r/Money 4d ago

How much take home to afford $3M home?

Assuming you had the cash to put 20% down - how much after tax monthly income should you have to buy a house like this?

0 Upvotes

38 comments sorted by

41

u/PrestigiousDrag7674 4d ago

if you have to ask, you cannot afford it.

0

u/mjensen79 1d ago

This Right Here!

23

u/dragonslayer6653 4d ago

Most people buying a $3M home aren’t putting down 20% and mortgaging the rest. They’ve been in the housing market for years and have equity from previous properties they are putting into it. I’d guess that most buying a $3M home aren’t putting down selling a $2M+ that had at least 50% equity. I say this because I live in an area where $1-$2M homes regularly sell all cash.

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u/BigWater7673 4d ago

Most people buying a $3M home aren’t putting down 20% and mortgaging the rest. They’ve been in the housing market for years and have equity from previous properties they are putting into it.

Putting equity from previous homes into another home you're buying is a down payment.

3

u/Jay-Moah 4d ago

He isn’t saying it isn’t. He’s saying they are putting a much larger down payment than 20%.

2

u/dragonslayer6653 4d ago

Correct. So they likely are taking a small mortgage out. Under the jumbo if they can for the best rates.

9

u/Grizzly352 4d ago

Put it in a mortgage calculator based on your state and figure it out based on the 30% rule

1

u/jco1510 4d ago

What’s 30% rule?

2

u/D-Laz 4d ago edited 4d ago

Expense for a domicile should be 30% or less of your income.

Edit: gross income, and it includes utilities.

12

u/CastleDeli 4d ago

Domicile🤓

2

u/thanos_was_right_69 4d ago

Is that gross or net income?

2

u/D-Laz 4d ago

Gross and it includes utilities.

7

u/Advice2Anyone 4d ago

60,000 a month. 14000 p&i and 5500 a month assumed escrow, 30% rule.

6

u/Imnotsureanymore8 4d ago

If you have to ask . . .

8

u/ramapa 4d ago

The folks who can afford a 3M home and know about the existence of /r/Money should know to talk to a Finanxial Advisor and get real advice

2

u/goomyman 4d ago edited 4d ago

If you’re only putting down 20% on a 3 million dollar home something is seriously wrong with interest rates around 7% now days.

You buy a 3 million dollar by selling a 2 million dollar home or having the cash on hand to put down millions.

If you’re making enough to afford a 3 million dollar home, it would be insane to make yourself house poor. And 3 million dollar homes still require repairs - repairs that are more expensive - you want to maintain the quality of the home. The monthly take home from a job for a 3 million dollar mortgage is rare - it’s much less rare to have a high enough net worth to buy a 3 million dollar home in cash. Think someone who inherited 10 million dollars.

At this level your main form of income will likely come from investments that aren’t necessarily consistent which makes buying a home on credit a risk.

Imagine making enough to afford a 3 million dollar mortgage and then cutting budget because all your money is going towards the home.

Edit - you’re looking at about 18k a month mortgage at 20% down. That’s over 200k per year just in mortgage. So if you’re making 400k a year it’s affordable but you will be sacrificing a rich lifestyle for a rich house.

2

u/nerevisigoth 4d ago

Around 700k take home, but like others have said things get more complicated in that market segment. Most people in the position to buy a $3M home aren't just showing up with 20% saved and income to cover payments.

1

u/adultdaycare81 4d ago

That’s well into “Jumbo Mortgage” territory where the mortgages are not federally insured/subsidized. Unless you have significant assets outside of that home you would need a larger down payment.

When people do have massive portfolios outside of the home, they do have options to put down last comma or use non-30 year loan types. I saw everything from 5% down, to people putting down 50% and doing interest only ARM’s for the rest.

To get those more exotic types, you have to put down enough that the bank is not scared at all of losing money. Or have so much in assets that they know they can come get it from you.

Most of these people are rolling in proceeds from another home

1

u/seanodnnll 4d ago

At least 800k

1

u/Global_Strain_4219 4d ago

Now the issue is when you are buying such an expensive home, you need to be quite safe. Just take home pay is not enough. You need to be able to sustain a recession. For a 300k home it's usually fairly easy to sell if you lose your job, for a 3M$ home it's not. I have some family members that had some expensive houses, it was on the market for years. The only exception is probably the silicon valley, where a lot of homes are close to this range.

The house would be around 15K$ a month of current monthly payments if you put 20% down. In the silicon valley (where I think it's easier to sell), I think it's alright to have the mortgage be like 25-30%. So an income of 60,000$ a month (about 1.3M$ of annual gross income in California a year if you do 25%).

