properties due to ease of management compared to other multifamily properties and residential home loan options. Residential loans of 30 years with a fixed rate are available for properties with one to four dwelling units. FHA, VA, and USDA loans are available for those properties if they are owner-occupied.

For five or more units, a commercial loan is required. Commercial loans usually come with a higher down payment requirement, higher interest rate, and a shorter term, meaning significantly higher mortgage payments.

💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Why Buy a Multifamily Property?

Buying a multifamily home can jump-start your own real estate portfolio and investment portfolio. Here’s how.

Income From Flipping

Multifamily homes can be improved and then resold for a profit, or ”flipped.” Buying a multifamily property, remodeling, and then reselling can be even more profitable than flipping single-family homes because as you remodel, you can increase rents.

Once you increase rents, the property becomes more valuable, both in terms of monthly income, cash flow, and overall worth.

The ‘BRRRR’ Method

BRRRR stands for buy, rehab, rent, refinance, repeat. An investor buys a property, renovates it, and rents out the newly refurbished units for more money. After that, they can refinance the property to take out extra cash to buy a new property to renovate.

This method works well with larger multifamily properties because the rehabbing of multiple units can be done while other units that are not being renovated can still bring in some income.

Cash Flow

Multifamily homes were designed for cash flow. Space and amenities are optimized to bring in money for the investor. On the other hand, single-family homes are designed for comfort. The added space of a single-family home may not bring as high of a return as a multifamily property.

Quick Portfolio Expansion

Buying multifamily properties allows investors to acquire multiple units with one transaction, so they may have a favorite in the single-family vs. multifamily comparison. Additionally, investing in multifamily properties can allow an investor to quickly generate income, which could be enough to acquire more properties.

Reduced Risk

A multifamily property lessens risk exposure. When you have single-family homes, vacancies may have a bigger effect on your monthly cash flow. With one or more multifamily properties, the risk is spread across a number of properties. In other words, there may be units still rented that can help cover the costs of the units that are vacant.

Recommended: First-Time Homebuyer Guide

Analyzing the Investment Potential of a Multifamily Property

Investors can use a number of methods to determine if it makes sense to buy a multifamily property or not. Here are some of the most common calculations you can use to make that determination for yourself.

Cash Flow

In real estate investing, cash flow is money that’s generated by the property and money spent on the property. Positive cash flow, also known as profit, means income exceeds expenses.

Investors have differing amounts that they consider acceptable. Some real estate investors bank on the appreciation of the property instead of the amount of cash flow.

The 1% Rule

The 1% rule states that the gross rents should be 1% or more of the purchase price. The 1% rule is hard to apply in high-income areas where the purchase price of a property is high relative to the rents it generates.

Gross Rent Multiplier

The gross rent multiplier (GRM) is a ratio: the fair market value of a property divided by its gross annual rents. It doesn’t take expenses into consideration and is meant to be a simple calculation to determine if a property is worth exploring further. If you’re comparing two properties for purchase, the one with the lower GRM may be the better investment.

Cash on Cash Return

The cash on cash return is the annual amount earned compared with the amount of cash invested. It’s expressed as a formula: annual net cash flow divided by cash investment. This is helpful for investors who want to know how much cash is brought in by their cash investment each year.

Capitalization Rate

The capitalization rate, or cap rate, is the amount of net operating income divided by the purchase price. This number indicates how long it will take to get back all your money in an investment.

Recommended: Market Capitalization: Definition, What It Tells You, Formula

Internal Rate of Return

The IRR measures the rate of return over an amount of time. It takes into account both cash flow and expected appreciation.

Recommended: Mortgage Payment Calculator

How to Buy a Multifamily Property

You may be able to use 75% of documented rental income to help finance mortgage interest on your loan. And again, multifamily homes with four or fewer units can be financed more traditionally, while five or more units require a commercial mortgage.

