How to Afford a Million-Dollar Home

With rising property values and shifting markets, million-dollar homes are becoming more common than you might expect—and more accessible. In some markets, like California’s major cities, New York, and several other East Coast metropolitan areas, the average price for a home is already well over a million dollars.

For residents of these areas, affording a million-dollar home isn’t just a possibility but a reality if they ever want to become homeowners. So, if you want to know how to afford a million-dollar home, then this is the right article to get you started.

Today, affording a million-dollar property isn’t just about having wealth or a sizable income; it’s about thoughtful financial planning, disciplined saving, and understanding the right financing options. In this guide, we’ll break down the essentials of purchasing a million-dollar home, including financial preparation, calculating your budget, and exploring the most suitable financing options.

Is Buying a Million-Dollar House Worth It?

Is buying a million-dollar home worth it? That’s a loaded question. Buying a million-dollar house has a different meaning depending on where you live in the country.

If you are in a more affordable housing market, like Toledo, OH, where the median home price is just over $120,000, then a million dollar house means that you are buying an uber-luxurious property. However, on the opposite end of the spectrum is Atherton, CA, where the average home price is over $7.5 million. In fact, if you want to buy a single-family home anywhere on the San Francisco peninsula, you will probably have to pay over $1 million.

So, is buying a million-dollar home worth it? Well, it depends on where you live, what you value, and how much you earn. Each person looking to buy in this price range needs to review the advantages and disadvantages and how they work within their budget.

Advantages of Buying a Million-Dollar House

The advantages of owning an expensive home depend on the type of property and its location. Owning a million-dollar house comes with the feeling of a level of achievement, prestige, and exclusivity. These properties can come with premium amenities, like high-end appliances and finishes.

But they can also represent a certain lifestyle appeal and status due to their location in desirable neighborhoods or proximity to good schools. The home may have views, a large lot, or unique architectural features.

However, most million-dollar properties have one thing in common: they can hold value and often appreciate quickly, especially in hot housing markets. This potential for appreciation can see a million-dollar house increase by several hundred thousand dollars or even a million dollars during ownership.

While mortgage interest deductions have limits, homebuyers may still enjoy tax breaks on mortgage interest, property taxes, and certain expenses. Consulting with a tax professional can help buyers understand what deductions are available based on current tax regulations.

Challenges of Buying a Million-Dollar House

If you want to buy a million-dollar home, the biggest challenge you will face is affordability. These homes come with significantly higher costs, from the down payment to maintenance, mortgage payments, property taxes, and insurance premiums. Buyers need be prepared for expenses beyond the monthly mortgage payment itself, including things like landscaping and upkeep, as the overall maintenance of these properties to maintain their value is usually more time consuming and expensive.

Another downside of high-priced houses is that while they may hold and grow in value during strong real estate markets, they can also be more volatile when the market drops or there’s an economic downturn. The demand for housing at any price point depends on how much potential buyers can afford that property.

When houses are expensive, that buyer pool is already smaller, and when the economy is struggling, and housing affordability is impacted, the buyer pool shrinks even more, generally causing expensive homes to drop in value more than affordable options. Buyers of million-dollar homes need to keep market conditions in mind and recognize that resale might require patience or, in some cases, price adjustments.

Lastly, a million-dollar home will impact cash flow and savings. Buyers must be prepared for all monthly costs and have additional savings set aside for when anything goes wrong. These monthly outgoings can impact homeowners’ cash flow and long-term savings goals.

How Much Do You Need to Make to Afford a Million-Dollar Home?

How much you need to earn to afford a million-dollar home depends on your down payment and the interest rate you can get on your loan. In 2021, when home mortgage rates were about 3%, a million-dollar home loan was much more affordable than in 2024, with interest rates hovering between 6-7%.

When assessing affordability, lenders typically rely on certain rules and guidelines to determine whether buyers qualify for high-value mortgages. Understanding these criteria can help you gauge whether these loans are achievable or whether you can comfortably afford your dream home.

Income Requirements: the 28/36 Rule

Lenders often use the “28/36 rule” when assessing mortgage applications. This rule suggests that:

• No more than 28% of your gross monthly income should go toward housing costs, including mortgage payments, property taxes, and insurance.
• No more than 36% of your gross monthly income should go toward all debts combined (housing, credit cards, student loans, car payments, etc.).

