The higher home prices go, the harder it is for your buyers to qualify for a mortgage.
HSH.com’s Quarterly Report on Income Requirements to Afford a “Typical” Home in Q2 2021
Every quarter of every year, HSH.com calculates how much a potential buyer would have to earn in order to qualify for a median-priced home in the 50 largest metros in the US.
HSH bases its estimates on quarterly data from the National Association of REALTORS® (NAR) on median home prices, weekly data on national mortgage rate data by Freddie Mac, and mortgage rate data from the Mortgage Bankers Association (MBA).
In addition, HSH looks at metro-specific property tax data and homeowners’ insurance costs to assess how much annual salary it takes to afford the base cost of owning a home in a particular metro.
Then, with the total of that data, HSH uses the standard 28% front-end debt ratio and the standard 20% down payment subtracted from NAR’s median-home-price data to get to the required income necessary in a given market area.
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Q2 2021 Income Requirements +22% y/y Higher
According to NAR, the national median sale price in Q2 2021 was $357,900, approximately +22% y/y higher than in Q2 2020.
To qualify for a mortgage on a median-priced home in Q2 2021, the potential buyer would have needed an annual income of $68,032. Monthly mortgage payments on that median-priced home in Q2 2021 would have been $1,587/month.
Income Requirements to Qualify for Mortgages
Here are the incomes needed to qualify for mortgages in the 10 most and 10 least affordable metros in the US during Q2 2021:
Least Affordable Metros with Highest Required Income
San Jose CA
- Annual Income Needed – $286,703
- Monthly Payment – $6,690
San Francisco
- Annual Income Needed – $237,665
- Monthly Payment – $5,546
San Diego
- Annual Income Needed – $147,434
- Monthly Payment – $3,440
Los Angeles
- Annual Income Needed – $130,921
- Monthly Payment – $3,055
Seattle
- Annual Income Needed- $2,899
- Monthly Payment – $2,899
Boston
- Annual Income Needed – $123,534
- Monthly Payment – $2,882
New York
- Annual Income Needed – $118,042
- Monthly Payment – $2,754
Denver
- Annual income Needed – $104,739
- Monthly Payment – $2,444
Washington DC
- Annual income Needed – $104,118
- Monthly Payment – $2,429
Austin
- Annual Income Needed – $2,384
- Monthly Payment – $2,384
Most Affordable Metros with Lowest Required Income
Pittsburgh
- Annual income Needed – $38,275
- Monthly Payment – $893
Oklahoma City
- Annual Income Needed – $41,740
- Monthly Payment – $974
Cleveland
- Annual Income Needed – $44,090
- Monthly Payment – $1,029
Louisville KY
- Annual Income Needed – $44,314
- Monthly Payment – $1,034
Memphis
- Annual Income Needed – $47,272
- Monthly Payment – $1,103
Indianapolis
- Annual Income Needed – $47,731
- Monthly Payment – $1,114
St. Louis
- Annual Income Needed – $47,981
- Monthly Payment – $1,120
Buffalo NY
- Annual Income Needed – $1,139
- Monthly Payment – $1,139
Birmingham AL
- Annual income Needed – $49,164
- Monthly Payment – $1,147
Cincinnati
- Annual Income Needed – $49,367
- Monthly Payment – $1,152
Thanks to HSH.com and The New York Times.