Getting preapproved for a mortgage for your multifamily investment property is one of the best things you can do to get started. After a mortgage officer has examined your finances and greenlighted an amount, you can go shopping for your multifamily investment properties.

Find a Multifamily Home

To narrow your search for a new multifamily property here, you’ll want to decide what it is you’re looking for. Keep a few of these factors in mind:

•   Location: Do you have an area that you have expertise in? Are you going to manage the property yourself? These are some questions you’ll want to ask yourself to determine if you can buy a multifamily property near or far.

•   Price range: After you’ve looked at where you want to potentially invest, you’ll get a good sense of what properties will cost by looking at real estate listings. Keep in mind that you can count 75% of documented rents toward the purchase price for many loan types, so the price you’ll be looking at will be much different than if you were looking for a single-family home.

•   Type of property: Are you looking for a fourplex or an apartment complex? Duplex or 55+ community? There are many choices to make between different property types and whether or not they’ll bring you a profit.

•   Profit potential: Are you looking to invest for appreciation or cash flow? Many properties with a lower price tag in the Midwest may be better for cash flow, while properties on the West Coast may appreciate more. Take a look at both and decide on your investment strategy.

•   Condition: Do you have the resources and team in place to take on a multifamily property that needs a lot of work? Or would you rather have something turnkey? You’ll want to be sure you know what resources you can commit to the project before you get in over your head.

Choose a Loan

The type of rental property used may determine what type of loan you’re able to get. If this is your first rental, you may want to consider living in one of the units so you can qualify for owner-occupied financing, which usually comes with lower rates and down payment requirements.

Choose a lender that can answer your questions about mortgages.

Make an Offer and Close

Working with a real estate agent, you’ll submit a competitive offer for the property you’ve chosen. Some buyers use cash to make the most competitive offer, while others need financing.

Renovate and Get Ready for Your Tenants

No matter what class of property you buy, the rental units will almost always require some work. Whether it’s a simple clean or a major renovation, these things are both tax-deductible and will improve the value, not to mention rentability, of your property.

Create a Management Plan

To make sure you’re running a business, and it’s not running you, you need to have a solid plan in place for how the rentals will be managed. How are repairs going to be taken care of? What’s your process when a rental turns over? How are you going to keep up with laws and ordinances?

Having a plan helps. Even so, you’ll learn as you go and will need to adjust this plan.

💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

The Takeaway

To buy a multifamily property, do your research and choose a property that you’ll have the ability to finance and manage. Investing in rental properties and multifamily investing is not easy, but it can generate cash flow and create family wealth.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is buying a multifamily property a good investment?

Finding a multifamily property that is a good investment will depend on the investor’s analysis of the property. This can include the price, condition, gross rent multiplier, capitalization rate, and a number of other factors that will make renting the units successful.

What are the different kinds of multifamily properties?

•   Duplexes, triplexes, fourplexes

•   Townhouses

•   Apartment buildings

•   Condominiums

•   Bungalow courts

•   Mixed-use buildings

•   Student housing

•   Age-restricted housing units

•   Low-income housing units

What is the best way to finance a multifamily home?

Some would argue that an FHA loan with 3.5% down is one of the best ways to finance a home with up to four units. The owner must live in one of the units to qualify for this type of financing.

Photo credit: iStock/Andrey Sayfutdinov

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q126-076

If you need a $1 million mortgage to buy a house in your area, you want to feel secure that you have the income needed to make your payments, which is about $300,000 per year. Financing a $1 million dollar mortgage means a monthly payment of around $9,000, assuming you have a mortgage interest rate of 7%. (This number includes an estimate by Fannie Mae for the principal amount, interest, taxes, insurance, and HOA fees.)

If your lender follows the conservative 28/36 rule where the maximum amount of household debt you can have is 36% of your gross pay, then the monthly mortgage payment ($9,000) needs to be 36% of your monthly income. $9,000 is 36% of a $25,000 monthly income, or $300,000 per year.

