Can you afford to buy a home in your metro area?by Tim Manni
How much more money would you have to make to be able to afford a home in San Francisco as opposed to St. Louis? Here’s a hint: a lot more. What about cities like Philadelphia or Cleveland, Los Angeles or New York City?
Our latest infographic tells you just that.
HSH.com crunched some numbers to determine how much money homebuyers in 25 major metro areas need to earn in order to purchase the median-priced home in each market. The median price is the halfway point for the market, meaning half the properties sold for less and half sold for more during the period we compared. The price amounts come from the National Association of Realtors quarterly survey of existing single-family home sales.
How did we come up with these figures?
To determine the salaries you see on the map above, we used the median home price for the area, and subtracted 20 percent as a common down payment. With this “loan amount,” we plugged HSH.com’s average interest rate for a thirty-year, fixed-rate mortgage into our Mortgage Amortization Calculator to determine a monthly payment for each area. From this figure, we used a 31 percent “front end” debt-to-income ratio* to calculate how much income was needed to qualify to buy the median-priced home. (Taxes and insurance were not considered in the calculation.)
How does your income stack up?
While you might be able to buy a luxury home in one market, you may only be able to purchase little more than a starter home in another. Should you consider moving to a less-expensive area, getting lots more home for the same income? If your income’s not quite enough to buy a median-priced (or higher) home in your market, don’t worry – there are lower priced homes within your grasp, but you’ll probably need to scour the market a little harder to uncover them.
*= “Front end” debt-to-income ratio refers to the percentage of your monthly salary that your mortgage lender may use to go towards your mortgage payment. Lenders may use lower or higher ratios.
Tell us what you think about our latest infographic — leave us a comment below!