How Much Do You Need to Make to Get a $600,000 Mortgage?

To afford a $600,000 house, the amount of income needed depends on savings and the down payment, with a debt-to-income ratio of 43% or less being ideal for lenders.

Buying your dream home can be a big step. In many parts of the country, $600,000 can get you a big, beautiful home. It's significantly above the average home price in the U.S. of $420,800. For $600,000, you could get more space or premium features like a swimming pool, large yard, or more in lower-cost areas. 

If you're considering a $600,000 home, the good news is that you can still find good value in many years. There are very few places where you'll be priced out at $600,000, although in places like New York or parts of California, you might have to opt for a small apartment. Read on to understand how much do you need to make to get a 600000 mortgage to start planning your monthly budget. 

Key Takeaways

• Your income, total debt, credit score, and other factors determine whether you can qualify for a $600,000 mortgage. 
• Interest rates, fees, taxes, insurance, and the down payment amount affect monthly mortgage payment costs.
• To comfortably afford a $600,000 mortgage, you'll need a monthly income of $10,000 to $14,000 with current average interest rates. 
• Even if you can afford the mortgage payments, you must consider your total financial picture and other goals carefully. 

How Much Income Do You Need to Afford a $600,000 House?

How much income you need to afford a $600,000 house depends on your down payment and total savings. In general, lenders look for a debt-to-income (DTI) ratio of 43% or less, including total debt from auto loans, student loans, credit card debt, and any other outstanding debt. 

Aim to spend no more than ⅓ or 33% of your income on your mortgage payments. If you want to buy a $600,000 home with a 7% interest rate and total monthly payments of $4,666.81 with PMI and average taxes and insurance, your actual costs could be higher or lower.  

To calculate how much you need to make to afford $4,667 monthly, multiply by three. To comfortably afford a $600,000 home with a 7% interest rate, average taxes, and insurance, you must make at least $14,000 a month in take-home pay or about $168,000 annually. 

If you make a larger down payment, your total costs could be less. For example, if you make a down payment of 20% of $600,000 or $120,000, your monthly payment will be $3,560. That means you'd need a take-home salary of at least $10,680 to afford a $600,000 home comfortably.

While those figures are comfortable, you could increase your DTI and potentially still be approved for a mortgage with a slightly lower salary, with total debt up to 43% or even 45% of your income. And if you and your partner are applying together, the lender could look at your combined salaries and debt. 

Applying the 28/36 Rule

Many experts suggest using the 28/36 rule, which indicates that you should spend no more than 28% of your income on housing and no more than 36% of your income on all debt payments. This formula is optimized compared to the option above. 

Suppose you earn $120,000 a year, which is $10,000 a month. According to the 28/36 Rule, you should spend no more than $2,800 on housing payments, including your mortgage principal, interest, property taxes, insurance premiums, and HOA fees (if any). 

But that number might be lower if you carry significant other debt. With the same salary, you shouldn't spend more than $3,600 on total debt payments. If you have a $500 monthly car payment plus $400 in student loan repayments, your total available income for housing costs will be lower if you want to stay within 36% of your income used for debt payments. 

In that case, you could afford a mortgage payment of up to $2,500 ($3,600-$900=$3,500). This formula can help ensure you don't stretch your budget too thin or put yourself under undue pressure. With a $600,000 budget, you should have significant home options in most areas, allowing you to get a comfortable home in most markets. 

What Factors Determine How Much You Can Afford?

Lenders consider your total financial picture and income to determine how much you can afford on mortgage payments. Here are vital considerations. 

Down Payment 

A larger down payment can mean lower monthly mortgage payments. Even with a lower income, some mortgage lenders could approve you for a mortgage to buy a $600,000 home if you can make a larger down payment. For many borrowers, saving 20% of $600,000 —$120,000 — takes time and commitment and shows lenders you're willing to put significant equity in a home. Another plus of a larger down payment? You'll end up paying less in interest over the loan's lifetime. 

Mortgage Type

Different types of mortgages have different DTI criteria for borrowers. Many mortgages, including USDA, VA, and FHA loans, don't require a 20% down payment. Whether you can afford a $600,000 loan will depend on lender criteria, income, DTI, and more. 

Credit Score

Lenders use your credit score to gauge the likelihood of your paying off the loan without defaulting. You'll need a good (700+) credit score to be approved for a larger loan. However, if you meet other requirements for income, low DTI, and loan-to-value ratio, some lenders will approve a $600,000 mortgage even if you have a lower credit score. 

