How Much Do You Need To Make To Afford A $1 Million Dollar Home?

Once upon a time, very few people would imagine owning million-dollar homes. Thanks to rising housing markets around the country, however, $1 million is no longer the upper end of the home price ranges you’ll discover when hunting for top houses. Truth be told, if you want to live in a five-star property in places like New York City, Los Angeles, Miami, or San Diego, $1 million is at the lower end of the housing prices you would be expected to pay.

However, in the more affordable states, with generous tax laws and growing economies, some million-dollar homes are more attainable than one might think. Today, let's take a look at how much money homebuyers should save up and earn before purchasing a million-dollar house in any city.

What Does a Million-Dollar House Look Like in Different Florida Cities?

If you’re trying to figure out how much house you might be able to afford in different cities, take a look below.

1. Miami

If you want to live close to the water, look at this three-bed, three-bath condo. Enjoy luxury living with this southeast corner unit with an extra large wrap-around balcony for breathtaking views of Biscayne Bay and the Miami skyline. Located on eight acres of gated, private land, you’ll feel like you’re living on a resort with access to a brand new marina, pool, tennis courts, a gym, and BBQ area.

If you’re looking for a home with a yard, check out this 4-bedroom, two-bath home in North Bay Village. Located in a quiet neighborhood on an island in the heart of the Biscayne Bay, this recently renovated option now features a converted garage for additional room. With a large open living room, a patio area with a wood deck, a fenced-in backyard, and new kitchen appliances, you’ll have everything you need to be at home.

In the Downtown Miami/Brickell area, this two-bed, two-bath corner unit is on the market for just under a million dollars. The views of Miami and upgraded luxury features are what you’d expect from this SLS LUX condo. Enjoy amenities like an indoor gym, sauna, two pools, and concierge. The game room, mini golf course, and children’s playroom add to the sense of fun. The Brickell Financial District location offers the best of restaurants, bars, groceries, bars, and more.

For investment properties or starter homes, consider this house in Coconut Grove (one of Miami’s original neighborhoods), priced at $975,000. It has three beds and three baths for a total of 880 square feet on a 6,000-square-foot lot. The location is amazing — close to shopping centers, excellent schools, and charming restaurants. It’s a wonderful opportunity to own a residence in a historic neighborhood.

2. Tampa

Near the Bayside West area of Tampa, you can find homes like this multi-story, four-bed, two-and-a-half-bath, boasting more than 2,400 square feet. A new construction from 2014, this home features a breathtaking kitchen with 42” upper cabinets, a walk-in pantry, and stainless-steel appliances.

The spacious first floor is complete with engineered wood flooring and the backyard features artificial turf and a custom putting green. All four bedrooms and the laundry are located upstairs and feature brand-new plush carpeting.

3. St. Petersburg

Compared to Miami, one million dollars can get you more in St. Petersburg. For $1,199,000, you can get this three-bed, two-bath house located in the North East Park neighborhood. The picturesque waterfront property was extensively remodeled in 2019 and now features an attached two-car garage, a paved front porch, quartzite countertops, stainless steel appliances, and a wood-burning fireplace.

Stepping outside offers even more amenities as you’ll find a heated pool and spa, custom gazebo, and two boat lifts with canal access to the Smacks Bayou and beautiful Tampa Bay waters.

4. Sarasota

A million dollars in Sarasota can give you the deed to this three-bed, two-and-a-half-bath house located in the Palm Aire community. This estate home rests on a half acre of prime real estate and has experienced multiple renovations since being built in 1992.

In 2023 alone, a new AC system, refrigeration, and dishwasher were all installed. The three-car garage provides plenty of space, as does the spacious open floor and high ceilings inside the house. The gas-powered fireplace and in-ground covered pool area provide you with the perfect space for gatherings. Located just 20 minutes from downtown Sarasota and a plethora of world-class golf courses, it’s got a little of everything.

5. Fort Myers

Spending a million dollars can get you right to the top in Fort Myers with this three-bed, two-bath penthouse in Cape Coral. For only $829,000, you can live large with this luxurious penthouse with a million-dollar view of the Caloosahatchee River.

Park in your two-car garage and take your private elevator to enjoy panoramic views from the windows or two rooftop balconies. Granite countertops, a wet bar, a wine cooler, and sub-zero refrigeration make sure the party stays chilled all night long. New flooring, a new roof, and a steam shower featuring dual shower heads are just a few more amenities available in this suite. Minutes away from downtown Cape Coral and across the water from Fort Myers, you won’t find a better view on this side of Florida.

6. Naples

If you move to Naples, you can find the perfect two-bed, two-bath condo located in the Moorings. In this unit, you’ll be a few hundred steps away from Naples Beach and its clear, blue waters. Enjoy the perks of natural lighting along with a screened lanai and under-building parking garage. The Madrid Club also features a massive new pool area, a party pavilion with an outdoor kitchen, a fitness center, a social room, a launching dock, and a full-time property manager to meet your needs.

