Make $58,323? You qualify for Seattle-area home

How much income does a Seattle-Tacoma-Bellevue area homebuyer need to purchase the median-priced home of $265,400?

According to a new study conducted by the National Association of Realtors, homebuyers with a 20 percent down payment would need $49,114, those with a 10 percent down payment $55,253, and those with a 5 percent down payment $58,323.

When a homebuyer 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 homebuyer 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.

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, it used a more conservative ratio of 25 percent to create the metro area qualifying income. In other words, qualifying income is set to equal four times the calculated annual mortgage principal and interest payments. A prevailing interest rate of 4 percent was used for the calculations.

Having enough income relative to total house payment is just one factor that will be considered in a homebuyer’s application for a mortgage. A lender will also consider a borrower’s other debts and the total paid to service those debts relative to income, as well as credit history, demonstrated ability to pay, financial reserves, and other factors.