In their efforts to make the dream of home ownership possible for more individuals, government officials may have unwittingly created something better than “forced” home affordability… real market conditions which are making homes more affordable for the average family.
The National Association of Realtors (NAR) reports that the combination of falling interest rates and dropping housing values is opening up the housing market to more homeowners. They note that the income level needed to qualify for mortgages on these homes is well below the median income in many parts of the country.
In the first quarter, the median family income in the nation was at $61,000 dollars. To buy a home at the national median price the buyer would need a yearly income of $34,700 with a 5% down payment. A 10% down payment means the purchaser would only need $32,900 of income to buy. For 20% down, the income requirements drop even further to $29,300.
The above figures assume a good credit rating and interest rate of 4% with 25% of gross income allotted towards principal and interest.
NAR’s chief economist, Lawrence Yun, gives an example. Let’s say a buyer in Indianapolis would only have to make $24,000 per year after putting down a 10% deposit to buy a median-priced home. In Seattle, however, the same strategy would require that the buyer make $55,300.
“For now, buyers are facing an extraordinarily advantageous situation if they can obtain a mortgage,” said Yun.
The national median existing single-family home price in the first quarter of 2012 was at $158,100, which reflects a small decrease from $158,700 during the same time last year. The last quarter of 2011 showed a national median price of $163,500, showing a definite trend which buyers need to keep an eye on.
If you have good credit and have money to put down – even 5% – and you’re ready to be a homeowner, it might be a good idea to see what kind of deal your income can “buy” you!