7. Orlando

In Orlando, you can find options like this two-story, four-bed, two-and-a-half-bath Mediterranean home in Baldwin Park. Built in 2003, this 2,680 square-foot home features beautiful wooden floors, maple wood cabinets, a garden tub, and two upstairs bedrooms with a large open area that could be transformed into a third.

The two-car oversized garage is next to a raised deck featuring pavers and a fenced-in backyard. You’ll only be half a block away from the community pool, clubhouse, and playground, as well as everything else that Baldwin Park offers.

How Much Do You Have To Make a Year To Afford a Million-Dollar House?

A million-dollar price tag is not uncommon if you're in the market for a large-family home in Orlando or even a modest home in Miami. When it comes to how much you need to make a year to afford a million-dollar home, that can vary depending on several factors, including mortgage rate, upfront down payment amount, property taxes, insurance, and more.

Using Vaster's mortgage calculator can help you get a better idea of what annual income you will need to afford a million-dollar property in 2023. For our example, we will be assuming the following:

Down payment is 20%
Interest rate is 7.5% for a 30-year fixed rate mortgage
Annual property taxes are 2% of the purchase price
Annual hazard insurance premium is 0.7% of the loan amount

With the above factors incorporated, your monthly housing expense will be $7,727. This equals $92,724 per year on principal, interest, taxes, and home insurance. Using the common rule of thumb that you should not spend more than a third of your income on housing, we will multiply this figure by 3. Therefore, the annual salary needed to afford a $1M dollar home is $278,172.

Other Factors To Consider When Determining Home Affordability

1. Debts

If you are a “prime borrower” — that is, you have very low pre-existing monthly debts (think student loans) and an excellent credit score — your monthly income can be on the lower end.

Still, you might qualify for a mortgage loan for a one-million-dollar home even if you have a high DTI. If you have extra debts, you'll need to prove to the mortgage lender that you will pay for everything. In that case, expect to need an income likely over the projected analysis. The same goes if you have a low credit score.

Lenders also consider your debt-to-income ratio (DTI), which compares your monthly debt obligations to your gross income. A lower DTI is generally preferred. Most lenders prefer a DTI of 36% or less (43% is the maximum upper limit), including your monthly mortgage payment and other debts. Luckily, with work and care, it is possible to lower your debt-to-income ratio, as explained by Business Insider.

2. Credit Score

Your credit score will affect your interest rate as well. If you have a high credit score, you’ll be more likely to qualify for a prime loan than if you have a very low credit score. That said, most lenders will want to see a credit score between 700 and 720 to qualify for a jumbo loan (these loans are commonly used for houses that cost more than $726,200). Check out this article from Investopedia on how to raise a credit score.

3. Interest Rates

In addition to the down payment, you’ll want to consider the interest rate for the mortgage loans you may qualify for.

Interest rates for expensive homes are typically around the same as lower-priced houses. However, since they’re a percentage rate of the total mortgage, they’ll end up costing more money over time. The current interest ratesare hovering between 7.5% and 8% or higher. However, most are around the 7.5% range, and the rates might be coming down soon. A lower interest rate is always ideal, but various financial factors about your credit history will affect the interest rate you secure.

For instance, if you have a low DTI or debt-to-income ratio, you'll be much more likely to secure a mortgage loan with a low interest rate. That's because your lender will trust that you'll be able to pay for your mortgage plus interest consistently without struggling for income. The DTI accounts for your household income, your credit card debt, existing mortgage interest, and any other impacts on your net worth.

Your income itself will also affect your mortgage rate. When you apply for a big mortgage loan, such as a mortgage for a $1 million property, the lender might want to know your yearly income. If your income is over $200,000 or even more, you'll be more likely to secure a low interest rate.

Bottom line: Consider the interest rate for the mortgage loan, which is affected by factors such as your credit history, debt-to-income ratio, income level, and credit score. A low interest rate is always ideal, but do your research and consider the financial factors that may affect the interest rate you qualify for.

4. Property Taxes

Property taxes are recurring fees imposed by local governments on property owners. They are based on the property's assessed value and are used to fund public services and infrastructure. In Florida, property taxes play a significant role in revenue generation due to the absence of state income tax, making them a crucial aspect of homeownership expenses in the state. The median rate of Florida property taxes is 0.89%.

However, property taxes vary by municipality, and in most major cities in Florida, the property tax rate is closer to 1%. In Florida, your property taxes will also be reassessed on the following January 1st after the purchase date. As a home buyer, a good rule of thumb is to assume annual property taxes will equal 2% of the sales price.

5. HOA and CDD Fees

Homeowners association (HOA) fees are regular payments made by homeowners in a community with shared amenities or common areas. These fees typically cover maintenance, repairs, and management of shared spaces.

