In case you missed it, higher interest rates and sinking housing affordability mean that mortgages ate up 46.4% of median household incomes in October 2022, according to the latest data from the Federal Reserve Bank of Atlanta. That's an uptick from September when it was 46.3%, and a big jump from August when homeowners spent 43.3% of their income on their home loan.
That's almost twice as much as homeowners should be spending on their mortgages, according to the 28/36 rule. So if you're a homeowner, you should be looking to spend no more than 28% of your gross income (meaning, before taxes) on all bills or payments for your home. This includes your mortgage, insurance, and other expenses. In total, all of your debt—including student loans or credit card bills—shouldn't exceed 36% of your income.
But that's becoming increasingly difficult at a time when homes were 9% more expensive in October than the year prior, according to the most recent data from the CoreLogic Case-Shiller Index.
The average rate on a 30-year fixed-rate home loan also soared to over 7% in November, data from mortgage originator Freddie Mac shows. While mortgage rates have been on the decline, with the average 30-year rate at 6.15%, homeowners could still find themselves shelling out thousands of dollars more over the life of their home loan.
-Kristin
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