How is affordability calculated?
For homeownership, we calculate the income required to qualify for a mortgage on the median priced home by assuming a 90 percent loan-to-value ratio (that is, a 10 percent downpayment plus the use of private mortgage insurance). Monthly payments are calculated to include loan principal and interest as well as estimated taxes and insurance. These payments are annualized and assumed to comprise no more than 28 percent of annual income in accordance with conventional underwriting guidelines. The salaries for each of the 65 occupations are then compared with this qualifying income for each metropolitan area. For rental housing, we compute the housing wage needed to afford the unit. This concept, developed by the National Low Income Housing Coalition, is the hourly wage that must be earned so that gross rent does not exceed 30 percent of income, a commonly accepted standard of affordability. Actual wages for the selected occupations are then compared to the housing wages. For more details o
