How Much Income is Needed to Afford a Home in the USA?

How much household income is needed to afford a home in the US? If you wanted to afford the median priced home it would take household income of $99,589 — with the median priced home priced at $417,600.

Income needed to afford a home in the US has decreased 9.55% year-over-year while the median home price has increased in price from $407,100 to $416,700. How is this possible? The 30-year fixed mortgage rate was 7.31% the year prior — compared to the current 30-year fixed rate of 6.08%.

Table of contents

• Income to afford a home
• What impacts affordability?
• Calculation breakdown example

Houshold income to afford a home purchase

Here is the income it would take to afford a home on a state-by-state basis:

What impacts home affordability?

Let's start by answering that question of what makes a home affordable? The general mortgage affordability rule is to not spend more than 28% of your gross monthly income on home costs — these home costs includes the principal, interest, property taxes and insurance.

Following this 28/36 rule you can take your estimated monthly mortgage payment divide it by 28% to see how much gross monthly income you would need to make. Further multiplying this amount by twelve would give you annual income needed for this home to be considered affordability.

Assumptions used in calculating the income in each state

For this calculation we started with the median home price in each state.The mortgage amount was calculated by applying a 20% down payment to the median home price. A 30-year fixed mortgage rate of 6.08% was used which is the current mortgage rate. Since we used the 30-year fixed mortgage rate — it was fitting to use 30 years as the amortization period. PITI was estimated as $66 for homeowners insurance and 0.07% of the property value for property tax.

Calculation breakdown example

You can start with your monthly mortgage payment from a mortgage calculator — and then follow the below breakdown to convert it to the annual income needed.

Let's use the monthly mortgage payment on the median priced home in the US which gives us a monthly payment amount of $2,324 as a starting point.

You can also see how much home you can afford by using a mortgage affordability calculator.

Source: NAR