Average income for $1 million home?

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It should take a lot more than $250K to own a million dollar home for the simple reason that unless your income stream is certain, you need a greater margin of safety to cover possible diminishment of your future income. Even if you are a CEO of a company, with the average tenure less than 5 years, it would take a greater amount of income to be comfortable to buy a into a million dollar neighborhood.
 
<blockquote>It should take a lot more than $250K to own a million dollar home for the simple reason that unless your income stream is certain, you need a greater margin of safety to cover possible diminishment of your future income. Even if you are a CEO of a company, with the average tenure less than 5 years, it would take a greater amount of income to be comfortable to buy a into a million dollar neighborhood. </blockquote>
It's not just income that can get you into a million dollar home. A large down payment can help. Plus a lot of people I know have a nice investment portfolio. Some people have done well with real estate, stocks, mutual funds, stock options, inheritance, bonds, commodities, etc.
 
Here is when i know when i am ready to buy a $1 Million home. I will never leverage myself more than $417,000 mortgage MAX. Therefore when I can afford a $583,000 downpayment, that's when i know I am ready for a million home. Currently I can afford a $250k down payment, therefore i will not buy a home selling for more than $667k. This is a simple rule i will live by.
 
[quote author="PANDA BEAR" date=1211189240]Here is when i know when i am ready to buy a $1 Million home. I will never leverage myself more than $417,000 mortgage MAX. Therefore when I can afford a $583,000 downpayment, that's when i know I am ready for a million home. Currently I can afford a $250k down payment, therefore i will not buy a home selling for more than $667k. This is a simple rule i will live by.</blockquote>


Why have you decided to live by this rule? I'm not saying it's wrong or anything - just wondering why.
 
[quote author="Strom" date=1211199973][quote author="PANDA BEAR" date=1211189240]Here is when i know when i am ready to buy a $1 Million home. I will never leverage myself more than $417,000 mortgage MAX. Therefore when I can afford a $583,000 downpayment, that's when i know I am ready for a million home. Currently I can afford a $250k down payment, therefore i will not buy a home selling for more than $667k. This is a simple rule i will live by.</blockquote>


Why have you decided to live by this rule? I'm not saying it's wrong or anything - just wondering why.</blockquote>


That's alot of cash to put down.
 
[quote author="reason" date=1211200233]



That's alot of cash to put down.</blockquote>


Is this in response to me or PANDA? I agree that his rule will result in large down payments. Many people would say that investing the additional down payment money would yield better returns than putting it down on the house.



Some people have an aversion to debt, though. I was just interested in why he chose the $417k level for his maximum mortgage debt. If you have that much money to put down, and your income supports the loan, you would probably be able to get a reasonable rate both below and above the conforming limit (in "normal" periods in the credit cycle).
 
30k per year. 1k/month public assitance. Plus a few hundred extra a month on what we can get for recycling. :)

































j/k.



A lot of people in here make a lot of money. Too bad a million bucks isn't what it used to be.
 
[quote author="PANDA BEAR" date=1211189240]Here is when i know when i am ready to buy a $1 Million home. I will never leverage myself more than $417,000 mortgage MAX. Therefore when I can afford a $583,000 downpayment, that's when i know I am ready for a million home. Currently I can afford a $250k down payment, therefore i will not buy a home selling for more than $667k. This is a simple rule i will live by.</blockquote>


I don't look at the dollar figure, I look at the multiple on income as a limiter. I can safely (account for potentially a 10-20% loss in income as the result of a job change) afford 3X gross on a mortgage, at current rates, and that is where my limit lies. I'd much rather be 2-2.5X on a mortgage and that's why I continue to watch and wait...
 
Peoples estimates on the $250K/year income and $200K down are pretty accurate.... but you probably need to up the $200K down to $300K down to make it work.



Why?



$200K down leave you with a loan of $800,000. This does not fall into the FNMA jumbo conforming guidelines, nor does it fit in the FHA jumbo guidelines. The moeny doesn't move fluidly above those guidelines (hell, even with those programs, people scoff at the 6.5-7% average interest reate you get on them.... for a 30 year fixed. They somehow expect to get awesome rates, like 5.5% or better... lol). Those programs cap at $729K... So on a million dollar property, if you want a 30 year fixed loan, expect to bring no less thatn $300K to the table.



$270K to get the loan amount down, and another 30K to handle out-of-pocket closing costs (title, escrow, probably gonna buydown that rate a bit, etc.).



Loans above that $729K cap just aren't going to be attractive to anyone who is in that position. Just my $.02.
 
[quote author="skek" date=1211245925]Thanks, master. Great insight, as usual. Is there a market "price" for buying down an interest rate -- something akin to 1 point for every .25 rate reduction for a 30 year fixed? Or does it vary by lender? How low do lenders typically allow you to buy down your rate? Can you buy it down to 2.5% or do they stop you at some point?</blockquote>


There is no set 'scale' that buydowns occur at - rates are priced according to the current trading levels of the FNMA or GNMA MBS (as the case may be). Since there are different MBS for rate groups, and they trade indenpendantly, they will be all over the place. Generally there is no limit on how far you can buy down... the only limit the absolute 'floor' rate any given lender is willing to write at that particular time.



Anything above the 729K loan limit is a pure portfolio loan. Regardless of income, credit characteristics, and assets - these loans are going to be higher rate and more expensive. The next step down, the 729K, are higher rate and more epensive than the 417K and under loans. So on and so forth. There just happens to be a large disconnect between the 729K and over level.
 
[quote author="Stuff It" date=1211248964]so what does someone need to do for a living to make 200K a year?</blockquote>


Homes of that size/price are not intended for single owners.... A husband and wife team making over $100K each can do it.
 
<blockquote>so what does someone need to do for a living to make 200K a year? </blockquote>
The people I know making over $250k are in sales, stock market or a top executive of a company. Or a double-income family each making $125k.
 
[quote author="Stuff It" date=1211248964]so what does someone need to do for a living to make 200K a year?</blockquote>


Pimpin ain't easy.
 
[quote author="skek" date=1211252976][quote author="Stuff It" date=1211248964]so what does someone need to do for a living to make 200K a year?</blockquote>


If you are a hard working associate at a top law firm (about 5-10 such firms in OC), you can be 1-5 years out of law school and make $200k. If you are married to another attorney, you can push half a million in household income by your late 20s.</blockquote>


Realistically, people with this level of household income are extremely rare. I've seen my share...usually high level corporate positions (the kind where there is only 1 of them in the company... CFO, CEO, CIO, etc..), or two adults with good engineering/medical/law jobs in the low 6 figures each.



Figure 1 in a 1000 households or so.
 
For me, as a engineer I make significantly less. I do have the cash to purchase said unit, but I will not be making payments on the mortgage. I'm probably not the norm though. For me the main problem is affording the taxes, upkeep and repairs on said 1M home. While it is possible, i'd rather not be house poor.



I know several people who make FAR past 200k (like there taxes are in the 200-400k), but live in a modest home because its paid for and don't want to the burden of ever higher taxes (Prop 13?).



-bix
 
[quote author="Stuff It" date=1211248964]so what does someone need to do for a living to make 200K a year?</blockquote>


Director of SEC Reporting (CPA) at a public company = 160K and CPA at big four firm = 115K
 
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