If you played Monopoly as a child, it’s likely you grew up thinking a million-dollar home was a luxury few people could afford. But in today’s housing market, it’s becoming more common, especially in areas like Los Angeles, where nearly 64% of the homes for sale are priced at $1 million or more. As you roll the homeownership dice, you may be wondering, “What is the mortgage on a million dollar house?” Based on a 30-year fixed mortgage rate of around 6.9%, and accounting for required down payments and conforming loan limits, your base monthly mortgage payment on a million-dollar house would likely be between $5,000 and $6,500 if it’s located in a typical U.S. city. However, Denise Madan, a luxury home real estate agent in Flordia with 25 years of experience, explains that this does not include other costs, such as taxes and insurance. “If the house was in a community with an HOA and if the property taxes were higher than average, you could expect to pay closer to $7,000,” she says. In addition, if the home you are buying is in a housing market that the federal government designates as a “high-cost area,” your payment may be even higher because you can finance more of the home’s purchase price. You see, to keep our estimates above within real-life situations, we based our initial calculations on a $766,550 mortgage loan. This is because, if you finance a million-dollar home, it’s likely you’ll be dealing with something called conforming loan limits. A conforming loan is a mortgage that “conforms” to the guidelines set forth by Freddie Mac and Fannie Mae, large companies that guarantee most of the mortgages made in the U.S. A non-conforming mortgage is a loan that, because of its larger size, typically cannot be sold by a bank to Freddie Mac or Fannie Mae. Each year, the Federal Housing Finance Agency (FHFA) sets a conforming loan limit for these government-sponsored enterprises (GSEs). The FHFA adjusts the limit amounts every November for the upcoming year to reflect changes in the ever-evolving housing market. The goal is to be certain the average U.S. homebuyer can obtain a conventional mortgage loan, even as housing costs go up.How much is the mortgage on a million-dollar house?
What are conforming loan limits?
