How Much Income Is Needed for an $800,000 Mortgage?

By Kim Franke-Folstad · June 03, 2024 · 13 minute read

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How Much Income Is Needed for an $800,000 Mortgage?

If you earn at least $240,000 to $300,000 a year, you may be able to afford an $800,000 mortgage, assuming you have no significant other debts. But the exact amount you can qualify to borrow — even if you’re in that salary range or higher — will depend on several other variables, including your credit score.

Read on for a look at how much income may be needed for an $800,000 mortgage, how income fits into the overall mortgage equation, and how lenders typically decide how much mortgage a homebuyer can handle.

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What Income Is Needed to Get an $800,000 Mortgage?

You might think the loan amount you’ll receive when you apply for a mortgage will be based mostly on your household income. But income is typically just one of several factors a lender will consider when deciding how much someone can borrow.

The home mortgage loan you can qualify for generally depends on how much the lender believes you can reliably pay back. You can expect the loan company to run your financials through a few different checks and calculations to come up with that number. Here are a few things lenders may look at:

Income

Lenders will ask about your salary to help determine if you can make the monthly payments on the amount you want to borrow. They’ll also want to know how reliable that income is — so you may be asked how long you’ve had your job (or your business if you’re self-employed). If you’re wondering if your income is high enough to afford an $800,000 loan, you may want to use an online home affordability calculator before you apply for a mortgage. Or you might try prequalifying with one or more lenders.

Creditworthiness

Lenders will also check your credit score and credit reports to ensure that you’re financially responsible and have a history of paying your bills on time.

Down Payment Amount

Contrary to what many people believe, a 20% down payment isn’t required to get a home loan. You may be able to put much less down, depending on the type of mortgage you get. Still, a larger down payment can indicate to lenders that you’re serious about your investment, and that could impact your chances of qualifying for the loan you want.

Debt-to-Income (DTI) Ratio

You can also expect lenders to compare your monthly gross income to your existing monthly debts (credit cards, student loans, car payments, etc.) to help assess if you’ll be able to manage all your payments. This is called your debt-to-income ratio, (DTI = monthly debts ÷ gross monthly income.)

What Is a Good Debt-to-Income Ratio?

The Consumer Financial Protection Bureau advises homeowners to maintain a DTI ratio of 36% or less. And in general, that’s the number mortgage lenders are looking for, too. But some lenders may accept a DTI ratio of up to 43% — or even higher if the borrower can meet other criteria on certain types of loans.

What Other Factors Are Mortgage Lenders Looking For?

Here are a few formulas your lender — and you — may use to determine how much house you can afford on your income:

The 28/36 Rule

The 28/36 rule combines two factors that lenders typically look at to determine home affordability: income and debt. The first number sets a limit of 28% of gross income as a homebuyer’s maximum total mortgage payment, including principal, interest, taxes, and insurance. The second number limits the mortgage payment plus any other debts to no more than 36% of gross income.

For example: If your gross annual income is $240,000, that’s $20,000 per month. So with the 28/36 rule, you could aim for a monthly mortgage payment of about $5,000 — as long as your total monthly debt (your mortgage payment plus car payments, credit cards, etc.) isn’t more than $7,200.

The 35/45 Model

Another calculation lenders might look at is the 35/45 method, which recommends spending no more than 35% of your gross income on your mortgage and debt, and no more than 45% of your after-tax income on your mortgage and debt.

Let’s say your gross monthly income is $20,000 and your after-tax income is about $15,000. In this scenario, you might spend $6,750 per month on your debt payments and mortgage combined. This calculation offers a bit more breathing room with your mortgage payment — as long as you aren’t carrying a heavy debt load.

The 25% After-Tax Rule

This formula will give you a more conservative number to work with. With this calculation, you should spend no more than 25% of your after-tax income on your mortgage. So if you earn $280,000 and take home $17,733 a month after taxes, you might plan to spend $4,433 on your mortgage payments.

Keep in mind that these calculations can only give you a rough estimate of how much you can borrow. If you want to be more certain about the overall price tag and monthly payments you can afford, it may help to go through the mortgage preapproval process.

What Determines How Much House You Can Afford?

Here’s something else to consider when determining how much income is needed for an $800,000 mortgage: A house payment isn’t limited to just principal and interest. And the extra costs that may be tacked on every month can add up fast.

