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You’d need about $56,100 a year to pay for the 30-year mortgage in our example. Since research from The Ascent put the median household income at almost $62,000 a year, a $1 million home is well out of reach for most people. This is why most people’s homes cost a fraction of this amount.
Can (and should) you buy a $1 million home?
If you’re considering buying a $1 million home, you’ll want to make sure you can comfortably make those monthly payments. Ideally, that means your total housing costs will be well below 30% of your income. That’s the maximum experts recommend you spend on housing.
You should also be aware that other expenses of home ownership, such as utilities and maintenance, are typically higher with a more expensive home. So be sure to take these expenditures into account when you decide if it’s worth buying a home at such a high price.
Finally, consider your other financial goals and your ability to cover those large payments in an emergency. Consider whether paying so much for a house will make it more difficult to accomplish other things you dream of, such as early retirement or saving for a vacation. And make sure you have enough savings in an emergency fund to see you through a job loss or other unexpected event. If you don’t, you may want to scale down your expectations and choose a lower-priced home.
On the other hand, perhaps you can come up with the requisite down payment, easily cover your monthly mortgage payments, and still meet your financial goals. As long as you can easily save up enough in an emergency fund to cover three to six months of living expenses — including your new mortgage payment — then you’re in a good position to move forward. You can go ahead and purchase that $1 million property you’ve been dreaming of.
View more information: https://www.fool.com/the-ascent/mortgages/million-dollar-home/