## Cities That Could Face A Housing Downturn

Given buying a three million dollar house will likely be the most expensive purchase of your life, you should be aware of cities that may be at risk of a housing downturn. If you buy a three million dollar house with 20% down and the housing market declines by 20%, you just lost 100% of your equity. Thats $600,000 gone!

Therefore, be aware of cities where real estate prices are way up compared to its prior peak and with upcoming supply. These cities are in the upper right quadrant of the graphic below for 2022+. I would definitely be careful about stretching in cities like Austin, Dallas, and Nashville. In such heartland cities, try and keep your house price purchase to no more than 3X your household income. There is an endless amount of demand to build in these cities.

Conversely, cities in the lower left quadrant, have less upcoming supply and havent appreciated as much since the peak. Therefore, they look more attractive. In such cities, you are relatively safer to stretch to buy a home equal to 5X your household annual income. Its much harder to build in cities like San Francisco, San Diego, Miami, Seattle, and even denver due to laws and geography.

## How Much Money Does The Average American Retire With

Reading that may make you wonder how much the average American has when they retire.

And well its not a lot.

In fact, the median retirement nest egg is under $400,000. But, that doesnt mean that you cant save more to live comfortably! After allthe average person is broke, so dont be shooting for average!!

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## Can You Qualify For The First

If youre a first-time homebuyer, Canada has many incentives to assist you in entering the residential real estate market. The First-Time Home Buyer Incentive is a program that offers 5%-10% of the homes down payment.

To qualify for the First-Time Home Buyer program, participants yearly income cannot exceed $120,000 or $150,000 in the Toronto, Vancouver, or Victoria Census Metropolitan Areas. The program only accepts a total borrowing amount of four times the qualifying yearly earnings or 4.5 times in Toronto, Vancouver, and Victoria. That means the incentive does not apply to any property greater than $480,000 . Those purchasing a million-dollar home, even if the purchase is split between multiple parties, are not accommodated in this program.

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## Calculate Your Homebuying Budget

To figure out how much house you can afford, create a detailed account of your annual income and expenses. Then, factor in the new costs youll take on as a homeowner.

Besides your mortgage principal and interest, there will be property taxes, homeowners insurance, and home maintenance. Some properties also require homeowners association fees and special hazard insurance, such as flood insurance. Your utilities may be higher, too.

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## Complete The Full Mortgage Application

Once youve found a home you want to buy and a seller has accepted your offer, its time to apply for a mortgage. Youll provide extensive details about your income sources and your legally binding financial obligations, including debt payments and child support.

The lender wants to see that your income is stable and that your debt-to-income ratio is not too high to afford the mortgage youre applying for.

## How To Afford A $4 Million House

Youll need to be earning well over a million dollars annually for you to afford a $4 million home, and you must be certain that your income is consistent for the next several years. Even with that, it also helps to have a buffer in case things go south briefly so that you can still afford to pay the obligations on your mortgage. Generally, youll need the mortgage for $3.2 million after paying the down payment of $800,000. Depending on your interest rate and how long the loan duration is, youll be paying between $200,000 to $300,000 as yearly payments on the mortgage before paying taxes.

Of course, you have other expenses too necessary for your daily living. Asides from that, you may have other debt obligations youll have to fulfill. Following the 28/36 rule, youll have to earn over a million annually to be able to afford such a house. Earning over $1 million annual salary doesnt necessarily mean that your base salary is that amount. In most cases, its not. But if your income, when you include commission, stock grants, year-end bonuses, and lots of other benefits, all amounts to over a million, then you can go ahead and buy a 4-million-dollar home. Of course, you also need to consider whether such bonuses and other benefits are consistent and not just something you get occasionally.

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## Monthly Payments For A $1000000 Mortgage

Monthly mortgage payments are based on how much you borrow, what interest rate you can get, and how long you want to borrow the money for.

Your payment will include principal, interest, and other costs like property taxes and homeowners insurance.

**Heres what monthly payments for a $1,000,000 fixed-rate mortgage might look like for you:**

Interest rate | |
---|---|

$7,908 | $5,368 |

To get an idea of what your monthly payment might be, input your mortgage amount, interest rate, and loan term into our mortgage payment calculator.

