Income needed to afford a mortgage in 35 major US cities
If you don’t make $200,000 per year, you might have a hard time buying a home in San Francisco.
A recent home affordability report from Unison, a homeownership investment company, analyzed the income would-be homeowners would need to earn in order to afford a mortgage in 35 major U.S. cities.
A homeowner would need to make six figures to pay a mortgage on a home valued at the median price in San Francisco, San Jose, urban Honolulu, Los Angeles, San Diego, Seattle, Washington and New York City. Those income estimations were calculated to include funds you'd need to make a 20 percent down payment and pay a 4.45 percent interest rate or a 3.99 percent interest rate — the average annual Freddie Mac 30-year fixed rates for 2018 and 2017, respectively.
On the flip side, a mortgage in some cities is much more affordable. Under the same conditions, a homeowner in Detroit would only need to earn $10,033 per year to afford the $251 monthly payment, which Unison’s report calculated assuming payments wouldn’t exceed 30 percent of a homebuyer’s gross income.
Homebuyers in Milwaukee, Wichita, Indianapolis and Columbus, Ohio could also afford a mortgage with an income of less than $30,000, according to the report.
It could take a homebuyer decades just to afford a down payment in the cities with the highest monthly payments, Unison said. For example, in San Francisco, where the median home value is more than $1 million, it would take someone earning the median income there 40 years to save a down payment.
That same person would then need to earn $202,094 per year to make mortgage payments, assuming they put down 20 percent, according to the report. If that person put down a smaller down payment of 10 percent, they would need to earn $239,539. If they put down 5 percent, they would need to earn $252,846 in order to afford monthly payments.
In Detroit, it would take someone earning the median income just seven years to save up a 20 percent down payment under the same conditions, according to the report.
Despite the expensive conditions in some cities, most would-be homeowners might actually have a better shot at affording a mortgage than they believe. Earlier this month, Fannie Mae released the results of a nationwide study that found most people think it’s harder to qualify than it really is.
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People overestimate the minimum credit score they need to qualify for a mortgage, as well as the minimum down payment, which is about 3 percent. Most people in the study said it's 10 percent.
Here’s how much money you’ll need to earn in order to afford mortgage payments in 35 major U.S. cities, according to Unison:
San Francisco: $202,094
San Jose: $152,697
Urban Honolulu: $140,555
Los Angeles: $121,939
San Diego: $116,652
Seattle: $114,217
Washington, D.C.: $112,106
New York City: $109,313
Boston: $95,344
Portland: $74,137
Denver: $68,983
Miami: $61,634
Salt Lake City: $57,248
Atlanta: $54,266
Chicago: $51,031
Minneapolis: $49,122
Las Vegas: $45,998
Phoenix: $42,937
Richmond: $42,700
Charlotte: $40,710
Nashville: $40,210
Tampa: $39,407
Albuquerque: $39,407
Dallas: $35,670
Columbia: $34,435
Hartford: $34,200
Houston: $32,510
Louisville: $32,181
Philadelphia: $31,108
Kansas City: $30,528
Columbus: $29,618
Indianapolis: $26,922
Wichita: $25,547
Milwaukee: $25,383
Detroit: $251 $10,033
Fox Business' Brittany De Lea contributed to this report.
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