If you’re not quite there or wondering how this number changes with other debt and income levels, we have you covered. We’ll go through everything you need to know about the income you’ll need for a $1 million dollar mortgage.

Income Needed for a $1,000,000 Mortgage

The income you need for a $1,000,000 mortgage depends on how much debt you’re carrying and the amount of your down payment. These two factors affect your monthly payment, which in turn determines how much you’ll need to earn to qualify for the mortgage.

For example, as noted above, a $1,000,000 mortgage works out to about a $9,000 monthly payment including payment, interest, taxes, and insurance on a 7% annual percentage rate (APR). Without debt, you need to make about $300,000 per year to afford the payment.

How debt affects your $1 million mortgage: If you have $1,000 in additional debt you’re carrying each month, you’ll need more income to qualify for the loan.

$9,000 mortgage + $1,000 additional debts = $10,000 in total monthly debts
$10,000 is 36% of $27,778 per month, or $333,336 per year.

How a down payment affects a $1 million mortgage: A down payment also has an effect on the income you need for a $1 million dollar mortgage. If your down payment is only 10%, your mortgage amount increases because you’ll need to pay a mortgage insurance premium (MIP) on top of your monthly payment. For a mortgage of this size, your monthly payment increases $367 per month.

For the most accurate numbers, try using a mortgage calculator with taxes and insurance.

How Much Do You Need to Make to Get a $1 Million Mortgage

To get a $1 million dollar mortgage, the amount of income you would need is right around $300,000. To arrive at this number, we followed the 28/36 ratio, and assumed a 7% APR. With taxes, insurance, and PMI, your monthly payment will be close to $9,000. Assuming you have no debt, you would need to make $25,000 each month, or $300,000 each year to qualify for the monthly payment on a million-dollar home.

What Is a Good Debt-to-Income Ratio?

A good debt-to-income (DTI) ratio is debt levels below 36%. If you have a minimal amount of debt (student loans, credit card debt, car loans, etc.), you may be able to qualify for a bigger loan or better rates. If you have significant debt, the amount of mortgage you’ll qualify for will be less.

What Determines How Much House You Can Afford?

A million-dollar mortgage seems like such a high mark, but if you’re in a high-cost-of-living area, it’s the norm. Qualifying for a mortgage that high involves a look at the following factors:

•   Income: Lenders want to see reliable income and employment history to ensure that you’ll pay the mortgage back.

•   Down payment: A higher down payment enables you to look for a higher-priced home. A down payment of 20% or more also allows you to avoid mortgage insurance, which is a payment you’re required to make every month if you have less than 20% equity.

•   Credit history: If your credit history is patchy, the lender may hesitate to lend you money, even if you can qualify with your income. A lower credit score means you’ll get a higher interest rate, which translates into a lower mortgage amount.

•   Debt level: If your debt is too high, you may not qualify for a $1 million dollar mortgage. Lenders look for a debt-to-income (DTI) ratio of 45% at maximum (and usually lower).

You’ll also likely need a jumbo loan, also called a non-conforming loan, which usually has more stringent requirements.

It may be best to take a look at a mortgage calculator or talk to a lender to take your individual situation into account to get the most accurate number.

What Mortgage Lenders Look For

For the $1 million dollar mortgage, you’ll want to get your finances in tip top shape. Lenders look at a few factors to get you qualified for that price tag.

•   Cash reserves: When you’re looking at a million-dollar mortgage with a jumbo loan, the lender is also going to want to see how much money you have in the bank. Cash reserves are more important for a million-dollar mortgage than they are for lower mortgages.

•   Strong credit: Your credit score should be in the 700 range if you’re looking for a $1 million dollar mortgage.

•   Appropriate debt: You should also have low levels of debt. As mentioned previously, an appropriate DTI ratio is less than 45%.

$1,000,000 Mortgage Breakdown Examples

To help illustrate the income needed for a $1 million mortgage, we’ve put together a few examples with different scenarios using a mortgage calculator. All assume a home purchase price of $1,250,000 and a down payment of 20%, or $250,000. Keep in mind the taxes and insurance numbers may not reflect your area as some states have a higher cost of living than others.

