Income Needed for a $500k Mortgage? Buying a home is an exciting time, and there are so many options to consider when shopping around for your dream home, including the size of the house, the style of the exterior, the number of bedrooms and bathrooms, and more.
But if you want to make this happen, it’s essential to consider the most significant decision first – what’s the income needed for a $500k mortgage? Luckily for you, we can help! Let’s look at what it takes to buy a $500k home!
Income Needed for a $500k Mortgage?
According to Redfin, the median list price of a home in San Francisco is more than $1.35 million. The rest of the Bay Area isn’t much better; only in cities like Modesto ($349,250), Santa Rosa ($425,000), and Sacramento ($315,000) can you find homes with asking prices below half-million dollars.
For first-time buyers trying to get into these markets on their dime, that will not happen without serious help from mom and dad. However, there are many ways you can qualify for a mortgage as an individual that doesn’t require significant savings or family support — even on high six-figure mortgages. Here are some common tips
Cost over time
Income needed for a $500k mortgage; The typical down payment is 20% of your home’s value, but as home prices soar, that requirement increases substantially. For example, in 2018, to buy a house with a $300,000 price tag, you’ll need to pay about $30,000 for your down payment and closing costs.
While you may be able to take out an FHA loan with as little as 3.5% down, it will cost you more in insurance premiums. That number jumps even higher if you want to live in certain parts of Seattle or Los Angeles: You might need 30% or more because housing costs are so high there!
Saving for a down payment
When buying a home, you might think you need as much money saved as possible before you begin your house hunt. But there’s another number you should consider just as much: your debt-to-income ratio (DTI).
That figure is a good gauge of whether or not you can afford a mortgage and how much home your budget will allow for. You can calculate it yourself, but most lenders use front-end DTI—the total monthly debt payments divided by gross monthly income—to determine how much house you can buy.
Save on taxes with an HBP/HST rebate.
If you were planning on using money from your registered retirement savings plan (RRSP) to buy your first home, it might be worth taking advantage of Canada’s Home Buyers’ Plan (HBP).
The HBP allows Canadians to withdraw up to $25,000 tax-free from their RRSP if they use that money within 30 days. To qualify, buyers must meet specific criteria, including not owning a home in the past four years. You can also do an HST rebate if you have maxed out your RRSP contribution limit.
Ask your real estate professional about getting an HST rebate if you have already contributed maximum amounts into your RRSP and are purchasing your first home under $1 million outside of Quebec.
Increase your net worth by paying off debts early
There are more ways to get ahead than just earning more. For example, paying off debts early increases your net worth and can help you reach financial freedom faster.
If you have one credit card with a balance of $2,000 at 10% interest, it will take 120 months (10 years) to pay off—at the cost of almost $6,000 in interest payments.
Finding the income needed for a $500k mortgage isn’t impossible, but it does mean living frugally for some time. This can mean saving up for a down payment or paying off debts early. If you want a mortgage for $500k, you need to save or work until you have $625,000 in your bank account.