So you want to buy a house?

For anyone trying to climb the “housing ladder”, it has been a disheartening two years as prices soared in a crowded market of buyers bidding against each other for just about any home available.

Things may calm down, with the Austin Board of REALTORS reporting fewer sales and more homes available this summer, but prices here continue to rise. The latest numbers from ABoR peg the median home price in the city of Austin at $633,000 in July, the most recent month of data available.

Mortgage rates have more than doubled in the past year, from around 3% to well over 6% on a 30-year fixed-rate loan, rising even more this week after the Federal Reserve raised rates banking on Wednesday.

So how affordable are homes right now? This, of course, depends on what you want and how much you are able or willing to pay, but here are some rough estimates of what a typical buyer would pay to buy a $650,000 home, which is about close to Austin’s “average” home. at present.

Mortgage banker Chris Holland (NMLS 211033) of Sente Mortgage of Austin ran some numbers for Austonia to illustrate a typical purchase.

Holland says that while the 30-year fixed rate mortgage is often mentioned in the media, the most popular loan he sees right now is a 7/1 adjustable rate mortgage, which has a fixed rate for 7 years and then adjusts each year according to market rates, with a limit on its annual increase. Interest is amortized over a period of 30 years. Adjustable rate mortgages (ARMs) offer lower rates than fixed rate mortgages.

Here are the figures, which are examples. In practice, the exact numbers vary depending on the buyer’s credit score and overall financial situation, as well as the rate, which can go up or down at any time.

  • $650,000 home purchase price
  • ARM 7/1 at 5.875%
  • 5% down payment, equals $32,500
  • 95% funded, equals $617,500
  • Payment of $4,990 including principal and interest (P&I), insurance and property tax
  • As a general rule, a borrower’s debt-to-income ratio should be 45% or less. So for this mortgage, a borrower or borrowers would need an income of about $11,100/month, or $133,200/year. That number could be higher, depending on the buyer’s outstanding credit balances on things like credit cards and auto loans.

Not included are closing costs, moving costs, maintenance, and any changes a new buyer might want to make to the home.

Holland says he’s had a lot of clients approved for loans who were looking for a home but put it on hold, hoping prices would come down.