What income do I need to afford a $600K house?

A $600,000 home budget can unlock a world of opportunities in the U.S. real estate market. This places you comfortably in the top half of homebuyers, given that the national median home price stands at $410,200. However, affording a home at this price point hinges on various factors, including your income, down payment, and mortgage interest rate.

Let’s break it down using Bankrate’s mortgage calculator. Assuming a 20 percent down payment on a 30-year loan with a 6.5 percent interest rate, your monthly principal and interest payment would amount to $3,033. Additional expenses like property taxes, home insurance, and possible HOA fees would bring the total to an estimated $3,700 per month, or $44,400 annually.

Following the widely recommended housing-affordability guideline, which suggests not allocating more than a third of your income to housing, we calculate an annual income requirement of $133,200 for a $600,000 purchase.

Next, let’s apply the 28/36 rule. With a $133,200 income, this translates to a maximum monthly mortgage payment of $3,108, encompassing principal, interest, property taxes, insurance, and potential HOA fees. It’s crucial to also evaluate your overall debt payments, ensuring they don’t exceed 36 percent of your income.

Remember, the $3,108 figure doesn’t encompass ongoing homeownership costs like utilities, maintenance, and upkeep, which vary based on property specifics.

Factors influencing your affordability extend beyond income and home price. Consider:

1. Down Payment: A larger down payment reduces your loan amount, lowering interest costs over time.
2. Mortgage Type: While a 20 percent down payment is often recommended, explore alternative loan options with lower upfront costs, although they may lead to higher monthly payments.
3. Credit Score: A higher score qualifies you for better rates, potentially saving thousands over the life of the loan.
4. Loan-to-Value and Debt-to-Income Ratios: These metrics are closely examined by lenders to determine your borrowing capacity.
5. Financial Assistance: Investigate local and state down payment assistance programs to alleviate upfront costs.

As you await closing day, refrain from making significant purchases or life changes that could impact your credit score. Avoid acquiring large items like cars, applying for new credit cards, or changing jobs until after closing.

Lastly, a seasoned real estate agent with a deep understanding of your local market can be an invaluable resource. With a $600,000 budget, you’ll have a plethora of options, and an agent’s expertise can guide you through this exciting journey.