How to Buy a Million Dollar Home

Table of Contents

How to buy a million-dollar home

Reasons to buy an expensive house

Tips on how to afford a million-dollar home

Average Interest Rates in South Carolina

Credit Score in Charleston SC

The monthly mortgage payment on a $1 million home

Charleston: Down payment on a million-dollar home

Benefits of a larger down payment

Additional costs on buying a million-dollar house

Annual salary amount to afford $1 million house

FAQ

How to buy a million-dollar home

Just like the book by Felix Dennis “How to become Rich” people search for ways of buying expensive homes for themselves. There is always the psychological factor behind the scenes of course! According to a group of psychologists from different platforms, people tend to buy luxury items and expensive products to increase their self-esteem or provide themselves with a sense of security and belonging.

A sense of accomplishment is another reason why some people buy luxury goods. They want to reward themselves for their hard work by treating themselves to something they typically could not afford. Do you ever have these feelings or thoughts? In real estate buying an expensive house is more or less justified. A house is a very long-term investment in the life and spending your earnings on an expensive house will definitely pay you off and affect the quality of your life. How to buy a million-dollar home? Just before we get to that let’s see below the advantages of buying a million-dollar house!

Reasons to buy an expensive house

People choose houses due to different factors, some of them being the neighborhood, the appearance of the house, the closeness to schools and groceries, and others. There are many advantages to buying pricier houses and investing more in them. You might wonder “Can I afford a million-dollar home?” Well, this is a crucial question but after reviewing some reasons to buy an expensive house you will rethink the question!

1. Spend less on improvements

Even if you think some houses can be overpriced, most of the time the prices are justified by the house conditions, the fresh paint, or freshly done projects around the house which have a lot of influence on the overall price indeed.

2. Higher resale value

Financing a million-dollar home has another great advantage! You can always resell the house at its price or even more.

3. Modern system

You might think that if the house is expensive then living in it will be more expensive but this is exactly where you are not correct. Buying a million-dollar home means you will spend less on your monthly bills due to the fact that these houses have modern electricity-saving systems, eco-friendly solutions, and much more!

The first property is the most important financial decision in life and you should be thoughtful about your actions.

Tips on how to afford a million-dollar home

Work work work, yes! Finding a better-paid job can of course help big time but there are other tricks in buying the million-dollar house of your dreams! How do you save enough for a down payment on a million-dollar home? These questions seem confusing but here we are!

1. Consider getting a jumbo loan

Jumbo loans allow you to take much higher loans than the regular limited loan amounts but one of the disadvantages is that the interest rates on a Jumbo loan can be very high depending on your area.

2. Maximize your credit score

The higher your credit score up to a certain point, the better the mortgage interest rate you will receive. You will be more likely to be eligible for a lower down payment program

3. Downsize your lifestyle while saving for a down payment

This point is something many people are concerned about. Some people can not save up properly and they get worried that maybe saving up or downsizing their lifestyle will not be a solution. It can be indeed. When you lower your bills at restaurants, on clothing, or any other kind of activity, you will be able to save up and gather a nice amount of money for your dream house.

4. Benefit from First Time Buyer programs

If you search enough and are willing enough to explore, you will be able to find different programs that grant you loans or low-interest rates as a first-time buyer. No need for the highest salary to buy a million-dollar house.

5. Use your retirement as a down payment

For those who don’t yet own a home, their biggest asset is usually their retirement plan. The IRS allows home buyers to take out up to $10,000 from an IRA or 401(k) plan without the 10 percent early withdrawal penalty for those under the age of 59 ½. The funds must be used within 120 days of withdrawal to avoid the penalty, and all funds are added to your taxable income for the year.

6. Find an experienced Realtor

Finding a realtor who can help you navigate your local market and find the right home in your price range is very crucial. Check out more on how can real estate agent help seller/buyer.

Average Interest Rates in South Carolina

According to USbank

You should also check South Carolina property taxes

Credit Score in Charleston SC

What credit score do you need to have in Charleston SC to buy a house?

There are different credit score systems for different mortgages in Charleston SC.

Credit scores typically range from 300 to 850, and borrowers within a certain range can qualify for mortgage loans.

While you don’t need a perfect 850 credit score to get the best mortgage rates, there are general credit score requirements you will need to meet in order to take out a mortgage.

Conventional Loan: Minimum credit score required: 620.

Jumbo Loan: Minimum credit score required: 680.

FHA loan: Minimum credit score required: 500 (with 10% down) or 580 (with 3.5% down).

VA loan: Minimum credit score required: None officially, though many lenders prefer 620.

USDA loan: Minimum credit score required: None officially, though most lenders prefer 640.

Conventional fixed-rate mortgages in South Carolina

Term

Rate

APR

30-year fixed

4.125%

4.197%

20-year fixed

3.625%

3.723%

15-year fixed

3.25%

3.375%

10-year fixed

2.99%

3.171%

Monthly mortgage payment on a $1 million home

Bank procedures are probably the most complicated ones. All the rates, percentages, etc. This is why it is always recommended to have someone experienced by your side for guidance. Let’s find out how much is a mortgage on a million-dollar home monthly.