Enter your loan information to calculate how much you could pay

With a**$** home loan, you will pay**$** monthly and a total of**$** in interest over the life of your loan. You will pay a total of**$** over the life of the mortgage.

**Need a home loan?**Credible makes getting a mortgage easy. It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter.

Checking rates wont affect your credit score.

## Here’s What Monthly Payments Might Look Like On A $1 Million Home

Let’s assume you have your $200,000 down payment and you qualify for a jumbo loan for the remaining $800,000. You’re ready to buy your million-dollar place.

You’d need to get a personalized rate quote, as different borrowers qualify for different rates. But these examples can give you a good idea of what you’d end up paying per month.

Don’t forget, your mortgage principal and interest aren’t the only payments you need to make. You’ll have to pay taxes and insurance too. These can vary dramatically depending on where you live. Here are some approximate monthly payments for a 30-year or 15-year mortgage.

LOAN TERMS |
---|

*Data source: Estimates using**The Ascent’s mortgage calculator**.*

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.

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## What Is The Best Mortgage Term For You

A mortgage term is the length of time you have to pay off your mortgagestated another way, its the time span over which a mortgage is amortized. The most common mortgage terms are 15 and 30 years, though other terms also exist and may even range up to 40 years. The length of your mortgage terms dictates how much youll pay each monththe longer your term, the lower your monthly payment.

That said, interest rates are usually lower for 15-year mortgages than for 30-year terms, and youll pay more in interest over the life of a 30-year loan. To determine which mortgage term is right for you, consider how much you can afford to pay each month and how quickly you prefer to have your mortgage paid off.

If you can afford to pay more each month but still dont know which term to choose, its also worth considering whether youd be able to break evenor, perhaps, saveon the interest by choosing a lower monthly payment and investing the difference.

## Invest In Real Estate Online

If you dont have the downpayment to buy a property, dont want to deal with the hassle of managing real estate, or dont want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today. The platform has over 300,000 investors and runs $3 billion. All you need is $10 to get started.

Real estate is a key component of a diversified portfolio. Fundrise offers diversified funds for investors who want exposure to real estate, mainly in the form of single-family home rentals. Thanks to low rates, positive demographics, and a desire to own real assets, rents and property prices are increasing.

My other favorite real estate investing platform is CrowdStreet. CrowdStreet focuses on individual real estate opportunities in 18-hour cities. 18-hour cities have faster growth and lower valuations. As a result, upside could be greater. If you are an accredited investor who likes to build their own portfolio, Crowdstreet is great.

Ive met executives from both platforms. They are the two leaders who are sourcing some of the best deals. Ive **invested $810,000** in real estate crowdfunding so far to diversify my expensive SF real estate holdings. I love being able to earn more passive income so I can spend time taking care of my family.

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## What Is The Prime Interest Rate

The prime interest rate is a benchmark interest rate financial institutions use to set their own interest rates on the different types of loans they offer, such as lines of credit and variable-rate mortgages. Where does the prime rate come from? It is heavily influenced by the overnight rate set by the Bank of Canada our central bank responsible for carrying out monetary policy.

The overnight rate is the interest rate financial institutions use when lending and borrowing money amongst themselves. When the overnight rate changes, the prime interest rate usually changes within a few days. Financial institutions use the prime rate as a benchmark when setting the interest rates for mortgages, lines of credit, personal loans, car loans, student loans, etc.

If you have a variable interest rate mortgage, your lender will charge you an interest rate of prime plus or minus a certain amount. The posted rate is the mortgage interest rate that financial institutions advertise to the public. If the prime rate is 1.25% and the lenders posted rate is 2.25%, the lender may charge you a total mortgage interest rate of 3.5% prime + the posted rate.

## Mortgage Payment Calculator Loan Amount = $95000 Interest Rate = 35% Loan Term = 30 Years

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## The Ideal Mortgage Amount Is $750000

Updated: by Financial Samurai

The ideal mortgage amount *was* $1,000,000 before the Tax Cut & Jobs Act was passed for 2018 and beyond. Today, the ideal mortgage amount is $750,000, if your income can afford it.

