Have you ever seen, been, or wondered how much money do you need to make to afford that house you really liked? I know I have, even though I cannot afford to buy a house right now as a student, these questions have crossed my mind so many times and I wanted to elaborate on How Much House Can You Afford Based on How Much You Are Making?

As I mentioned before, I currently reside in Southern California (Orange County) and buying a home here is not so cheap. Currently, as of October 2018, the median sale home price in Orange County, California is $715,000 or $520,000 if taking just Southern California which includes: LA County, Orange County, San Bernardino County, Ventura County, Riverside County, and San Diego County. Being honest here, but half a million dollar for an average house is pretty expensive.

I wanted to make the number simple without going too much into details. You will find information in every category including:

  • 20% down payment
  • Average Interest at 4.5%
  • 30-year, 20-year, and 10-year loan (Because when you get that mortgage, your dream will be to pay it off as soon as possible)
  • Maximum Monthly Payment (PITI) is the sum of a mortgage payment that includes the principal amount, loan interest, property tax, and homeowner’s property and private mortgage insurance premiums

Before I dive into discussing what you need to make to afford a house from $200,000 to $5,000,000 and I will throw in as a bonus a $30,000,000 just for you to get an idea of what super rich pay.

Let’s first talk about the factors that drive the house cost. 

Basic Factors Affecting the House Cost

Neighborhood – We’ve all been to bad neighborhoods before and thought to ourselves, how do people live here? A good neighborhood with reputable schools surrounding the neighborhood affects value of the house. Similarly, crime rates in the neighborhood also affect the value of the home.

Condition of the House – This is simple, would you buy new or old house? I think you will lean towards newer homes because it is most likely will be faced with less maintenance work required and I mean as simple as it is, it is new!

Market – If the area is getting popular in terms of many people are looking at buying the house in that area, the housing market will fluctuate just like any other economic asset. Home prices will rise if the area is getting a lot of attention.

Size – A home’s size have a tremendous impact on the overall house cost. Many buyers consider the price per square foot before even considering looking at the house.

History of Sale Prices – The first thing that real estate people look at are the prices of the property over time. I mean why would you buy a house if the price did not fluctuate much over decades. Meanwhile, if the house is gaining value rather fast, then there will be a lot of home buyers, appraisals, and real agents looking at that house.

Surrounding Area – Isn’t it nice when you don’t have to drive far to the major store or get on the major highway? Well, that also counts into homes value in terms of accessibility to our every day life and homes that are closer to the shopping centers and highways will sell more.

These are some of the major factors that affect the value of the homeland they make sense because when picking a home we want it to be as close as possible to our dream house.

Note* There are many factors that are involved in buying a house and I wanted to go over the basics without going too much in-depth review of financial aspect of it.

Lenders feel more comfortable lending money for a house when you put 20% down payment towards a purchase. The more you put down, the less you have to finance. It is simple, don’t buy what you can’t afford!

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The Reality of Buying A House

As I mentioned this article should not be used as a final step before purchasing a house. There is so much involved when you are ready to buy and it is best to consult your financial advisor or real estate agents because this days they are everywhere. Do you want to know how much real estate agents really make?

The income I listed here will be a bare minimum and it is not including any debts you may have, so if you are paying $1,000 towards your credit card, student loans debt, car loan, and other things. The annual salary needed for a house purchase below may easily double because everybody’s financial life is different and not everybody has 0 debt before they buy a house. The smart thing to do is to get rid off of all the debt you may have first before buying a house.

How Much Do You Need to Make for $200,000 House?

Starting out with a house costing $200,000. There are plenty of houses available that you can buy in that category depending on factors I listed above.

30-year at 4.5%

  • 20% down payment – $40,000
  • Annual Salary – $35,000
  • Monthly Salary – $3,000
  • Maximum Monthly Payment – $810.60

20-year at 4.5%

  • 20% down payment – $40,000
  • Annual Salary – $34,000
  • Monthly Salary – $3,700
  • Maximum Monthly Payment – $1,012.24

10-year at 4.5%

  • 20% down payment – $40,000
  • Annual Salary – $72,000
  • Monthly Salary – $6,000
  • Maximum Monthly Payment – $1,658.21

How Much Do You Need to Make for $500,000 House?

We are entering a half a million dollar house category, you can start looking at some luxury houses with a great amount of land when you are entering this range in many states and cities. The recommended down payment is still at 20% but it goes up to $100,000 this time. You are looking at bringing in some serious money annually with 20 year or less loan here.

30-year at 4.5%

  • 20% down payment – $100,000
  • Annual Salary – $87,000
  • Monthly Salary – $7,250
  • Maximum Monthly Payment – $2,026.74

20-year at 4.5%

  • 20% down payment – $100,000
  • Annual Salary – $109,000
  • Monthly Salary – $9,100
  • Maximum Monthly Payment – $2,026.74

10-year at 4.5%

  • 20% down payment – $100,000
  • Annual Salary – $178,000
  • Monthly Salary – $6,000
  • Maximum Monthly Payment – $4,145.54

How Much Do You Need to Make for $1,000,000 House?

