Core Insights - The article discusses the income requirements necessary to afford a $1.5 million home, emphasizing the importance of evaluating income before starting the home-buying process [1] Mortgage Costs - A $1.5 million mortgage typically requires a jumbo loan, which is not backed by government agencies and exceeds conventional loan limits [2] - Jumbo loans are harder to qualify for and usually come with higher interest rates due to the increased risk for lenders [3] Monthly Payment and Down Payment - Monthly payments for a $1.5 million home can vary, with down payments ranging from 10% to 30% of the purchase price [4] - Closing costs for jumbo loans are generally higher, totaling 2% to 5% of the home's purchase price [5] Income Requirements - According to the 28/36 rule, a monthly pretax income of at least $28,771 (approximately $345,257 annually) is needed to afford the mortgage for a $1.5 million home [7][8] - The 25% rule suggests a required monthly post-tax income of around $32,224 (approximately $386,592 annually) based on the same estimated monthly payment [9][11] - The 35/45 rule indicates a need for a monthly pretax income of about $23,017 (approximately $276,206 annually) to afford the mortgage [12][18] Ongoing Homeownership Costs - Homeownership entails additional costs, with experts recommending budgeting 1% to 4% of the home's purchase price for annual maintenance, translating to $15,000 to $60,000 per year for a $1.5 million home [14] - Property tax and homeowners insurance costs may increase over time, impacting overall affordability [14] FAQs on Income Requirements - To afford a $1.5 million home, an annual pretax income of $276,206 to $345,250 is necessary, assuming a 20% down payment [15]

Following three interest rate cuts in 2025, the Federal Reserve is back in its wait-and-see mode. Current thinking, as measured by federal funds futures trading, puts the next rate cut no sooner than June. Scott Anderson, chief U.S. economist for BMO, believes resilient consumers are driving the economy but will "need to rely on swelling personal income tax refunds to sustain that growth." In a recent analysis, Anderson noted that recent inflation reports met forecasts, and costs of goods have seen "almo ...