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Associate Broker, Investments
HowMuch.net is a great resource for understanding money, however their recent article, “How Much You Must Earn to Afford a House in the 50 Largest U.S. Metros,” excludes some important information. The article lists the top 10 Metros Where You Need to Earn the Most to Afford A Median-Priced House, which include:
- San Jose, CA: $274,623
- San Francisco, CA: $213,727
- San Diego, CA: $130,986
- Los Angeles, CA: $114,908
- Boston, MA: $109,411
- Seattle, WA: $109,275
- New York City, NY: $103,235
- Washington, DC: $96,144
- Denver, CO: $93,263
- Portland, OR: $85,369
Of course, you will note that Denver is on the list at number 9 with $93,263. Here’s what you need to keep in mind: those stats are based on a 28% debt ratio and 20% down payment. While we agree that it is best practice that your mortgage or rent payment only equal 25-30% of your take home salary, we don’t agree that those are the only terms with which you’ll be able to afford a home.
If you earn $5,000 per month (equal to around a $78,000 annual salary) then you can spend up to $1,500 per month on a mortgage. That would enable you to buy a $350,000 home. The best part of buying a primary residence (one that you’re going to live in), is you can put as little as $0 down, depending on the program. There are programs available to you that require from as little as zero dollars down to 3.5% of the home selling price, whereas a conventional loan starts at 5% down. All these options mean you can purchase a home with less savings and still afford the payment.
While we appreciate that sometimes it is beneficial to be a renter, if you are in a position to own your own home and want to, then why pay someone else’s mortgage when you can pay yourself? Further you get to write off the depreciation (tax break), all home repairs, etc. It is much easier to become a homeowner than you might think and there are options available to help you get into the home of your dreams, so don’t let big statistics scare you!
If you want to talk helpful expert about your options, please feel free to reach out to me at firstname.lastname@example.org or 303-931-0689.
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