[quote=skerzz]Your payment and required salary figures seem high to me. In years 1 and 5, I compute monthly payments of $2,700 and $3,900 respectively. Assuming a 36% front-end ratio, then your annual salary figures are also overstated.
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Looks like I had a bug in my excel formula. I get $2,600 to $3,900 which is still an increase of 50%. Of course I’ve also left out property taxes and any MID tax benefits. Not sure why you’d assume a 36% front end. Bankrate and other sites tend to say 28-30% percent front end and 36-41% back end. I made my salary calculation on 30% which I felt was pretty fair.
If your San Macros place appreciates at 5% and interest rates increase at 50 basis points per year I get the following.
The house is worth $510K. The monthly payment @6.5% is ~$3,250 and at 30% front end ratio a average annual salary of $130K. That average annual household salary would be in the top 20%.