Your salary is the biggest factor in determining your ability to buy a home, along with your credit score. Across the United States, median-home prices shift along with the cost of living and incomes.
So how much of a salary do you need to afford the principal and interest payments on a median-priced home in your metro area?
The website HSH.com took the National Association of Realtors’ third-quarter data for median-home prices and HSH.com’s third-quarter average interest rate for 30-year, fixed-rate mortgages to determine how much of your salary it would take to afford the base cost of owning a home — the principal, interest, taxes and insurance — in 27 metro areas.
The analysis used standard 28 percent “front-end” debt ratios and a 20 percent down payment subtracted from the NAR’s median-home-price data to arrive at the figures.
“We’ve incorporated available information on property taxes and homeowner’s insurance costs to more accurately reflect the income needed in a given market,” HSH.com says.
On a national scale, with 20 percent down and at an average interest rate of 4.37 percent, the income needed to afford a median-priced home of $217,300 is $51,246.61.
It is possible to buy a home with less than a 20 percent down payment.
However, the larger loan amount when financing 90 percent of the property price, plus the need for Private Mortgage Insurance (PMI), raises the income needed considerably.
See HSH.com’s chart below.