*Approximate calculation

Expense 

Down payment

20%

10%

Principal and interest

$3,424

$3,853

Homeowners insurance

$417

$417

Property taxes

$917

$917

Private mortgage insurance (PMI)

$0

$750

Total 

$4,758

$5,937


The two primary components of your monthly mortgage payment are principal and interest. The principal is what you owe on your mortgage.

Interest is the fee you pay the lender for loaning you the money to buy the house.

Things that can lower your monthly payment and the total cost of the mortgage.

> Making a large down payment

> Shopping around for a low-interest rate

Charleston: Down payment on a million-dollar home

The minimum down payment depends on the type of mortgage, the lender, and your finances. Finding enough cash for a down payment to buy a house is perhaps the biggest roadblock for most people.

A down payment is the cash you pay upfront to make a large purchase, such as a car or a home, and is expressed as a percentage of the price. A 10% down payment on a $350,000 home would be $35,000.

How much down payment for a million-dollar home? Most jumbo mortgages require a 20-30% down payment. For a $1 million home, that translates to $200,000-300,000. Yes, getting a mortgage on a million-dollar house requires a big budget and a lot of patience.

The minimum down payment required for a house varies depending on the type of mortgage.

Benefits of a larger down payment

Can you pay more than indicated for your down payment? It can be a very smart step to pay more for a downpayment for so many reasons. Making a larger down payment has advantages, which include:

  • A better mortgage interest rate.
  • Lower upfront and ongoing fees.
  • More equity in your home right off the bat.
  • A lower monthly mortgage payment.

Additional costs on buying a million-dollar house

The calculations are approximate*

Expenses 

Approximate monthly cost 

Maintenance 

  $833-3,333

Utilities 

  $1,120

HOA fees

  $0-1,000+

Total: $1,953-5,520+


Maintenance expenses on an ordinary $1 million house could average $833-3,333 per month, although costs will fluctuate and increase over time as the house ages.

HOA (homeowners association fees) are the cost of shared amenities. You might have a pool area, security patrols, gold area, and other amenities you will have to pay a fee for.

When you think of buying a million-dollar house, surely your excitement of the idea and comfort of the house is so high that you forget to calculate the rest of the expenses on the way. Even though having a million-dollar home can be your dream, it is important to also see the realistic point of it. How much do you earn? Do you have the income required for a million-dollar home?

Tax implications of a million-dollar home

Now that we close down the question of “can I get a million-dollar mortgage” let's talk about the tax implications of a million-dollar home and how your new home will affect your income taxes.

The mortgage interest tax deduction has a limit of $750,000, which means that if you put down less than $250,000, you will incur “lost” tax savings each year until your principal loan balance drops below $750,000.

Methodology: Assumes a 30-year fixed-rate mortgage at 3.12% and a combined federal and state tax rate of 40%.

Initia Mortgage Balance 

"Lost" Tax Savings in First Year

$800,000

  $785

$900,000

  $2,354

$1,000,000

  $3,923

Closing costs

Closing costs are paid according to the terms of the purchase contract made between the buyer and seller. Usually, the buyer pays for most of the closing costs, but there are instances when the seller may have to pay some fees at closing too.

Here is a roughly estimated example of possible closing costs of a 1 million dollar house.

Expenses

Cost

Loan origination fee

$8,000

Title insurance

$5,000

Prepaid home insurance premium

$5,000

Prepaid property tax

$1,833

Prepaid interest

$1,040

Home inspection(s)

$1,000

Settlement/closing fee

$1,000

Application fees

$500

Title search

$500

Appraisal

$350

Total 

$24,223

Annual salary amount to afford $1 million house

What annual salary do you need to afford a $1 million house?

Time to refer to the scariest question. How much annual income to afford a million-dollar home? Here are rough estimations for you!

It is suggested that you might need an annual income between $100,000 to $225,000, depending on your financial profile. Your debt-to-income ratio (DTI), credit score, down payment, and interest rate all factor into what you can afford.

Methodology: Assumes a 30-year fixed-rate mortgage at 3.12%, annual homeowners insurance equivalent to 0.5% of home value, annual property tax equivalent to 1.1% of home value, and $500 in monthly homeowners association (HOA) fees.

Down payment levels lower than 20% include 1% in annual PMI payments.

Down Payment Level 

$1 Million Home 

$2 Million Home 

$3 Million Home 

$4 Million Home 

0%

$297,768

$574,080

$850,416

$1,148,160

5%

$286,848

$552,132

$817,536

$1,104,264

10%

$275,868

$530,220

$784,668

$1,060,440

20%

$225,384

$429,240

$633,192

$858,480

30%

$207,036

$392,544

$578,148

$785,088

FAQ:

Should I buy a $1 million home?

If you are suitable for a low-interest rate mortgage and you have enough annual salary to cover the expenses then buying a $1 million home can be great.

Can I afford a million-dollar home?

If you have a big budget and are ready to face future costs concerning the house then the answer is surely yes!

How much annual income to afford a million-dollar home

Between $100,000 to $225,000

How much would a million-dollar house cost per month

Depends on different factors but in a rough estimate, it can be $1000-6000

What is the mortgage payment on a million-dollar home

$5,937 in 10% mortgage

Income required for a million-dollar home

Between $100,000 to $225,000

If you desire a smooth home buying process with a team of experts by your side you should choose a professional real estate agent. If so, Matt O’Neill Real Estate is here to help. Contact for more.

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