Debt-to-Income Ratio

Your debt-to-income ratio is the relationship between your total monthly debt payments and income. Generally, an ideal DTI with your mortgage payments is 36% or less. However, some mortgage lenders will approve borrowers with a DTI of up to 43% or, in extreme cases and with other strong factors, even a 50% DTI.

Loan-to-Value Ratio

The loan-to-value ratio assures lenders you aren't borrowing more than the home's value. In general, a good loan-to-value ratio is up to 80%. Anything above 80% is considered a high LTV. In that case, you might face higher borrowing costs. You'll also need to pay for private mortgage insurance for most types of mortgages. An LTV above 95% could mean you're not approved for the mortgage. 

Financial Assistance

State and government financial assistance programs are available. If you can afford a $600,000 mortgage, you don't usually meet the maximum income requirements to qualify for these programs. 

However, financial assistance from a co-signer, co-borrower, or a gift for a down payment from family or friends could help you qualify for a $600,000 mortgage. 

How Much Is a $600,000 Mortgage Payment Per Month?

The monthly cost of a $600,000 mortgage depends on the interest rate, whether you opt for a 15-year or 30-year fixed-rate mortgage, and your down payment amount. Learn more about fixed-rate vs. variable-rate mortgages to understand how they can affect your monthly payments long-term. 

Here are a few examples, without adding in taxes or insurance, which vary by area:

• Payment on a 30-year, fixed-rate mortgage with 6% interest rate would cost $3,847.
• Payment on a 30-year, fixed-rate mortgage with 7% interest rate would cost $4,242.
• Payment on a 30-year, fixed-rate mortgage with 8% interest rate would cost $4,653.
• Payment on a 15-year, fixed-rate mortgage with 6% interest rate would cost $5,313.
• Payment on a 15-year, fixed-rate mortgage with 7% interest rate would cost $5,643
• Payment on a 15-year, fixed-rate mortgage with 8% interest rate would cost $5,984.

What to Consider Before Getting a $600,000 Mortgage

Before getting a $600,000 mortgage, consider your total costs, current financial situation, and expected changes to income. Here's a detailed overview:

Additional Homeownership Costs

Remember that your monthly mortgage payment is just one part of the cost of homeownership. You should also consider additional homeownership costs like property taxes, insurance, and maintenance. Taxes and insurance may be calculated as a percentage of the property's value, meaning you'll pay more taxes and insurance on a $600,000 home than a $300,000 home. 

In addition, you should allow a minimum of 1% to 2% of the property's value each year for repairs and maintenance. On a $600,000 home, you must save an additional $500 to $1,000 monthly for maintenance costs. While you won't necessarily need it every month, when a major repair comes up, you'll be happy to have the savings ready. 

Your Current Financial Situation

It is important to consider your current financial situation, such as other debt obligations and long-term financial goals. Just because you can afford a $600,000 home doesn't necessarily mean you should go for it. If you can find a comfortable, less costly home, you could use the additional monthly savings to build your long-term savings, invest in real estate, or reach other financial targets. 

Changes In Your Income as the Years Go On

Considering how your income will change over time is essential before getting a $600,000 mortgage. There can be less uncertainty if you are in a stable job and established in your career. However, if you're new in your career or there's uncertainty around your position, taking on a $600,000 mortgage could add to financial strain if you take a pay cut. 

How to Apply for a Mortgage on a Home Worth $600,000

You'll need to follow steps similar to other mortgage applications to apply for a mortgage on a home worth $600,000. This includes:

• Gather documents, including government-issued ID and proof of income, savings, and debt. You may be asked for bank statements or two years' past tax returns to verify income. 
• Compare lenders, including both online lenders and local banks, to find the best interest rates and terms. 
• Get prequalified with documents to confirm how much you can afford to buy a home and start your home search. You can apply for a mortgage with multiple lenders within 45 days, and it will only count as one hard credit check on your credit report. 
• Stay in contact with the lender you choose through your home search process.
• Once you find a home, contact the lender and provide any additional requested documentation to finalize the mortgage approval. The lender will typically order a home appraisal and inspection as part of the approval process. 

Compare the Best Mortgage Providers From Benzinga’s Top Lenders

Find some of the best mortgage lenders from Benzinga's top providers here to compare lenders. 

Should You Get a $600,000 Mortgage?

In some high-cost areas like New York City, Seattle, and California, a $600,000 home might be a small apartment or home. In other places, you could get a large home with premium finishes. Whether you should buy a home for $600,000 depends on several personal factors, including your total income and debt, financial goals, job stability, and property value. 

Carefully compare the best offers from lenders, run your numbers to see how $600,000 fits into your financial picture, and consider speaking with a financial advisor to plan your home purchase while reaching other economic targets. 

Frequently Asked Questions