June 21st, 2019 8:55 AM by Jackie A. Graves, President
Impact of the drop in
mortgage rates on the housing market
If you don’t make
$200,000 per year, you might have a hard time buying a home in San Francisco.
A recent home affordability report from Unison, a
homeownership investment company, analyzed the income would-be homeowners would
need to earn in order to afford a mortgage in 35 major U.S. cities.
A homeowner would need to make six figures to pay a mortgage on a home valued
at the median price in San Francisco, San Jose, urban Honolulu, Los Angeles,
San Diego, Seattle, Washington and New York City. Those income estimations
were calculated to include funds you'd need to make a 20 percent down
payment and pay a 4.45 percent interest rate or a 3.99 percent interest rate ?— the average annual Freddie Mac 30-year fixed
rates for 2018 and 2017, respectively.
On the flip side, a
mortgage in some cities is much more affordable. Under the same conditions, a
homeowner in Detroit would only need to earn $10,033 per year to afford the
$251 monthly payment, which Unison’s report calculated assuming payments
wouldn’t exceed 30 percent of a homebuyer’s gross income.
Homebuyers in Milwaukee,
Wichita, Indianapolis and Columbus, Ohio could also afford a mortgage with an
income of less than $30,000, according to the report.
It could take a
homebuyer decades just to afford a down payment in the cities with the highest
monthly payments, Unison said. For example, in San Francisco, where the median
home value is more than $1 million, it would take someone earning the median
income there 40 years to save a down payment.
That same person would
then need to earn $202,094 per year to make mortgage payments, assuming they
put down 20 percent, according to the report. If that person put down a smaller
down payment of 10 percent, they would need to earn $239,539. If they put down
5 percent, they would need to earn $252,846 in order to afford monthly
In Detroit, it would
take someone earning the median income just seven years to save up a 20 percent
down payment under the same conditions, according to the report.
Despite the expensive conditions in some cities, most would-be
homeowners might actually have a better shot at affording a mortgage than they
believe. Earlier this month, Fannie
MaeOpens a New Window. released the results of a nationwide study that
found most people think it’s harder to
qualify than it really is.
People overestimate the minimum
credit score they need to qualify for a mortgage, as well as the minimum down
payment, which is about 3 percent. Most people in the study said it's 10
Here’s how much money you’ll
need to earn in order to afford mortgage payments in 35 major U.S. cities,
according to Unison:
San Francisco: $202,094
San Jose: $152,697
Urban Honolulu: $140,555
Los Angeles: $121,939
San Diego: $116,652
Washington, D.C.: $112,106
New York City: $109,313
Salt Lake City: $57,248
Las Vegas: $45,998
Kansas City: $30,528
Detroit: $251 $10,033
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