The reason why $1,000,000 was ideal was because that was the mortgage limit for where you can write off the interest. Today, that ideal mortgage amount is $750,000 because $750,000 is the maximum mortgage you can take to be able to write off the mortgage interest.

Back in 2002, a $1 million mortgage cost around $50,000 to $65,000 a year in interest expense given mortgage rates were 5%-6.5% for a 5/1 ARM or a 30-year fixed. Multiply the annual interest expense by three, and you get $150,000-$195,000, the minimum annual income recommended to take out such a loan.

In 2022, a $1 million mortgage costs around $35,000 $55,000 a year in interest expense given mortgage rates are now 3.5% for an ARM and 5.5% a 30-year fixed. Interest rates plummeted to all-time lows in 2020 due to coronavirus fears. However, interest rates are finally ticking back up as the economy reopens and inflation is high.

Mortgage rates will likely stay low for the rest of our lives. As a result, Im still very positive on the housing market long term. If you plan to own a property for more than five years, I would buy. The housing market is softening and more deals will be had through 2023.

## How To Calculate Your Home Buying Budget

The best way to figure out your home buying budget short of contacting a lender is to use a mortgage calculator.

This mortgage calculator will help you figure out how much house you can afford based on your salary, down payment, and debts. It also accounts for other factors, like your mortgage interest rate and estimated property taxes and homeowners insurance costs.

To get the best estimate, be as accurate as you can when filling out each field.

Remember, a calculator can only give you an estimate. To know whether you can really afford a 1-2 million dollar home, youll need to get preapproved by a mortgage lender.

Preapproval means the lender has verified your credit, income, savings, and other items on your application.

If you have a preapproval letter in hand stating you can afford a million-dollar home, then its more or less a sure thing.

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## Income Needed For A $1 Million Mortgage Vs A $2 Million Mortgage

Your household income is one of the most important factors that determines the size of the mortgage loan you can borrow. As you can imagine, the majority of people dont have sufficient income to qualify for a mortgage of one or two million dollars.

The figure that lenders use to calculate the size of the mortgage you can borrow is your debt-to-income ratio , which is the percentage of your gross income that goes toward debt. Lenders generally require a DTI of no more than 43%, though 36% is the preferred ratio.

So, what income would you need to qualify for a $1 million mortgage? It partially depends on how much debt you have. If your mortgage payment will be your only debt, then its also the only figure used in your DTI.

Lets take the monthly payment of $5,368 that we discussed earlier. Assume that you have combined homeowners insurance and property taxes of $1,632, for a total monthly payment of $7,000. To qualify, you would need a monthly income of about $19,444, which comes out to roughly $233,328 per year.

Your monthly payments on a $2 million mortgage are likely to be about twice as much, meaning you would need a monthly income of about $38,889 per month, or $466,667 per year.

## What Is The Monthly Payment Of A 95000 Dollar House

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## Factors In Your New York Mortgage Payment

New York property taxes are as diverse as the occupants in this heavily populated state. The amount of tax you pay can vary greatly county by county. Some of the highest taxes in the entire U.S. are in Westchester County, which is north of New York City. Overall, the average effective property tax rate in New York is 1.69%.

You might think that buying property in one of the five boroughs of New York will come with a high property tax bill. Surprisingly, tax rates are more affordable in the city than they are in the surrounding suburbs. If you own a home in Brooklyn, which is in Kings County, your effective tax rate is a mere 0.66%. Owning in Manhattan will only set you back 0.95%. However, if you move north to the suburbs, your effective tax rate jumps to 1.89% in Westchester County and about 2.30% in Rockland County. Unfortunately, tax rates dont improve for some of the smaller cities. In Erie County, for example, in the northwest portion of the state , the effective property tax rate is 2.58%. Much of those taxes go to school districts in the county.

The good news is there are some property tax exemptions for New York homeowners, including the school tax relief program, senior, veterans, disabled and agricultural exemptions.

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