Question of the Week
Each week we select a personal finance question that's top of mind for consumers.
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Can I afford a $1 million house?
Deciding how much house you can afford is a very personal question.
Some people spend a higher proportion of their income on housing than others. This could be because they live in a high-cost area, or because they value their home more than other financial priorities.
Still, you may be looking for some general guidelines to help determine whether you can comfortably afford a certain price.
One widely accepted rule of thumb is to keep mortgage payments below 28% of your monthly pre-tax income.
Let’s go back to the $1 million house.
Assuming you make the standard 20% down payment and take out a 30-year mortgage with a 7% interest rate, your monthly mortgage payment would be just over $7,105.
For that amount to be under 28% of your monthly pre-tax monthly, you would need an annual salary of around $304,500.
Earning that salary would put you among the highest-earning Americans. The national median household income is $80,610, according to the most recent U.S. Census Bureau data for 2023.
Want to test other house prices? You can use NerdWallet’s mortgage calculator to see how far your homebuying budget can go.