30-Year Loan at 6% Fixed Interest Rate

Total Payment: $8,079
Principal and Interest: $5,996
Other Costs (homeowners insurance and property taxes): $2,083

15-Year Loan at 6% Fixed Interest Rate

Total Payment: $10,522
Principal and Interest: $8,439
Other Costs (homeowners insurance and property taxes): $2,083

30-Year Loan at 7% Fixed Interest Rate

Total Payment: $8,736
Principal and Interest: $6,653
Other Costs (homeowners insurance and property taxes): $2,083

15-Year Loan at 7% Fixed Interest Rate

Total Payment: $11,071
Principal and Interest: $8,988
Other Costs (homeowners insurance and property taxes): $2,083

Recommended: Home Loan Help Center

Pros and Cons of a $1,000,000 Mortgage

When comparing the different types of mortgage loans, there are some benefits and drawbacks to a higher-priced mortgage.

How Much Will You Need for a Down Payment?

In an ideal world, a 20% down payment on a mortgage loan allows you to get the most bang for your buck. You avoid PMI, which is very costly on a million-dollar home. With few exceptions, you’ll likely need at least 10% to qualify for a million-dollar mortgage.

Can You Buy a $1 Million Home with No Money Down?

There are very rare instances where you can buy a $1 million home with no money down. Some of these may include:

•   Your loan is privately funded

•   You qualify for a VA loan (from the U.S. Department of Veterans Affairs) and live in Hawaii (or another exceptionally high cost area)

Can You Buy a $1 Million Home with a Small Down Payment?

If you’re looking to buy a $1 million home with a small down payment, generally, you’re out of luck. Most lenders look for at least a 10% down payment (and usually more). But there are a few scenarios where it makes sense to look for a million-dollar home with a small down payment.

High-cost-of-living areas: If you live in an area that’s defined by the FHFA (Federal Housing Finance Agency) as a high-cost area, you may be able to get a million-dollar mortgage with a small down payment if it falls under the conforming loan requirements.

One of these requirements is the loan limit amount. The FHFA sets the conforming loan limit for mortgages, which is the maximum loan amount it will guarantee. In high-cost-of-living areas, this amount is 150% of the conforming loan limit of $832,750, which works out to be $1,249,125.

So, even though the amount is over a million dollars, it’s still considered a conforming loan and will allow for conforming loan requirements, such as a 3% down payment.

VA Loan: With a VA loan, you can qualify for a $0 down payment, and in high-cost-of-living areas, the loan limit may go up to $1,299,500.

Is a $1 Million Mortgage with No Down Payment a Good Idea?

As with all no-down-payment mortgages, your monthly payment will be higher — and the required mortgage insurance premium will drive it even higher. But even if you’re comfortable with those bigger numbers, it’s rare to find a lender that would be comfortable lending you a million dollars without a down payment. The exception? If you qualify for a VA loan and live in Hawaii, you might have a shot at a million-dollar mortgage with no down payment.

If you’re wondering what size mortgage you can afford with the down payment amount you’ve set aside, consult a home affordability calculator.

Can’t Afford a $1 Million Mortgage?

If you can’t quite qualify for a $1 million mortgage, you can make plans to help you get there in the future. Here are a few tips to qualify for a mortgage.

Pay Off Debt

With less debt, you’ll qualify for a higher monthly mortgage payment. If you pay off a car and you no longer have a monthly payment of $500, for example, you may be able to qualify for a larger mortgage.

Look into First-Time Homebuyer Programs

First-time homebuyer programs can help with a range of tools, such as down payment assistance, lower interest rates, and lower housing prices. For example, in San Francisco, there are several options to help first-time homebuyers afford a home. If you qualify and if there is a property available, you can put your name in a lottery for a property to be sold below market value. There are also several programs that offer a loan up to $375,000 on properties in the city.

