While the times have changed and unconventional mortgages are gaining in popularity, most real estate experts still rely on the old adage: 20 percent down payment and a mortgage less than 28 percent of income. This industry standard however is proving to be a great stretch for many and nearly impossible for most.
According to a new study conducted by HSH.com and using data from the National Association of Realtors, the majority of homes in major metropolitan areas are far too expensive to afford on the region's median salary.
San Diego, for instance, requires roughly $109,440 in annual income to afford a median priced home. But San Diegans only pull in on average $66,192. The report noted that San Diego is one of only two regions where even with the requisite 20 percent down payment, buying a median-priced home would still require a jumbo mortgage – a loan that exceeds federal standards for a conventional mortgage.
Meanwhile, mortgage rates remain near all-time lows. Conforming no-point 30-year fixed rates averaging 3.375 percent while the 15-year rate is near 2.75 percent.
Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.