Mortgage Affordability Metrics
The nation’s economy continues to improve in many ways. The unemployment rate is under five percent, for example.
But mortgage affordability continues to be a problem. The average price for a new home more than $321,000 (it’s $232,000 for an existing home), and the minimum income needed to get a mortgage on a median-valued home in rose from $49,752 in the first quarter of 2009 to $55,753 in the first quarter of 2016.
According to an article in “The Home Story,” A Fannie Mae property, the following “household-level metrics” can be used to determine if the true costs of home ownership, including the mortgage payment (principal and interest):
- Housing cost-to-income ratios measure the cost of homeownership as a percentage of total household income. A household is considered cost-burdened if housing costs are more than 30 percent of total household income.
- Residual income approaches measure how much income is left over to the typical household after the mortgage payment is made. This measure typically varies by the number of people in the household.
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