These percentages might not seem like a lot, but they can quickly add up. In today’s interest rate environment, you’ll need a substantial annual income—at least $250,000 or more—to comfortably afford a million-dollar home’s mortgage and other housing costs.

The Down Payment and Closing Costs of a Million-Dollar Home

One of the biggest hurdles to overcome when buying a million-dollar home is the down payment. Most people who buy these properties have to get a jumbo loan, which means they will need to have a larger down payment than required with a conventional mortgage. Most jumbo loans require buyers to put down at least 20%, which is $200,000, on a million-dollar home. The larger the down payment, the better loan terms the buyer will likely get.

Additionally, buyers need to pay closing costs. Closing costs increase the more expensive a property’s value. Generally, it’s a good rule to set aside 2% to 5% of your purchase budget for closing costs, which adds $20-50,000 to upfront expenses.

To better understand closing costs in your area, connect with a local real estate agent with experience in high-end properties through FastExpert’s extensive network. Our platform allows you to compare and choose from over 70,000 professionals, ensuring you find the right expert to guide you through the luxury home-buying process.

Ongoing Costs Budget

As mentioned, a million-dollar home often comes with elevated expenses beyond the mortgage. Property taxes, insurance, and maintenance costs can be significantly higher, especially in upscale neighborhoods or for properties with extensive amenities with HOAs. Buyers need to be prepared for these costs. Realistic, if not conservative, budgeting with a reserve “home maintenance fund” will prevent future financial strain.

Buyers should plan to set aside 1-3% of their home’s value each year for maintenance and repairs. Older homes will need more ongoing maintenance, while newer properties will likely have minimal unexpected repairs. 797

What Monthly Payments Might Look Like on a Million-Dollar Home?

Buying a million-dollar home is more than a down payment and a mortgage payment. Buyers must account for all costs, including property taxes, insurance premiums, ongoing maintenance costs, and unexpected repairs.

However, the biggest variable impacting whether or not you can afford a million-dollar home other than your down payment and income is the interest rate on your home loan. Buying a million-dollar home with a 20% down payment of $200,000 will require a $800,000 loan. Assuming you get a competitive interest rate of 6% on a 30-year fixed-rate mortgage, your monthly payment will be $4,797, exclusive of taxes and insurance.

Where you live will impact your property taxes and insurance, adding up to several thousand dollars per year in more expensive areas. When calculating the monthly payment on a home you are interested in, make sure you consider the following expenses in addition to your mortgage payments:

• Property taxes, which vary widely depending on location but can add hundreds or even thousands of dollars monthly for a million-dollar home. Some areas charge around 1% to 2% of the home’s value annually, translating to $10,000 to $20,000 per year (or $833 to $1,667 monthly).
• Homeowners insurance costs with comprehensive coverage increase the more expensive a home is. Depending on the location and specific risks associated with the property and region, expect to pay anywhere from $200 to $500 monthly for comprehensive coverage. In areas like Florida, homeowners can expect to pay $800-$1,000 per month for insurance.
• Homeowners Association Fees apply to properties in communities with an HOA, and they can range from $100 to $1,000 or more.

It’s crucial that a potential buyer calculates all monthly expenses related to a property before committing to buy. Property taxes, HOA dues, and insurance can be nearly as much as monthly debt payments on a million-dollar home.

Financing Options for a Million-Dollar Home

Conventional or government-backed financing options might not be available to you when buying a million-dollar home. High-value properties often require specialized loans and a more strategic approach to financing to ensure you get the best terms available.

Jumbo Loans

A jumbo loan, or non-conforming loan, is a mortgage that is meant for more expensive personal residences. They are called non-conforming because they exceed the Federal Housing Finance Agency (FHFA) loan limits, which oversees Freddie Mac and Fannie Mae. These limits change yearly, but fortunately, the conforming loan limit was just increased to $802,650 for 2025. This means that if you need to finance more than the conforming limit, you will likely need a jumbo loan.

