How Much Income Does a Family Need to Live in Puyallup?

I could give you a single number, and it would be wrong for you. It would also be stale in six months. The income a household needs here depends on what the home costs, what interest rates are doing, and what else is in the budget.

What does not change is the method. If you know how to run it, you can get an accurate answer on any day, for any house. That is what this post gives you.

The method in four steps

1. Estimate the full monthly housing payment for the kind of home you want.
2. Divide that payment by 0.28 to find the gross monthly income a common lending guideline calls for.
3. Check your other debts against a second guideline.
4. Test the result against the rest of your real budget, especially childcare and transportation.

That is it. The rest of this post fills in each step.

Step 1: The housing payment

The payment is more than the loan. Lenders count four things, often called PITI.

• Principal and interest on the mortgage
• Property taxes, divided by 12
• Homeowners insurance, divided by 12
• Mortgage insurance, if required

Add association dues if the home has them.

Principal and interest

This depends on the loan amount and the rate. Here is what each $100,000 borrowed costs per month on a 30-year fixed loan.

To use it, multiply by the number of hundred-thousands you would borrow. A $400,000 loan at 6.5% is 4 times $632, or about $2,528 a month.

Freddie Mac publishes the average 30-year rate every week. Your own rate depends on credit, down payment, and loan type.

Property taxes

In the Puyallup area, total property tax has generally run around 1% of assessed value a year, a bit more or less depending on the tax code area. For planning, 1% of the price divided by 12 is a reasonable placeholder.

For a real number, look up a similar home in the county's parcel search.

Insurance

Get a quote. Until you have one, a placeholder in the range Washington homeowners typically pay is fine for planning. If the home is in a flood zone, add flood insurance, which is separate.

Mortgage insurance

With less than 20% down on a conventional loan, you will usually pay private mortgage insurance until you build enough equity. FHA loans have their own mortgage insurance. VA loans have a funding fee instead of monthly insurance. Your lender will give you the figure.

Step 2: The 28% guideline

A long-standing rule of thumb says your housing payment should be no more than about 28% of your gross monthly income.

So the income needed is the payment divided by 0.28.

This table is arithmetic, so it does not go out of date. Find your payment in the left column and read across.

Step 3: The total debt guideline

Lenders also look at all of your monthly debt payments together: the housing payment plus car loans, student loans, credit card minimums, and any other obligations.

A traditional guideline puts that total at no more than about 36% of gross income. In practice, many loan programs approve higher ratios, sometimes well into the 40s, for borrowers with good credit or other strengths.

What that means for you:

• If you have little other debt, the 28% housing guideline is the one that binds.
• If you have large car or student loan payments, the total debt ratio will limit you first.
• Being approved for a payment is not the same as being comfortable with it.

That last point matters. A lender will tell you the maximum. Only you can decide what leaves room for the rest of your life.

A worked example

This is an illustration with round numbers. It is not a statement about current prices or rates.

Suppose a home is priced at $500,000 and you put 10% down.

Divide $3,536 by 0.28 and you get about $12,630 a month, or roughly $151,500 a year in gross household income to meet the guideline.

Change any input and the answer changes:

• At 7.5% the payment rises by about $300 a month, and the income needed rises by about $13,000 a year.
• With 20% down, the loan is smaller and the mortgage insurance goes away.
• A lower-priced home brings everything down in proportion.

Run your own version with today's rate and the price of homes you are actually considering.

Step 4: The rest of the budget

Qualifying for the house is one test. Living well in it is another. In Puyallup, two other costs decide whether an income feels like enough.

Childcare

For households with children under school age, childcare can rival the mortgage. The lending guidelines ignore it completely. A family that qualifies easily on paper can be stretched thin once daycare is added.

Get real quotes. Washington's Child Care Check lists licensed providers. Then put the number in your budget before you decide on a price range.

Transportation

Most Puyallup households run two cars. Add payments, insurance, fuel, and upkeep. A long commute adds more. If one adult can take the Sounder train, this category shrinks.

A second reference point

The MIT Living Wage Calculator for Pierce County estimates what households of different sizes need to cover basic expenses, including housing, food, childcare, healthcare, transportation, and taxes. It is updated annually.

Two things to know when you read it:

• It reflects a basic, no-frills budget based on typical rents. It is a floor.
• It shows how sharply the required income rises with each child, mostly because of childcare.

If your household income is well above the calculator's figure for your family size, you have room. If it is near that figure, plan carefully.

One income or two

A large share of households here rely on two incomes. That is true across the Puget Sound region.

If you plan to live on one income, the math still works. It usually means one or more of these:

• A lower price range
• A larger down payment
• An older or smaller home
• A location farther from the freeways
• No childcare cost, which changes the picture considerably

Many single-income households do well here by buying below their maximum and avoiding the daycare bill.

