How Much Income is Needed for a $700,000 Mortgage?

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.

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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.

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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).

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