In Florida, where many residential communities have HOAs, these HOA fees often provide access to amenities such as pools, gyms, and landscaping services, contributing to residents' overall quality of life since the state has over 200 sunny days a year.

Forty-five percent of Florida homes are part of an HOA — more than anywhere else in the United States for an average of $389 a month. This number should factor into your budget. When it comes to resale, homes that are in HOAs are worth about 13 percent more than those that aren’t.

Unlike private HOAs, a Community Development District (CDD) is like a government organization that cares for important things in a community. They help pay for and look after roads, parks, and utilities. They do this by collecting money from the people who live in the community through fees or assessments. This way, they ensure the community has everything it needs to be a nice place to live.

6. Type of Mortgage

When purchasing a million-dollar home, your mortgage type plays a crucial role in your affordability. Typically, you would be looking at conventional loans and jumbo loans.

Conventional loans are not backed by the federal government and often have stricter credit requirements and smaller loan limits. Jumbo loans exceed the maximum loan limits set by government-sponsored entities. They are designed for luxury purchases and usually require a larger down payment and a strong credit score.

For luxury residential investment purchases over $5 million, portfolio loans and private loans are often considered since most traditional banks will not approve loans over $3 million.

A portfolio loan is kept by the lender in their investment portfolio and offers more flexibility in loan terms. A private loan, provided by private lenders like Vaster, offers quick and flexible financing options.

Closing Costs

Closing costs are an essential part of the home-buying process. These are fees paid at the closing of a real estate transaction and can include lender fees, title insurance, escrow fees, appraisal fees, and more. While these costs vary, as a rule of thumb, they typically range from 2% to 5% of the home’s purchase price.

When budgeting for a million-dollar home, factor in the potential additional housing costs. While some closing costs can be negotiated or rolled into your mortgage, you'll want to discuss these options with your lender. Additionally, some states offer first-time homebuyer programs that can help offset these costs.

Property Maintenance and Upkeep

Owning a home, especially a million-dollar home, comes with the responsibility of property maintenance and upkeep. These ongoing costs can significantly impact the affordability of your home. Typical maintenance costs include landscaping, HVAC maintenance, roof and gutter upkeep, and major repairs such as plumbing or electrical issues.

On average, homeowners spend 1% to 4% of their home's value annually on maintenance and repairs, which tend to increase as the house ages. For a million-dollar home, this translates to up to $40,000 a year. Budget for these expenses and set aside a contingency fund for unexpected repairs. Luxury homes might have higher-end finishes and more complex systems that could be more expensive to repair or replace.

Insurance

Homeowners insurance is a significant factor in high-value home purchases, offering protection against potential damages for a hefty price. For a $1 million home, the annual hazard insurance premium typically accounts for about 0.7% of the loan amount. This can significantly impact overall affordability.

Insurance rates can vary based on the property's location, size, and value. For instance, homes in areas prone to natural disasters, such as South Florida, may require comprehensive coverage, leading to higher premiums. Get an accurate insurance quote during the home-buying process to ensure proper budgeting.

Lenders also consider insurance during their decision-making process. They want to ensure the property they are financing is adequately protected, so obtaining sufficient coverage is often a prerequisite for loan approval.

The type of home also influences insurance costs. Luxury homes often have unique features like custom finishes or rare materials that can be expensive to replace, leading to higher premiums. Additionally, amenities like pools or guest houses can increase liability, which may also increase the cost of insurance.

Finance Your Million-Dollar House With Vaster

Even if you already have enough money to afford a $1 million home, you may not know where to find the perfect mortgage. Vaster can help. With our expertise in mortgage lending, we offer various loan options tailored to your needs. Whether you're a first-time buyer or seeking to refinance, Vaster provides valuable guidance and competitive rates, helping you find and purchase your luxury dream home in Florida.

Our knowledgeable loan officers can connect you to the best conventional loan or jumbo mortgage for your requirements, so inquire about a preapproval today.

Sources:

What are Mortgage Closing Costs? | NerdWallet

Debt-to-Income (DTI) Ratio: What's Good and How To Calculate It | Investopedia

Jumbo Loans: What You Need to Know | NerdWallet

770 NE 69th St Unit 5I, Miami, FL 33138 | MLS# A11456686 | Redfin

7548 Adventure Ave, North Bay Village, FL 33141 | MLS# A11395978 | Redfin

801 S Miami Ave #2405, Miami, FL 33130 | MLS# A11366717 | Redfin

3840 Charles Ter, Coconut Grove, FL 33133 | MLS# A11388703 | Redfin

3612 E Royal Palm Cir, TAMPA, FL 33629 | MLS# T3480604 | Redfin

7579 Links Ct, SARASOTA, FL 34243 | MLS# A4583820 | Redfin

4019 SE 20th Pl #801, CAPE CORAL, FL 33904 | MLS# 223085178 | Redfin

3430 Gulf Shore Blvd N Unit 2B, Naples, FL 34103 | MLS# 223084056 | Redfin