Some of the costs covered by a monthly loan payment can include:

Principal

Principal is the original amount borrowed to buy the home, minus the down payment. Each month, a portion of your payment will go toward paying down this amount.

Interest

Interest is the money you pay to the lender each month for giving you the loan. The interest rate you pay can be influenced by personal factors (such as the loan length you choose, your credit score, and your income) as well as general economic and market factors.

Homeowners Insurance

The cost of homeowners insurance also may be rolled into your monthly mortgage payment, with your lender paying the premium when it’s due.

Mortgage Insurance

Depending on the type of loan you get and the amount you put down on your home, you may be required to carry private mortgage insurance (PMI) or some other type of mortgage insurance policy. This insurance is designed to protect the mortgage lender if a borrower can’t make the agreed upon loan payments.

Property Taxes

A portion of your monthly mortgage payment may also go toward the property taxes you’ll need to pay your local government.

Recommended: Home Loan Help Center

$800,000 Mortgage Breakdown Examples

The monthly payment on a $800,000 mortgage can vary based on several factors, including the length of the loan (usually 15, 20, or 30 years) and the interest rate. A mortgage calculator can help you get an idea of what your payments might look like.

Here are some examples of how the payments for a $800,000 mortgage might break down. A mortgage calculator with taxes and insurance can show you how paying taxes and insurance changes the overall cost of your home.

30-Year Loan at 6% Fixed Interest Rate

Total Payment: $5,940
Principal and Interest: $4,796
Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,144

15-Year Loan at 6% Fixed Interest Rate

Total Payment: $7,894
Principal and Interest: $6,751
Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,143

30-Year Loan at 7% Fixed Interest Rate

Total Payment: $6,466
Principal and Interest: $5,322
Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,144

15-Year Loan at 7% Fixed Interest Rate

Total Payment: $8,334
Principal and Interest: $7,191
Other Costs (estimated PMI, homeowners insurance, and property taxes): $1,143

Pros and Cons of an $800,000 Mortgage

According to Redfin, the median home sale price in the U.S. in May 2024 was $433,558. If you can qualify for a mortgage that’s around $800,000, there’s a good chance you’ll be able to find a pretty nice home. (A lot can depend on where you plan to buy, of course.)

The downside of borrowing $800,000 is that your payments could take a sizable slice out of your income every month. If you’re cutting it close and you experience an unexpected expense or temporary job loss, you may have trouble staying on track. You may want to speak with a financial advisor before committing to a loan of this size, to be sure it fits with your budget and your other goals.

Recommended: Best Affordable Places to Live in the U.S.

How Much Will You Need for a Down Payment?

A down payment is generally between 3% and 20% of a home’s purchase price. The amount you’ll need to put down can vary, though, depending on the type of mortgage loan you get.

Can You Buy a $800,000 Home with No Money Down?

You may be able to get a mortgage with no down payment if you can qualify for a government-backed VA home loan (from the U.S. Department of Veterans Affairs) or a U.S. Department of Agriculture (USDA) loan. These loans are insured by the federal government — which means the government will help pay back the lender if the borrower defaults on the loan.

Borrowers must meet specific requirements to qualify for both VA and USDA no-down-payment loans — and not all lenders offer these programs. But if you think you may be eligible, this could be an option that’s worth looking into.

Can You Buy a $800,000 Home with a Small Down Payment?

If you don’t meet the qualifications for a VA or USDA mortgage program, you might want to check out the requirements for an FHA loan (backed by the Federal Housing Administration) that allows you to make a down payment as low as 3.5%. There may be a limit on how much you can borrow with an FHA loan, depending on where you buy: In 2024, the limit may be as much as $1,149,825 in higher-cost areas. And in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the 2024 limit is $1,724,725.

Some private lenders will accept as little as 3% down on a conventional mortgage — so don’t overlook that opportunity when you begin loan shopping.

Is an $800,000 Mortgage with No Down Payment a Good Idea?

There’s no question that coming up with a down payment can be an obstacle to homeownership — especially for first-time homebuyers — and skipping that step can be appealing. It may help you get into a home faster or allow you to hold onto your savings for renovations, an emergency fund, or other financial goals.

It’s important to remember, though, that without a down payment it can take longer to build up equity in your home. And though you won’t have to pay for mortgage insurance with a no-down-payment government-backed loan, you can expect to pay an upfront funding fee for a VA loan and an upfront and annual guarantee fee for a USDA mortgage. A mortgage professional can help you weigh the pros and cons of different types of mortgage loans and determine the best move for your circumstances.

