One of the biggest issues I have to tackle for my Boston condo buyers is housing affordability.
The federal guidelines from HUD says housing is affordable when gross costs are no more than 30% of the gross income of the residents. Since gross costs include things like utilities, property taxes, mortgage interest and the like, I figure the actual price of the house should represent maybe 25% of the gross income.
That leads to the recommendation that the price of the home should not be more than 2.5 times annual income. Of course, in 2022, Fidelity thinks you should be looking at 3 to 5 times your annual income:
- If you are completely debt-free, congratulations—you can consider condos that are up to 5 times your total household income.
- If less than 20% of your income goes to pay down debt, a home that is around 4 times your income may be suitable.
- If more than 20% of your monthly income goes to pay down existing debts in the household, dial the purchase price to 3 times.