Home prices are steadily crawling upward nationwide, due to high demand and low inventory. That means house hunters may be spreading themselves thinner in order to get into a home.
Trulia, a real estate brand that’s part of Seattle-based Zillow Group, just launched a feature to give those buyers better insights into what they can afford.
The ‘Affordability Calculator‘ uses a buyer’s annual income, down payment amount, credit score, and debt-to-income ratio to determine what he or she can afford. Buyers can also enter additional information, like monthly debts, credit score, and the zip code where they’re looking, for greater accuracy.
Using that information, the Affordability Calculator estimates the price range buyers can afford and determines whether their debt-to-income ratio is in the “safe,” “stretching,” or “aggressive” range. This is similar information mortgage lenders use when determining the loan amount a buyer is eligible for. The calculator also estimates property taxes and interest rates, based on the zip code a shopper is looking in.
“With home prices on the rise across the county and inventory at historic lows, homeownership has become even more out of reach of many everyday Americans,” Trulia Senior Economist Cheryl Young writes in a blog post. “Nationally, the typical American worker makes $37,040 annually (national median income) while the typical American house costs $254,900 (national median list price). That means that the median worker would have to spend 42 percent of their income on mortgage payments if they bought the median-priced home, up six percentage points from two years ago.”
Trulia defines “affordability” as having a debt-to-income ratio at 31 percent, meaning a buyer’s monthly mortgage payment would be just 31 percent of his or her income. The Affordability Calculator is targeted at first-time home buyers who may find the process of getting a loan opaque.