What credit score do I need for a $500000 loan?
Jumbo loans
Conventional loan financing is typically best for borrowers with good or excellent credit because they require a higher credit score than government-backed loans. To secure a conventional loan to buy a house, most lenders typically require a minimum credit score of 620.
In today's climate, the income required to purchase a $500,000 home varies greatly based on personal finances, down payment amount, and interest rate. However, assuming a market rate of 7% and a 10% down payment, your household income would need to be about $128,000 to afford a $500,000 home.
The monthly cost of a $500,000 mortgage is $3,360.16, assuming a 30-year loan term and a 7.1% interest rate. Over the course of a year, you would pay $40,321.92 in combined principal and interest payments.
The 30% rule for home buyers
If your annual salary is $100,000, the 30% rule means you should spend around $2,500 per month on your house payment. With a 10% down payment and a 6% fixed interest rate, you could likely afford a home worth around $350,000 to $400,000 (depending on the cost of taxes and home insurance).
FHA loans require a down payment of 3.5%. For a $500,000 home, this amounts to $17,500. Closing costs should also be taken into consideration. These include various fees and taxes and generally fall between 2% and 2.25% of the listing price.
For a million-dollar home, you'll need a stable income that shows you can comfortably afford mortgage repayments. Even though VA loans don't require a particular credit score, most lenders prefer borrowers with a score of at least 620. However, for a jumbo VA loan, lenders might require a higher score.
Introduction to down payments
It's usually expressed as a percentage of the purchase price. So, if your mortgage requires that you put down, say, 3%, the down payment needed for a $500K house would be $500,000 x 3% = $15,000. And a 20% down payment would require $100,000 ($500,000 x 20% = $100,000).
The salary needed to afford a 700k house will be based upon various factors including the mortgage program, property taxes, and current mortgage rates. A salary of approximately $150k per year is needed to afford a $700k home.
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.
How do people afford 500k houses?
To afford a $500,000 house, you need to make a minimum of $91,008 a year — and probably more to make sure you're not house-poor and can afford day-to-day expenses, maintenance and other debt, like student loans or car payments. One good guideline to follow is not to spend more than 28 percent of your income on housing.
| Interest | Mortgage term | Monthly payments |
|---|---|---|
| 6.00% | 30 years | $2,998 |
| 6.25% | 15 years | $4,287 |
| 6.25% | 30 years | $3,079 |
| 6.50% | 15 years | $4,356 |
As a general guideline, it's often recommended to limit your housing expenditure to no more than about one-third of your income. And so, to determine approximately how much income you would need to afford a $550K home purchase, triple $42,000: You'd need an annual income of at least $126,000.
On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.
The 28/36 rule
This guideline states that you should spend no more than 28 percent of your income on housing costs, and no more than 36 percent on your total debt payments, including housing costs. (So that would also include credit card bills, car payments and any other debt you may carry.)
| Product | Interest Rate | APR |
|---|---|---|
| 30-year fixed-rate | 7.139% | 7.224% |
| 20-year fixed-rate | 7.108% | 7.215% |
| 15-year fixed-rate | 6.425% | 6.572% |
| 10-year fixed-rate | 6.178% | 6.376% |
400 - 500K income is a lot of money. Of course wealthy people can have high expenses and live beyond their means, but at that level, I fail to see how a non-extravagant lifestyle can produce an outcome of no savings even in the highest COL areas. Unless, of course, most of the money goes to taking care of your parents.
What income is required for a 400k mortgage? To afford a $400,000 house, borrowers need $55,600 in cash to put 10 percent down. With a 30-year mortgage, your monthly income should be at least $8200 and your monthly payments on existing debt should not exceed $981.
For many, the key to affording a million-dollar home lies in the equity of their current property. Homeowners can tap into this equity through a sale or a home equity line of credit (HELOC), providing a substantial down payment for their next purchase.
Which FICO Score do mortgage lenders use?
The most commonly used FICO Score in the mortgage-lending industry is the FICO Score 5. According to FICO, the majority of lenders pull credit histories from all three major credit reporting agencies as they evaluate mortgage applications. Mortgage lenders may also use FICO Score 2 or FICO Score 4 in their decisions.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
How Much Should I Pay for a Down Payment? Aim for a down payment that's 20% or more of the total home price—that's $40,000 for a $200,000 house. This minimum is partially based on guidelines set by government-sponsored companies like Fannie Mae and Freddie Mac.
On a salary of $45,000 per year, you can afford a house priced at around $120,000 with a monthly payment of $1,050 for a conventional home loan — that is, if you have no debt and can make a down payment. This number assumes a 6% interest rate.
| Annual Salary | $40,000 | $40,000 |
|---|---|---|
| Mortgage Rate | 7.287% | 7.287% |
| Home Purchase Budget (25% monthly income on mortgage payments) | $103,800 | $114,900 |
| Home Purchase Budget (28% monthly income) | $109,500 | $127,600 |
| Home Purchase Budget (36% monthly income) | $141,100 | $159,300 |
