How did we come up with these figures?
HSH.com took the National Association of Realtors’ 2013 third-quarter median home prices, as well as its average interest rates for 30-year, fixed-rate mortgages in the quarter, and plugged them into a mortgage calculator to determine the principal and interest payment needed to buy a median-price home with a 20 percent down payment in 25 major metropolitan areas.
It determined the after-tax income required to cover only the mortgage’s principal and interest payment. It used standard 28 percent “front-end” debt ratios and a 20 percent down payment subtracted from the median-home-price data to arrive at the figures.
There is no doubt that your income will need to be much higher, possibly even double or triple these levels to cover the needed taxes, insurances and other expenses to live in the home, plus any other debts you might have. Because those are highly variable, down to even the individual property level and personal choice, there is no adequate way to factor for them.
That’s where you come in. You have the basic, bottom-line income you need to cover the mortgage; add the annual cost of taxes and insurance to arrive at a realistic cost to obtain a home in your chosen city. Depending upon where you are, these can add up to as much as the mortgage payment itself or more.