Affordability in Austin: Can $30-35/hr Support a Decent Home?

Considering a relocation to Austin and wondering if a salary between $30 to $35 per hour would be enough to secure a decent home? This article explores the factors to consider, providing a realistic perspective on the housing market in Austin and the steps you can take to make informed decisions.

Income and Comfort in Austin

As Jose Tormo astutely points out, income is indeed sufficient for comfort in Austin, but the landscape changes significantly when it comes to purchasing a home. While your take-home pay is important, other factors such as the amount of cash you can put down, your debt-to-income (DTI) ratio, and your credit score play crucial roles in determining your ability to secure a mortgage.

Understanding the Housing Market

Your idea of a 'decent' house might differ from others', so let’s break down what your specified income can afford.

Assuming a 32.50 per hour wage, a 40-hour workweek translates to a gross annual income of $67,600. However, the mortgage industry has a ludicrous policy that bases the loan amount on a mere third of your monthly income. This policy can lead to overextension and financial strain, especially for young buyers.

Monthly Payment and Affordability

For instance, if your monthly gross income is $6,000, committing to a mortgage payment of $2,000 can result in a foreclosure scenario. Understanding the cost of ownership beyond just the mortgage payment—utilities, maintenance, homeowner’s association (HOA) fees, and other unforeseen expenses—is crucial.

Risk vs. Safety

Given these factors, a more prudent approach would be to allocate around 1/3 of your gross monthly income to your mortgage. For our example, a $1400 monthly mortgage payment would be a safer and wiser choice. At this rate, you can afford a house in the neighborhood of $150,000, depending on your credit score. This house would not be a mansion but would also not be a dilapidated one. It would be in a middle-of-the-road area, potentially semi-good, and quite livable.

Exploring Further Views and Areas

When considering the surrounding communities such as Hutto, Manor, and others outside the city limits, your options might still be appealing, given that the reasonable housing is typically 30 or 40 minutes away from downtown Austin. Inside the city limits, prices can be significantly higher. A $150,000 house would not go very far in the heart of Austin. However, for those willing to venture a few miles out, the cost is more manageable.

Next Steps: Seeking a Home

If a $150,000 house is not considered ‘decent’ enough for you, don’t give up. Continue your search diligently and you will eventually find the right home.

Remember, when delving into the housing market:

Compare neighborhoods and their cost of living. Consult with lenders to assess your finances more accurately. Factor in all costs associated with homeownership, not just the mortgage payment.

With attention to these factors and a well-planned approach, you can find the perfect home in Austin.