In a previous article, we explored some of the scenarios where a home buyer in…
Income Needed to Buy a House in the San Francisco Bay Area
A new report sheds light on the income needed to cover the monthly mortgage payments when buying a median-priced house in the San Francisco Bay Area.
According to the California Association of Realtors (CAR), the state’s Housing Affordability Index rose slightly during the first quarter of 2017, reaching 32%. This index measures the percentage of households that can afford to purchase a median-priced home.
Of course, when it comes to real estate, location is everything. Home prices vary widely from one county to the next, and that’s particularly true for the highly diverse San Francisco Bay Area.
Fortunately, the state’s Realtor group has offered some county-by-county analysis as well, and this helps us answer a common question among home buyers: How much income is needed to buy a house in the San Francisco Bay Area, when using a mortgage loan?
Related: Maximum mortgage size in California
Income Needed to Buy a Home in the Bay Area
The Bay Area consists of nine counties, and CAR analyzed each of them to determine how much a home buyer would need to earn to afford the monthly payments on a median-priced house. Specifically, the industry group looked at:
- Housing affordability index
- Median home price in the county
- Average monthly mortgage payment, including taxes and insurance
- Minimum income needed to qualify for a loan on a median-priced home
Note: The average monthly payments shown below include property taxes and insurance on a long-term, fixed-rate loan with a down payment of 20%. These numbers would look very different with a smaller down payment.
| County | Median Home Price | Monthly Payment | Minimum Qualifying Income |
|---|---|---|---|
| Alameda | $798,000 | $4,100 | $163,980 |
| Contra Costa | $562,500 | $2,890 | $115,590 |
| Marin | $1,200,000 | $6,160 | $246,590 |
| Napa | $668,000 | $3,430 | $137,270 |
| San Francisco | $1,300,000 | $6,680 | $267,130 |
| San Mateo | $1,300,000 | $6,680 | $267,130 |
| Santa Clara | $1,070,000 | $5,500 | $219,870 |
| Solano | $390,750 | $2,010 | $80,290 |
| Sonoma | $605,000 | $3,110 | $124,320 |
Mortgage Approval Is Not ‘One Size Fits All’
This is just a generalized look at housing affordability in the San Francisco Bay Area, using median home prices and average monthly payments. On an individual basis, there are a lot of variables that can determine the income a particular borrower needs to qualify for a mortgage in the Bay Area. So don’t get too wrapped up in these numbers.
For example, CAR’s analysis showed that home buyers in Napa County need an income of $137,270 to afford the monthly mortgage payments on a median-priced property. But that doesn’t necessarily mean that someone who earns, say, $129,00 per year is unqualified for a loan. If said borrower has excellent credit, manageable debt, and a history of paying bills on time, he or she could still qualify for financing.
Related: How much home loan can I get?
In short: This chart gives us some basic insight into how much income is needed to buy a home with a mortgage loan in the San Francisco Bay Area. But it doesn’t take the place of personal budgeting or mortgage pre-approval. The best way to determine how much you can afford is by creating your own monthly housing budgeting, and by getting pre-approved by a mortgage lender.
Get Pre-Approved to Find Out What You Can Afford
This article underscores the importance of mortgage pre-approval when buying a home in the Bay Area. Pre-approval is when a mortgage company reviews your financial situation to determine how much you are able to borrow.
Getting pre-approved helps determine if your income is sufficient to buy a home in the Bay Area, and how much of a mortgage you can take on. It’s a worthwhile process that helps you establish a budget and narrow down the market.
Please contact us if you have questions about the income needed to buy a house, or if you’d like to get pre-approved for a loan.