We are now entering a million dollar house and I think this is a dream of many to own a million dollar home.  It really is an achievement in financial life, but also come high costs of owning a million dollar house. Let’s dive right in.

30-year at 4.5%

  • 20% down payment – $200,000
  • Annual Salary – $174,000
  • Monthly Salary – $14,500
  • Maximum Monthly Payment – $4,053.48

20-year at 4.5%

  • 20% down payment – $200,000
  • Annual Salary – $217,000
  • Monthly Salary – $18,100
  • Maximum Monthly Payment – $5,061.20

10-year at 4.5%

  • 20% down payment – $200,000
  • Annual Salary – $355,000
  • Monthly Salary – $29,600
  • Maximum Monthly Payment – $8,291.07

M1 Finance

How Much Do You Need to Make for $2,000,000 House?

Whats better than a million dollar home? A two million dollar home! Nearly everything doubles from a million dollar home and is considered a multi million dollar home. This is completely different from a million dollar house, see why. If you are planning on buying a house this expensive, then you are better off-putting higher deposit as well. I will stick with the same 20%

30-year at 4.5%

  • 20% down payment – $400,000
  • Annual Salary – $347,450
  • Monthly Salary – $29,000
  • Maximum Monthly Payment – $8,107

20-year at 4.5%

  • 20% down payment – $400,000
  • Annual Salary – $434,000
  • Monthly Salary – $36,200
  • Maximum Monthly Payment – $10,122.39

10-year at 4.5%

  • 20% down payment – $400,000
  • Annual Salary – $711,000
  • Monthly Salary – $59,500
  • Maximum Monthly Payment – $16,582.15

How Much Do You Need to Make for $3,000,000 House?

$3,000,000 and up home is a different story as this is where majority of 1%-ers look to in this range. Because of a hefty down payment on top of it, you will definitely be better off-putting more of down-payment if you are looking to shop in $3 million and up range.

30-year at 4.5%

  • 20% down payment – $600,000
  • Annual Salary – $739,000
  • Monthly Salary – $61,600
  • Maximum Monthly Payment – $17,227.30

20-year at 4.5%

  • 20% down payment – $600,000
  • Annual Salary – $922,000
  • Monthly Salary – $76,850
  • Maximum Monthly Payment – $21,510.08

10-year at 4.5%

  • 20% down payment – $600,000
  • Annual Salary – $1,510,160
  • Monthly Salary – $125,850
  • Maximum Monthly Payment – $35,237.06

How Much Do You Need to Make for $5,000,000 House?

The last but not least is the $5 million dollar house. There are plenty of these houses in area I currently reside in and they are pretty amazing! (as you should be expecting when dropping $5 million dollars!) With a 20% down-payment it comes down to $1,000,000 cash to come up with which is a LOT! But as I mentioned it is better to put down way more than 20% because of the interest that you will be paying.

30-year at 4.5%

  • 20% down payment – $1,000,000
  • Annual Salary – $869,000
  • Monthly Salary – $72,500
  • Maximum Monthly Payment – $20,267.41

20-year at 4.5%

  • 20% down payment – $1,000,000
  • Annual Salary – $1,085,000
  • Monthly Salary – $90,416
  • Maximum Monthly Payment – $25,305.98

10-year at 4.5%

  • 20% down payment – $1,000,000
  • Annual Salary – $1,777,000
  • Monthly Salary – $148,100
  • Maximum Monthly Payment – $41,455.36

How Much Do You Need to Make for $30,000,000 House?

(Los Angeles Home)

If you just came here to see how much it would cost to have a house like this then this numbers will blow your mind. People that buy in these ranges are usually billionaires for cash or celebrities renting them for $100,000+ a month. If you ever end up buying one, please don’t forget about me as I would love to see one in real person and get inspired. Let’s dive right in and see how much it will cost.

30-year at 4.5%

  • 20% down payment – $6,000,000
  • Annual Salary – $5,212,000
  • Monthly Salary – $434,350
  • Maximum Monthly Payment – $121,604.47

20-year at 4.5%

  • 20% down payment – $6,000,000
  • Annual Salary – $6,507,251
  • Monthly Salary – $542,270
  • Maximum Monthly Payment – $151,835.85

10-year at 4.5%

  • 20% down payment – $6,000,000
  • Annual Salary – $10,670,000
  • Monthly Salary – $889,170
  • Maximum Monthly Payment – $248,732.18

Bottom Line

I know that his post is not very informing, but I hope this can cover some interests you may have or ever wondered how much the person is paying for their property apple

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