Understanding Your Price-to-Income Ratio (USA Context):

The Price-to-Income ratio is a basic measure of housing affordability. It compares the price of a home to your gross annual household income.

• Ratio < 3.0: Generally considered affordable in many traditional US housing market views. Housing costs are likely to be a manageable portion of income.
• Ratio 3.1 - 4.0: May be considered moderately affordable. This range has become more common in many US markets.
• Ratio 4.1 - 5.0: Considered less affordable. Housing costs (including mortgage, taxes, insurance) could consume a significant portion of your income, potentially straining your budget.
• Ratio > 5.0: Generally considered unaffordable or a stretch for many households. Indicates that home prices are very high relative to income, potentially leading to being "house poor."

Important Considerations:

• These are very general guidelines. What's "affordable" varies significantly by individual financial situations, interest rates, down payment size, overall debt levels (DTI ratio), property taxes, insurance costs, and local market conditions.
• Historically, a common rule of thumb in the US was that a home should cost no more than 2.5 to 3 times annual income, but this has shifted upwards in many areas.
• A lower ratio generally indicates better affordability.
• This ratio does not account for the cost of borrowing (interest rates) or other monthly housing expenses (PITI). Consider using a full mortgage affordability or DTI calculator for a more comprehensive picture.

This tool is for informational purposes only and not financial advice.