Renting instead

Landlords use a simpler screen. Many require gross monthly income of about three times the rent. So a home that rents for $2,500 a month would call for about $7,500 a month, or $90,000 a year.

That is roughly a 33% housing ratio, a little looser than the 28% lending guideline. Screening standards vary by landlord and are regulated by state law.

What moves the answer most

In order of impact:

1. The price of the home. Obvious, and the lever you control most.
2. The interest rate. A one-point change moves the payment on a $450,000 loan by roughly $300 a month.
3. Down payment. More down means a smaller loan and possibly no mortgage insurance.
4. Other debts. A car payment can cut your price range more than you would guess.
5. Property tax and association dues. They vary by address.
6. Credit score. It affects both rate and mortgage insurance cost.

Programs that help

Depending on your situation, look into:

• VA loans for eligible service members and veterans, with no down payment requirement. They are common here because of Joint Base Lewis-McChord.
• FHA loans, with lower down payment and credit requirements.
• USDA loans for eligible rural addresses on the edges of the area.
• State down payment assistance through the Washington State Housing Finance Commission, for qualifying buyers who take a homebuyer class.

A loan officer can tell you which fit. I do not recommend specific lenders, but I can tell you what questions to ask.

Gross income versus take-home pay

The lending guidelines use gross income, which is your pay before taxes and deductions. Your budget runs on take-home pay. The gap between the two is where people get into trouble.

Washington helps a little here, since there is no state tax on wages. Federal income tax, Social Security, Medicare, health insurance premiums, and retirement contributions still come out.

A payment that is 28% of gross can easily be 35% to 40% of what actually reaches your bank account. Run your budget on the take-home number. If the housing payment plus childcare and car costs takes most of it, look at a lower price.

Income that lenders count, and income they do not

Not every dollar you earn is treated the same.

• Salary and hourly wages with a steady history count fully.
• Overtime, bonuses, and commissions usually need a two-year history to count.
• Self-employment income is generally averaged over two years of tax returns, after business deductions.
• Military pay includes housing and subsistence allowances, which are not taxed and can be adjusted upward by lenders.
• A new job in the same field is usually fine. A change of field or a move to commission pay can complicate things.
• Rental income, child support, and retirement income count with documentation.

If you are relocating for a job, an offer letter is often enough to start. Talk to a loan officer before you resign from anything or change how you are paid.

A reality check on "comfortable"

Here is how I suggest pressure-testing a number.

• Could you still make the payment on one income for three months?
• After the payment, childcare, and cars, is there room for savings?
• Do you have reserves for a roof or a furnace? Something will need replacing.
• Does the budget survive a tax or insurance increase? Both rise over time.

If the answers are yes, the income is enough. If they are no, the fix is usually a slightly less expensive house, not a different town.

Do the math for your own search

1. Pick a realistic price from current listings.
2. Get today's rate.
3. Multiply the loan amount by the payment per $100,000 in the chart above.
4. Add 1% of the price divided by 12 for taxes, plus insurance, mortgage insurance, and dues.
5. Divide by 0.28.
6. Compare with your gross income.
7. Add childcare and transportation and see what is left.

Ten minutes with a calculator will tell you more than any published "salary needed" list.

This post is general information, not lending or financial advice. A licensed loan officer can give you numbers based on your credit and the programs available.

Frequently asked questions

What salary do you need to live in Puyallup?

It depends on your housing cost. Using the common 28% guideline, divide your expected monthly housing payment by 0.28 to find the gross monthly income needed. A $3,500 payment calls for about $150,000 a year.

How much do I need to make to buy a house in Puyallup?

Estimate the full payment including principal, interest, taxes, insurance, and any mortgage insurance, then divide by 0.28. Your other debts and credit also affect what a lender will approve.

Can a family live in Puyallup on one income?

Yes, many do. It usually means choosing a lower price range, a larger down payment, or an older or smaller home, and it is easier without a childcare bill.

What is the 28% rule for housing?

It is a guideline that your monthly housing payment, including taxes and insurance, should not exceed about 28% of your gross monthly income.

How much income do I need to rent in Puyallup?

Many landlords look for gross monthly income of about three times the rent. For a $2,500 rent, that is about $7,500 a month.

Related reading

• Cost of Living in Puyallup: What It Takes to Live Comfortably
• What Kind of Home Can You Buy in Puyallup on Your Budget?
• Moving to Puyallup: Rent First or Buy Right Away?
• Hidden Costs of Buying a Home in Puyallup

Equal Housing Opportunity. Austin Robertson, License # 21036843, Austin Robertson and Allena Robertson Real Estate Brokers, regulated by the Washington State Department of Licensing (DOL). This article is general information only. It is not legal, tax, insurance, lending, or construction advice, and it is not an appraisal of any property. Robertson & Co. supports fair housing and does not describe or recommend neighborhoods based on who lives there. Costs, rates, and rules change. Confirm the details with the sources linked above before you act.