FRESNO, Calif. (KFSN) — For decades, homebuyers were advised to follow the “30% rule,” meaning they should spend no more than 30% of their gross income on housing.<\/p>\n
But a new analysis suggests that the guidelines may no longer apply.<\/p>\n
A Bankrate study found that a typical U.S. household would need to spend 43% of its income to afford a median-priced home.<\/p>\n
Rising home prices and elevated mortgage interest rates are taking a much bigger bite out of family budgets.<\/p>\n
“I mean, just the reality of the market, you know, when you’ve got a state where the, you know, the median home price is getting close to a million, and in, you know, places like Northern California, it’s closer to $2,000,000. Yeah, it’s just not realistic to spend only 30% of your income on housing as a first-time buyer. So yes, definitely those rules of thumb are being reexamined,” said Jeff Ostrowski, a Bankrate financial analyst.<\/p>\n
The start of a new year often prompts prospective buyers to calculate how much they can afford each month and whether they can make a down payment.<\/p>\n
Ostrowski recommends researching down payment assistance programs.<\/p>\n
“Another big thing is research down payment assistance programs.<\/p>\n
So in California in particular, you can qualify for a down payment assistance grant or loan even with a household income north of $200,000,” he said.<\/p>\n
Ostrowski noted that such programs could make a difference for some buyers.<\/p>\n
The City of Fresno offers assistance to low-income homebuyers.<\/p>\n
According to Bankrate, Pittsburgh, St. Louis and Detroit are the only major U.S. cities where the 30% rule still applies.<\/p>\n
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