High-income jobs come with more benefits than just liquid cash, you have more to put towards retirement, savings, and other things. It’s also easier to qualify for a credit card or mortgage with high incomes.
However, the combination of the affordability crisis and near 8% interest rates are wreaking havoc on what median-income earners—and even top-earners—are able to qualify for to get a home loan.
A new study by LendingTree [1], using the “28% Rule”—an industry standard which recommends that borrowers should spend no more than 28% of their gross monthly income on housing—looked at top metropolitan areas across the country looking for where 28% is enough for a median-income earner (by specific locations using U.S. Census data) to afford a home and also where those earning a high income could qualify for a mortgage, assuming a 20% down payment at a rate of 6.66%.
On it’s face DINK’s (short a married couple with no children or “double income, no kids”) have the best shot at qualifying for a mortgage based on the 28% rule due to not having costs related to anything involving childcare. These borrowers are also more likely to pay more towards their mortgage than minimum payment amounts, or make concessions and break the 28% rule and buy a more expensive home because they have more to put towards mortgages.
But having a high-paying job doesn’t guarantee you can easily afford a place to live. In fact, buying might still be out of reach in some places, even for high-income earners.
To look deeper at the impact of working in a high-paying occupation on a person’s ability to afford a home, LendingTree ranked the nation’s 50 largest metropolitan areas based on how affordable a mortgage would be for someone working in their metro’s highest-paying occupation group.
Key findings of the report, as highlighted by LendingTree include:
- In 30 of the nation’s 50 largest metros, a mortgage on a median-value home is affordable to someone making the median earnings in their area’s highest-paying occupation group. While mortgages are affordable to high earners in most metros, they remain prohibitively expensive in multiple areas, including Phoenix, Seattle, Boston, Miami and Salt Lake City (to name a few).
- Those with median earnings in the highest-paying occupation groups in Cleveland, Milwaukee and Memphis, Tenn., can most easily afford a mortgage on a median-value home. In Cleveland, someone with median earnings in the area’s highest-paying occupation group (legal) could afford to spend $1,095 more each month than a mortgage on a median-value home in their area would cost them. In Milwaukee and Memphis, this mortgage payment surplus is $990 and $973, respectively.
- Three high-cost California metros—San Jose, San Francisco and San Diego—are where those with median earnings in their area’s highest-paying occupation group would have the most difficulty affording a house. In San Jose, a mortgage payment on a median-value home would cost $4,115 more each month than what someone with median earnings in the area’s highest-paying occupation group (computer and mathematical) could comfortably afford. In San Francisco and San Diego, a mortgage on a median-value home would cost $2,821 and $2,378 more than what workers in those metro’s highest-paying occupation groups could comfortably afford.
- While there’s variety among metros, certain occupation groups are more likely to be the highest-paying in a given area. Legal occupations have the highest median earnings in 19 of the nation’s 50 largest metros, while architecture and engineering occupations do in 15 metros. Further, the highest median earnings come from computer and mathematical occupations in 11 cities, followed by law enforcement occupations (three) and health diagnosing and treating practitioner occupations (two).
Metros where housing is most affordable for those in highest-paying occupation group:
1: Cleveland
- Occupation group with highest median earnings: Legal
- Median earnings in highest-paying occupation group: $106,253
- Median home value: $209,000
- Calculated monthly mortgage payment for median-value home: $1,384
- Affordable mortgage payment for someone with median earnings in area’s highest-paying occupation group: $2,479
- Difference between affordable monthly payment and calculated monthly mortgage payment: $1,095
2: Milwaukee
- Occupation group with highest median earnings: Legal
- Median earnings in highest-paying occupation group: $120,945
- Median home value: $289,600
- Calculated monthly mortgage payment for median value home: $1,832
- Affordable mortgage payment for someone with median earnings in area’s highest-paying occupation group: $2,822
- Difference between affordable monthly payment and calculated monthly mortgage payment: $990
3: Memphis, Tennessee
- Occupation group with highest median earnings: Legal
- Median earnings in highest-paying occupation group: $102,546
- Median home value: $244,100
- Calculated monthly mortgage payment for median value home: $1,420
- Affordable mortgage payment for someone with median earnings in area’s highest-paying occupation group: $2,393
- Difference between affordable monthly payment and calculated monthly mortgage payment: $973
Metros where housing is least affordable for those in highest-paying occupation group:
1: San Jose, California
- Occupation group with highest median earnings: Computer and mathematical
- Median earnings in highest-paying occupation group: $172,799
- Median home value: $1,422,600
- Calculated monthly mortgage payment for median value home: $8,147
- Affordable mortgage payment for someone with median earnings in area’s highest-paying occupation group: $4,032
- Difference between affordable monthly payment and calculated monthly mortgage payment: -$4,115
2: San Francisco
- Occupation group with highest median earnings: Legal
- Median earnings in highest-paying occupation group: $162,373
- Median home value: $1,135,500
- Calculated monthly mortgage payment for median value home: $6,609
- Affordable mortgage payment for someone with median earnings in area’s highest-paying occupation group: $3,789
- Difference between affordable monthly payment and calculated monthly mortgage payment: -$2,821
3: San Diego
- Occupation group with highest median earnings: Architecture and engineering
- Median earnings in highest-paying occupation group: $106,202
- Median home value: $846,600
- Calculated monthly mortgage payment for median value home: $4,856
- Affordable mortgage payment for someone with median earnings in area’s highest-paying occupation group: $2,478
- Difference between affordable monthly payment and calculated monthly mortgage payment: -$2,378
Click here [2] to see the full rundown of data for the top-50 metropolitan areas.