Some considerations about jumbo loans to take into account are that they:

• Require a higher credit score. Because lenders are taking on more risk with a higher loan amount usually require a good credit score above 700.
• Require a large down payment. Most jumbo loans require a 20% down payment.
• Have slightly higher interest rates. Jumbo loans often come with higher interest rates than conforming loans due to the increased level of risk they pose to lenders. Because of the volatility in higher-end markets, lenders want to offset any potential fluctuations in property values that could impact loan repayment.

Conforming loans are standardized and easily traded on the secondary mortgage market, allowing lenders to recoup their funds quickly. Jumbo loans are harder to sell, making them less liquid and increasing the risk for lenders, which can lead to higher rates.

Conventional Loans

Because conventional loan limits increase yearly, getting a conventional loan to purchase a million-dollar home might be within reach. The conventional loan limit for 2025 is just over $800,000, which means that buyers with enough cash reserves to cover a 20% down payment and closing costs may be able to finance using a conventional loan.

Conventional loans are most commonly used to buy million-dollar properties when the buyer sells a previous home and has a large pool of equity from their last home to use as a down payment. The large deposit offsets their financing needs.

While conventional loan requirements are not as strict as jumbo loans, buyers still need to meet certain qualifications, such as:

• A good credit score. Typically, lenders look for scores above 700 for conventional loans, although requirements may vary depending on the lender.
• Stable income and employment history. Lenders typically require at least two years of steady income and employment, with documentation like pay stubs, W-2 forms, or tax returns.
• Debt-to-income (DTI) ratio within acceptable limits. Most lenders prefer a DTI ratio under 43%, though lower is better.
• Sufficient cash reserves. Beyond the down payment and closing costs, many lenders want to see several months’ worth of mortgage payments saved in reserve.

Home Equity Line of Credit (HELOC) or Home Equity Loans

Equity from an existing property can be used to buy a new home using a home equity line of credit or home equity loan.

A home equity line of credit (HELOC) is a revolving line of credit attached to a home’s equity. It functions similarly to a credit card in that homeowners can borrow as needed and only pay interest on the withdrawn amount.

A home equity loan (HELOC) is a lump-sum loan taken out against a home’s equity, often referred to as a second mortgage. Unlike a HELOC, borrowers receive the full amount at once and repay it over a set period, commonly 5-30 years.

HELOCs and home equity loans are best for buyers with an existing home with a lot of equity who are looking to buy a second home or vacation property. Either loan option can cover the down payment, closing costs, or even the entire value of the property if enough equity is available.

Bridge Loans

Bridge loans are short-term loans usually used to “bridge” the gap between buying a new home and selling an existing one. They are useful for buyers upgrading to a million-dollar home but haven’t yet sold their current property. They provide temporary financing to cover down payments or closing costs, which are then repaid when the existing home is sold.

Bridge loans are usually easier to qualify for than conventional or jumbo loans, especially if the borrower has sufficient equity in their existing property and there is a clear path to refinance. However, they do usually come with the downside of considerably higher interest rates than long-term financing.

Co-Borrowing

Co-borrowing involves partnering with another individual—such as a family member, partner, or friend—to increase overall borrowing power. This can be incredibly helpful when buying a million-dollar home. The process works by considering both borrowers’ income and assets in the loan application, making qualifying for a larger loan easier.

The downside of co-borrowing or getting a co-signer for your loan is that it requires considerable trust and an explicit agreement of ownership and responsibilities. Whether buying with a friend, family member, or partner, ensure you have pre-arranged legal agreements to protect all parties’ interests.

You Can Achieve Your Million-Dollar Home Dream

Do you think you have the income and finances to support your million-dollar dream home? While a million-dollar home might seem like an unattainable goal, with the right financial planning and real estate support, it can be achieved with increasing home prices and incomes.

Whether you’re ready to buy now or are preparing for the future, take the first step by consulting with a real estate agent and mortgage advisor. They can offer valuable insights tailored to your financial circumstances and the real estate market. At FastExpert, we’re here to connect you with experienced agents who understand the luxury market and can guide you through every step.

Take the first step toward your dream home with FastExpert. Compare the experience and track records of qualified real estate agents in your area to find one that fits your needs. With expertise and support, a million-dollar home is within your reach.