Does Your Home Fit Your Income?
Recent data from Realty Trac indicates more than 1.1 million U.S. homes are currently in some stage of foreclosure. Foreclosure is of course the worst case scenario, but an over-budget home can cause house rich and cash poor syndrome. Whether you rent or own your home, living in a house that is budget friendly can only help you both short- and long-term.
When your home payment is within your means, it makes room in your budget for additional savings, emergency funding, and retirement funds. However, with around three-fourths (76 percent, according to CNN Money) of Americans living paycheck to paycheck and around 50 percent having higher rent payments than they can afford, many Americans do not fit into this “living within their means” category.
Your home cost consists of more than just your mortgage or rent payment. You also have additional costs, such as repairs and insurance. Using CNN’s Home Affordability Calculator, combined with information from other reports, we compiled information on what an ideal situation looks like for the average person. How do you compare?
As of the most recent Census, the median household income in the U.S. is $51,371 per year. However, median income varies widely based on location, ranging from $37,095 in Mississippi to $71,122 in Maryland. For the purpose of this discussion, let’s assume the average household earns an annual income of $51,000.