What If You Can’t Afford an $800,000 Mortgage Even with No Down Payment?

Here are a few steps to consider if it turns out you can’t afford the payments on an $800,000 mortgage:

Look for a Less Expensive Home to Buy

If you can’t find a home that fits your budget in your favorite neighborhood or city, you may want to widen your search area. Or maybe you could trim down your list of “must-haves” to get a home you still like but can better afford.

Wait Until You’re Earning More

If you expect your salary to increase as you continue moving up the ladder, you may want to put homeownership on hold until you’re earning more.

Wait Until You Can Save More

You may also choose to press pause on your home purchase while you save up more money. Creating a budget and trimming other expenses could help you reach your savings goal. If you can come up with a bigger down payment, you may be able to borrow less and limit your monthly payments to a smaller amount.

Alternatives to Conventional Mortgage Loans

If you can’t qualify for a conventional mortgage loan, you may have some alternatives to consider. Here are a few potential options:

Homebuyer Assistance Programs

As mentioned above, some buyers can qualify for a federal, state, or local first-time homebuyer program that can help lower the down payment, closing costs, and other expenses. There might be limits on how much income you can earn to qualify, the type of home you can buy, or the home’s cost.

Rent-to-Own

Another option might be to enter into an agreement to rent-to-own a home. With this type of arrangement, you start out renting, but the landlord agrees to credit a portion of your monthly payment toward purchasing the home.

If you can afford the payments but don’t have enough for a down payment or can’t qualify for the mortgage you want, this may be a way to start working toward homeownership. But it’s important to understand the downsides of the deal — including that you might lose money if you change your mind about buying the home, or if the landlord has second thoughts about selling.

Owner Financing

With owner financing, the person who’s selling the home serves as the lender for all or part of the amount the buyer borrows to make the purchase. Just as with a rent-to-own home, there are risks to this kind of agreement. But it can make homeownership possible if a traditional loan isn’t available.

Mortgage Tips

No matter how much you plan to borrow, buying a home is a big step. Here are a few things you may want to do to prepare:

Check Your Credit

If you aren’t sure where your credit stands these days, you can request a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and Transunion). Checking your reports can give you an idea of what lenders might see when they evaluate your credit. If there are any errors, you can take steps to get them fixed. And if you see negative (but true) information in your reports, you can work on improving your credit habits. If you use a credit-score monitoring service, you may already know what your credit score is and if it needs a boost. Conventional lenders typically look for a minimum score of 620 to 640.

Work Out Your Housing Budget

Remember, your housing costs won’t be limited to principal and interest. It’s important to determine how much you might pay for insurance, taxes, homeowners association dues, general upkeep, and other expenses before you make the transition from renting to homeownership.

Find the Mortgage and Terms That Best Suit Your Needs

When you start mortgage shopping, you can decide whether you want a:

•   fixed vs. variable interest rate

•   conventional vs government-backed loan

•   shorter vs longer term loan

Remember that if interest rates drop significantly, if your financial situation changes dramatically, or if there are other loan parameters you wish to change down the line, a mortgage refinance may be an option.

Consider Getting Preapproved

Even if you’ve crunched the numbers yourself, going through the mortgage preapproval process with a lender may provide an even better estimate of how much you can afford to spend on a home. And having preapproval may give you an edge over other house hunters in a tight market.

The Takeaway

Getting a mortgage is just one of many steps in the homebuying process, but it’s an important one. Taking the time to do some research and/or ask for help from a professional could keep you from getting locked into a loan — or a home — that isn’t the right fit for you.

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.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much would an $800,000 mortgage cost over 10 years?

Paying off a $800,000 mortgage over 10 years would cost a total of $1,090,060, assuming you have a 6.5% interest rate.

How much do you need to make to buy a $900,000 house?

If you earn $240,000 or more annually and/or if you can come up with a hefty down payment, you may be able to buy a home valued at $900,000, But you can expect lenders to look at other factors besides your income when deciding how much you can borrow, including your DTI ratio and credit score.

How do people afford $1.5 million homes?

An income of $500,000 or more a year could allow someone to qualify for a mortgage on a home valued at $1.5 million. Having two incomes contributing to the mortgage each month can help. But some people buy $1.5 million homes by putting down an extremely large down payment — for example after the sale of another residence. There are many factors that dictate what you can ultimately afford.


Photo credit: iStock/vladans

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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