So you've got your eye on a $600k house? Wow, that's a big step and we've got to discuss what that means financially. Understanding the amount of money you need to earn and save is extremely important. This is because a mortgage on a home worth $600,000 or more is not a small amount.
Mortgage lenders advise not spending over 28% of your monthly income before taxes on housing costs. This is known as the front-end ratio. Now, the down payment is typically somewhere between 5-20% of the total price of the house.
So for this $600k house, you'd have to save somewhere from $30,000 to $120,000! Remember, the more you put down at the start, the less you have to pay each month.
Continue reading to learn more about how to afford a mortgage a $600,000 home, or apply for a pre-approval. A mortgage pre-approval allows you to understand how much you're likely to get approved for. It can be a great first step to help you decide if a home worth $600k or more is the right decision for you.
How much income do I need to afford a $600k house?
A home worth $600,000 or more needs enough income to pay for the mortgage and other expenses. It's a big financial responsibility. The money you need can vary depending on factors like yourmortgage rate and the initial down payment.
Generally, banks want your mortgage payments to be less than 28% of your income before taxes. This includes property taxes and insurance.
If you put down 20% on a home worth $600,000 with a 30-year, fixed-rate mortgage at 7%, your principal plus interest is $3,193. This means that you need a monthly income of about $11,404.
Keep in mind, it's a good idea to discuss a commitment like this with a financial advisor.
How much of a down payment do I need for a $600k home?
So, how much do you think you need for a down payment on a $600k house? Well, it can vary a lot! It really depends on the mortgage you pick and your own money situation.
Some mortgage options let you put down less. Just remember, that might mean you have to pay extra for private mortgage insurance.
Your paycheck plays a huge part too when you're trying to buy a $600k house. Experts advise that your monthly mortgage payment should not be more than 28% of your pre-tax income. This payment includes the loan, interest, taxes, and insurance.
For a $600k house, especially if you're not putting a lot down, you'll probably need a pretty hefty paycheck to afford the monthly payments. Consulting a mortgage advisor or financial planner can provide a better understanding of your affordable options.
What does a 20% down payment option look like for a $600k house?
Whether or not you can afford this mortgage is determined by various factors. These factors include your other debts, the lender's debt-to-income ratio requirements, and the mortgage's interest rate.
For a $600,000 mortgage, a 20% down payment is $120,000. Unless you have that much cash on hand, you may need to cash in investments or sell property to help get you to 20%.
What does a 15% down payment option look like for a $600k house?
A 15% down payment on a home worth $600,000 is $90,000.
A larger down payment reduces overall mortgage borrowing, payments, and interest. Aim to keep mortgage payments under 28% of your gross monthly income.
The principal, interest and property mortgage insurance on $600,000 house with a 15% down payment and a 30-year, fixed-rate mortgage with 7% rate would cost $3,662. To afford this, you would need a monthly income of about $13,079 or an annual income of about $157,000.
What does a 10% down payment option look like for a $600k house?
A 10% down payment on a $600,000 house would be $60,000, but you'd still need financing for the remaining $540,000. This financed amount determines the monthly mortgage payments, not the house's total cost.
What does a 5% down payment option look like for a $600k house?
A 5% down payment on a $600,000 house would be $30,000, but you'd still need financing for the remaining $570,000. The principal, interest, and property mortgage insurance would cost about $4,061 with a 5% down payment. You'd need a monthly income of about $14,504 to make this affordable.
KEY TIPS TO USE TO AFFORD A $600K MORTGAGE
Income
Increase your income sources to afford a larger house budget.Credit Score
Maintain a good credit score for a better chance of loan approval. Double-check your report for any items that you may need removed or adjusted before starting the application process.Down Payment
Save for a substantial down paymentto reduce the loan amount and monthly payments.Government Loan Options
Consider getting a FHA loan, which requires a lower down payment. Think about a VA loan if you're a veteran or the spouse of a veteran who meets the requirements.Limit Spending
Stick to the recommendation of not spending more than 28% of your income on housing costs. Also, set a realistic budget and stick to it when home shopping.Budget for Additional Costs
Consider additional costs such as property taxes, insurance, and maintenance in your budget.
How can I apply for a mortgage on a home worth $600k?
Do you already have a home in the $600k range that you've had your eye on? If you're ready to apply for a mortgage pre-approval, Guaranteed Rate is here to help. You can apply online for a pre-approval and get a response in as little as a day.
Mortgage pre-approval is a common first step that most homebuyers take. With pre-approval, you can show sellers that you're serious and know how much you're likely to be approved for. Start your pre-approval today to get a better idea if that home worth $600,000 or more is attainable.
