Worked example
One home, two dates, one monthly gap
An illustration of the funding requirement, not an underwriting decision. It does not say what any household can afford or what grant it should receive.
| Home price today | $500,000 | Scenario |
|---|---|---|
| Down payment | 20% ($100,000) | Scenario |
| Loan | 30-year fixed | Scenario |
| Rate today | 7.00% | Scenario; latest weekly 7.03% |
| Rate, January 2020 | 3.62% | Observed monthly average |
| Same home, January 2020 | $315,390 | $500,000 × 212.360 ÷ 336.663 |
| Earnings growth | +30.7% | $957 (Q1 2020) → $1,251 (Q2 2026) |
Where the monthly payment went
Gap: $2,661 − $1,503 = $1,158 a month. That is a 131.4% rise in the payment against a 30.7% rise in earnings.
Monthly gap
$1,158
$2,661 today vs $1,503 earnings-supported
Principal reduction that closes it
$174,052
Present value of $1,158 for 360 months at 7%
Total cash at closing
$274,052
Buyer's $100,000 plus assistance; 54.8% of the price
Excluded: property taxes, homeowners insurance, maintenance, association fees, mortgage insurance, closing costs and other household debts. Not captured: household income (two earners, or one), local prices, the ages and incomes of actual buyers, and the lower down payments most first-time buyers make (NAR reports a median of 10%).
How the gap moves with the assumptions
| Benchmark share of earnings | Gap / month | Principal |
|---|---|---|
| January 2020 (27.7%) | $1,158 | $174,052 |
| 1998 annual (31.2%) | $967 | $145,422 |
| 1998–2019 average (32.7%) | $887 | $133,336 |
| 2012 low (23.0%) | $1,412 | $212,222 |
| 2006 peak (47.0%) | $115 | $17,346 |
| Ages 25–34 earnings, Jan 2020 (30.4%) | $1,131 | $170,065 |
| Rate | Payment | Gap / month | Principal |
|---|---|---|---|
| 6.0% | $2,398 | $895 | $149,272 |
| 6.5% | $2,528 | $1,025 | $162,171 |
| 7.0% | $2,661 | $1,158 | $174,052 |
| 7.5% | $2,797 | $1,294 | $185,010 |
| Price | Gap / month | Principal |
|---|---|---|
| $300,000 | $695 | $104,431 |
| $429,100 (U.S. median, Aug 2026) | $994 | $149,371 |
| $500,000 | $1,158 | $174,052 |
The 2006 benchmark preceded the foreclosure crisis and is shown only to mark the range; it is not a reasonable affordability standard. January 2020 had one of the lowest burdens in the series, so it produces a larger gap than a long-run average would.
Try your own assumptions
Payments use the standard fixed-rate amortization formula; see Sources & methods.