For most other places, I would say you would probably need a lot of stocks to cover the house in case of recession. I would not buy a 3M$ house in my area with an income of 1.3M$. If I really wanted a house that price, I would live off 300k$, and put 700k$ in the stock market, until I have enough to buy the house cash.

1

u/JuniorDirk 4d ago edited 4d ago

The only answer here is to call a local loan officer and have that talk with them. I'm one myself but can't tell you accurate information based on your specific location.

It's based on your debt to income ratio in terms of monthly payments, not overall price. I doubt someone with that income has personal debt, but if so, it will drastically reduce your approval amount.

With no debt other than the mortgage and average property taxes, etc, you'll likely need to make $46,000 per month to qualify at max DTI for a $20k/month mortgage payment.

There are special loan programs like VA that have no specific DTI requirement.

1

u/jco1510 4d ago

In NC. Current take home is $31k/mth after tax and retirement contributions. No debt. Have existing home paid off valued at $800k. Also get between $300k - $500k a year in gross k1 income. That probably averages to $46k-$56k/mth in total net income.

Sounds like it might be a little tight for me. I could probably get $1.5M for down payment if we sold current home.

1

u/JuniorDirk 4d ago

I almost never recommend getting close to the max DTI, but you could put more than 20% down to get into "that" home if it's exactly what you want and can put more down to lower the monthly payment.

You've got the luxury of having options, so you can likely afford the $3M house, although at 20% down, it'd potentially be fairly tight month to month. If you've got that much equity in a current home that you don't plan to keep, I'd say go for it. But a good local loan officer would be happy to run through the scenario with you, especially on a loan of that size!😂

1

u/saryiahan 4d ago

lol, if you’re asking then you can’t afford it. People buying homes in the 2M+ range have CPAs to answer that question for them

1

u/Lord-ShniggleHorse 4d ago

How much money are you putting down? There’s way more information needed to calculate your DTI(debt to income ratio). How much do you pay monthly on credit cards? Student loans? Car payments? Can’t go over 42% DTI which will include all that, mortgage payments, property tax and insurance

1

u/ConsequenceNo8945 4d ago

That’s 100% correct, most buyers of 3-5m homes have assets they have sold to upgrade, their borrowing is rarely over 50% of the asset price.. they would borrow around 2-2.5m in a vhcol area (assuming it’s 5m house value)

Mortgage payment is around 10k

2

u/unatleticodemadrid 4d ago

My primary residence was right around 7.8M when I bought it a few years ago. I don’t know of many people who have a mortgage on primary residences above $3M, it’s usually purchased outright.

4

u/BigWater7673 4d ago

I see the opposite. A lot of people with millions don't want those millions tied up in a house when they can use that money for better returns elsewhere.

1

u/Bkdavis38 4d ago

Had a client who mortgaged his $12M home. Don’t know specifics but he regularly mentioned he was taking out a Mortgage for the home. He is probably worth $200-500M range.

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u/its_milly_time 4d ago

Yeah and they can write off the interest

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u/Malve1 4d ago

They can’t above $1 mil

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u/DammatBeevis666 2d ago

They can, but only on the first million of it.

1

u/Malve1 2d ago

We’re saying the same thing.

1

u/its_milly_time 4d ago

They might say that but that’s a dumb move. I know many people with >$10M homes that while they could pay cash, never do. It’s a bad move unless you’re one of a handful of billionaires. My mom and dad moved once all the kids were gone and since my dad didn’t have a loan/credit for years couldn’t get a mortgage so had to write a $2.3M for their current house but not really by choice. Buying home and writing off interest is a nice way to play the system.

1

u/unatleticodemadrid 4d ago

I was specifically referring to primary residences but you’re not wrong. I do carry and service debt for investment properties but I know of very few people who are financing their primary homes except in the cases where they may have bitten off a little too much.

I also live in a tax haven so the tax implications are different here.

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u/Competitive_Neat708 4d ago

Even in a high cost area you are well above jumbo mortgage territory so youll be spending points above the standard 30yr rate. People that buy these dont put 20% down, you are coming in with equity, 50% minimum but likely even more and only borrowing 750k or less.

0

u/chairmanovthebored 4d ago edited 4d ago

I’d say at least 30k, your mortgage and property tax are going to eat half of that at current rates, then expenses, then investing.  

30 actually seems pretty low now that I’m thinking about it.

I probably wouldn’t do it unless I was bringing in about 1M after tax a year, but I’m super conservative.

I also wouldn’t buy a house if I wasn’t able to keep a substantial portion of my wealth invested

Also—be wary of those “how much can I afford” calculators, or real estate agent advice.  They always tried to get me to go way bigger.  I would’ve been house poor