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Qualifying Income for Buyers
In addition to metropolitan area prices, NAR Research estimated qualifying income for each metropolitan area in the first quarter of 2012. This article will review what qualifying income is and how we estimated it. How does calculated qualifying income for the median priced home compare to the income of potential buyers in your area?
 
Qualifying IncomeWhen a home buyer seeks a mortgage for a home purchase, the lender will review the amount of income the potential buyer earns. Total gross income will be compared to the total housing payment to ensure that the home buyer is not spending more than a prudent percent of their income on housing. This should help ensure that lending is responsible and home ownership is sustainable (1).
What’s prudent? In its guidelines, the Department of Housing and Urban Development (HUD) suggests that total house payment not exceed 31 percent of gross income . HUD’s total house payment includes principle and interest but also includes payments for things such as mortgage insurance and homeowner’s insurance.
Because NAR’s analysis will exclude some factors that HUD includes in the total house payment, we use a more conservative ratio of 25 percent to create the metro area qualifying income. ... more

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