Many Hoosiers aim to invest in a home of their own. However, affordability is a concern, especially in the current environment of high prices and rising interest rates. Consider this:
- The median income for Indiana households at $61,944 (2021); according to an online mortgage calculator, the median household could be financed for up to $189,000 at 7 percent, costing $1,257 per month.
- The median sale price of an Indiana home is $222,300, according to Redfin estimated based on January 2023 data.
- Investment experts recommend paying 20% of the purchase price when buying a home. A 20% down payment for the median sale price of $222,300 totals $44,460 and reduces the mortgage amount to $177,840.
- Saving $200 per week toward the down payment of $44,460 would take 222 payments, or over four years. In a state with a $7.25 minimum wage and at least 12 percent of households live under the poverty line, though, saving $200 per week is out-of-reach for many Hoosiers, especially with rent and grocery prices on the rise.
To qualify for a mortgage, one must have consistent earnings large enough to cover the principal, interest, taxes, and insurance for the home. Other expenses that include groceries, internet services, medical care, or car maintenance and payments must also be considered when creating a household budget. To get the best interest rate—because in an environment of climbing rates, every fraction of a percentage affects the monthly expenditures—one should shop different financing options and be able to prove at least two years of steady employment.
For those with unblemished credit and a stable work history, mortgage approval may come easily, but if housing is in high demand—if, say, a giant investment firm that buys residential real estate as part of its portfolio makes cash offers on properties—regular shoppers can be excluded from the housing market as their offers are rejected and home prices increase.
When this system works, it works well. Homeowners who buy at an affordable price and hold onto it for several years benefit from its appreciation. Housing costs stay steady for people with fixed mortgage rates. Long-term, homeownership can stabilize households and enable wealth to be passed down through generations.
But what about everyone else?