First-time buyers can also explore down payment assistance programs through nonprofits, state and local government, and the federal government.

Cultivate Strong Credit

If credit history is your problem, it may take some time to build. Here are a few tips to help get you going.

•   Check your credit report. Pay attention to any negative marks and see if there are any errors that you can fix. Make sure your credit accounts are reported every month and call lenders if they haven’t been reported.

•   Consider opening a credit account. If you don’t have a credit account, take a look at secured credit cards or a credit-builder loan, which are easy to qualify for and can help you build up your credit in a hurry.

•   Automate your payments. Take the effort out of building your credit by setting your account to make a payment each month before the due date.

•   Ask for a credit limit increase. If you have a credit card, consider asking for a credit limit increase. The purpose of asking for a credit limit increase isn’t to use it, it’s to decrease the overall amount of your available credit that you are using.

Start Budgeting

Even on higher incomes, a budget can help you move toward your goal of saving for a down payment on a $1 million dollar mortgage. Put aside money every month or use your discretionary income to pay down debt.

Recommended: The Mortgage Preapproval Process

Alternatives to Conventional Mortgage Loans

If you’re looking for an alternative to a conventional mortgage, there are a handful of options to consider.

•   Private lending: Private lenders can help accommodate unique needs for financing, such as a $1 million dollar mortgage. They usually charge higher interest rates, but have less stringent qualifications.

•   Seller financing: Seller financing is where you make payments to the seller instead of a bank. There’s a legal contract involved that covers the purchase price, interest rate, term, home maintenance, and other details of the seller-financed mortgage.

•   Rent-to-own: It may be possible to arrange for a rent-to-own deal with the seller. You’ll come up with the terms on your own, but the basic agreement allows you to rent the home for a period of time before purchasing it.

•   Borrow from your retirement account: Though it’s not often recommended, it may be possible to borrow money from your retirement account for the purchase of a home. Be aware there are tax consequences and penalties if you aren’t able to repay the loan.

Mortgage Tips

At any income, you’ll want to choose the best mortgage possible. Here are a few tips to help you choose the right mortgage.

•   Shop around for a mortgage. You may have fewer options if your $1 million dollar mortgage doesn’t fall under conforming mortgage guidelines, but it’s still important to get firm quotes from multiple lenders.

•   Compare loan estimates. When you’re loan shopping, submit the same information to each lender and obtain a loan estimate. This standardized document can help you compare rates, fees, terms, and other details of the loan. You’ll be comparing “apples to apples” with the loan estimate.

•   Go with a reputable lender. You can check the lender’s rating on Trustpilot or the Better Business Bureau. Avoid a lender who misrepresents costs or wants to push you in the direction of one loan over another.

The Takeaway

Affording a $1 million mortgage typically requires a substantial income — often around $300,000 per year when following common lender guidelines — along with strong credit, a solid down payment, and manageable debt levels. Qualifying for such a high-value loan also means understanding how factors like your debt-to-income ratio, interest rates, and cash reserves influence your ability to make monthly payments and secure the financing you need.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much is a $1 million mortgage over 10 years?

Assuming an interest rate of 7%, you would spend $1,393,301 to pay off a $1 million mortgage with a 10-year term.

What income should you have to buy a million-dollar home?

If you have no debt, a million-dollar home with a 7% interest rate and a 30-year term requires $240,000 to $300,000 in annual income. Exactly how much income you would need is determined in part by how large your down payment is and how much you need to borrow through a home mortgage loan.

How hard is it to get a million-dollar mortgage?

It is harder to get a million-dollar mortgage than a mortgage of a lower amount because you likely need to qualify for a jumbo loan, which requires a higher credit score, a larger down payment, and a large amount of cash reserves. These requirements are on top of the amount of income you need to qualify for a million-dollar mortgage.

Photo credit: iStock/kupicoo

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHL-Q126-085