What income do I need to qualify for a $10 million mortgage?
To qualify for a $10 million mortgage, most lenders will want to see an annual income of at least $2-3 million per year. This is because lenders generally want your total monthly debt payments, including your mortgage, to be no more than 43% of your gross monthly income.
With a $10 million mortgage at current interest rates of around 5%, your monthly mortgage payment would be around $50,000. So your gross monthly income would need to be $115,000 ($50,000/43%) to qualify for the loan. This equals an annual income of $1.38 million.
However, many high-end lenders prefer to see your monthly debts take up no more than 36% of your income. At 36%, you’d need a gross monthly income of $138,000 to qualify for a $10 million mortgage. That’s annual income of $1.65 million.
To be conservative, you should plan on needing at least $2-3 million in verifiable annual income to comfortably qualify for a $10 million mortgage. Having assets and a down payment in addition to your income will also help strengthen your mortgage application.
How much money do I need for a down payment?
Most lenders will require a down payment of at least 20% for a $10 million home purchase. This means you need to budget at least $2 million for the down payment.
Some lenders may allow a lower down payment of 10-15% on luxury homes, but you’ll likely pay a higher interest rate and mortgage insurance premiums.
Coming up with at least a 20% down payment shows lenders you’re financially prepared for a large mortgage. It also provides equity in the home right away so your loan-to-value ratio isn’t too high.
What credit score do I need?
To qualify for a $10 million mortgage, you’ll need excellent credit. Most luxury home lenders want to see a minimum credit score of 720, and prefer scores of 740 or higher.
The higher your credit score, the better mortgage rate you can qualify for. With a score of 760 or above, you’ll likely get the best rates available for a jumbo mortgage over $10 million.
If your score is below 720, you can take steps to improve your credit before applying for an expensive home loan. Pay all bills on time, pay down debts, and correct any errors on your credit reports. It can take a few months to boost your score significantly.
How much cash should I have in reserves?
In addition to your down payment funds, lenders want to see you have substantial cash reserves after closing on the mortgage.
Many lenders require reserves equal to 12 months of mortgage payments. For a $10 million home loan, that means having $600,000 in post-closing reserves.
It’s also wise to have reserves to cover property taxes, insurance, maintenance costs and other homeownership expenses. Experts recommend having at least 18-24 months of total housing costs in liquid cash reserves when financing a luxury home.
The more reserves you have, the better. It shows lenders you can handle the mortgage comfortably even with changes in your income or expenses.
What assets do lenders look for?
Lenders for $10 million mortgages will thoroughly examine your assets and net worth. They want confirmation you have multiple streams of stable income, excellent cash flow and considerable wealth accumulated.
Assets lenders look closely at include:
- Bank accounts – checking, savings, CDs
- Brokerage and investment accounts
- Retirement accounts – 401(k), IRAs
- Real estate – homes, rental properties
- Life insurance cash value
- Business partnerships, ownership stakes
- Vested stock options, equity compensation
The more assets you have in diversified holdings, the stronger your case for repayment ability. Lenders may require you to liquidate some assets to fund the down payment and reserves if needed.
How much income do I need from assets?
Many lenders like to see a portion of your income derived from assets, instead of just traditional wages or salary. For instance, you may have investment income from dividends, interest, rental properties or business ownership.
Having a diverse income stream shows lenders you have multiple ways to make mortgage payments if one source were to dissipate. It also indicates you have the wealth and discipline to accumulate substantial assets.
There is no set amount, but expect lenders to want at least 20-30% of your qualifying income to come from invested assets and other sources besides W-2 wages.
Do I need to show consistent, increasing income?
Yes, lenders want to see a strong track record of earnings growth over the past 2-3 years at least. This demonstrates your income source and career are stable.
Annual increases in your W-2 income, investment returns, or business revenue are positive signs. A decline in earnings could raise concerns and make approval more difficult.
If your income has varied, be prepared to explain any dips or fluctuations. You may need to provide documentation like tax returns, pay stubs, and financial statements.
What types of homes can I afford?
Here are examples of luxurious homes across the U.S. a $10 million budget can afford:
- 6-8 bedroom suburban mansion with features like a home theater, wine cellar, pool, and spa
- 5-7 bedroom single-family home in an expensive metro area like New York or San Francisco
- High-end condo or townhome in a prime urban location
- Sprawling beachfront estate in Florida, Hawaii, or the Hamptons
- Lakefront cabin or mountainside lodge on acreage in destinations like Aspen or Sun Valley
- Horse ranch with 8,000+ square feet, stables, and riding areas
- Vineyard, golf course, B&B, or other luxury “toy” properties
You have lots of options for an incredible estate with a $10 million budget. Just be sure to pick a home you can really afford based on your financial qualifications.
Should I work with a mortgage broker?
Yes, working with an experienced luxury mortgage broker is highly recommended. They have relationships with banks and lenders that offer jumbo loans over $10 million.
A good broker will source the best financing options for you and can negotiate better rates and terms. They’ll also efficiently guide you through the complex paperwork and underwriting requirements.
Ask friends for referrals or research brokers that frequently work with high net worth clients in your area. Make sure to verify licenses and credentials before selecting a broker.
How can I improve my chances for approval?
Here are some tips to boost your odds of successfully financing a $10 million home:
- Shop for rates with multiple potential lenders
- Put at least 25-30% down if possible
- Verify all income and assets submitted to lenders
- Keep your spending and debts low before applying
- Move funds to less risky assets like cash if needed
- Correct any issues on your credit reports
- Have a long history with your bank and financial advisors
Being patient and taking time to strengthen your financial profile can help ensure your luxury mortgage application gets approved.
Conclusion
Buying a $10 million dream home is possible if you have sufficient income, assets, credit, and a qualified down payment. Work with a top-tier luxury mortgage broker to find the best lender and rates for a jumbo loan of this size. Manage your finances wisely in the months leading up to your application. With the right planning and preparation, you can turn owning a 10 million dollar home into a reality.