What Income Do You Need to Buy a Home in Irvine?

How much income do you need to buy a home in Irvine?

It depends on the address more than on the city. Your lender starts with the monthly payment for the home you want, adds your car loan, student loans, credit card minimums and any other monthly debts, and compares the total to your documented income. The lower that total, the less income you need.

That is why a citywide figure does not help much in Irvine. The price is only one input. The rest of the payment depends on the village, the tract and the parcel: how many associations the home belongs to, whether it carries Mello-Roos, and what it costs to insure. I put those numbers together for my buyers before they tour, so the income question has a real answer.

Key takeaways

• Lenders qualify you on the whole monthly housing payment, not just principal and interest.
• HOA dues and Mello-Roos count in that payment, so they raise the income you need.
• In Irvine those add-ons vary by village, by tract and by parcel, so two homes at the same price can need different incomes.
• Mello-Roos is not a citywide charge. Check the tax bill for the specific home.
• Ask for the association's current dues and the parcel's tax bill before you run any numbers.

What goes into the payment a lender qualifies you on?

Here is how I break the payment apart when a buyer asks what income they need. Only the first row is about the loan. The rest is about the home and about you.

An online calculator that asks only for price and down payment leaves out most of these rows. It cannot give you a number to shop with.

"When I qualify a buyer, the payment I count is not just principal and interest. It includes property taxes, any Mello-Roos special tax, homeowners insurance, and every layer of HOA dues. That is why two homes at the same price can need very different incomes, and why I ask for the actual tax bill and the association's current dues before I give a buyer a firm number."

Cindy M. Kramer, VP of Mortgage Lending, OriginPoint, NMLS #240190

How much can HOA dues and Mello-Roos change the income you need?

More than most buyers expect. Lenders compare your total monthly debts, including the new housing payment, to your gross monthly income. That comparison is called your debt-to-income ratio, and the CFPB explains how it works. The highest ratio a lender will accept depends on the loan program and on your credit, savings and down payment.

An illustration with round numbers. These are not real listings, and your lender's limits may differ. Picture two homes at the same price with the same loan:

• Home A has $200 a month in association dues.
• Home B has $700 a month, because it pays a master association and a sub-association.

Home B costs $500 more every month. If your lender allows 43% of your gross income for all your debts, covering that extra $500 takes roughly $1,160 more income a month, or about $14,000 a year. At a 50% limit it is still about $12,000 a year.

Mello-Roos works the same way. A special tax of $3,000 a year adds $250 to the monthly payment, which at a 43% limit means roughly $7,000 a year more income. Same price, same rate, same buyer, and a different answer.

Turn it around and it explains why a buyer can be approved for one Irvine home and come up short on another that costs the same. It also means a home with low dues and no Mello-Roos can let you look at a higher price.

Why one citywide number does not work in Irvine

Irvine is a city of villages, and each one carries a different set of monthly costs. A few examples from villages where I work:

• Woodbridge: homes carry no Mello-Roos, but every home pays the Woodbridge Village Association, and condos also pay a sub-association for their tract. I always ask what sits on top of the master association before anyone runs a payment. My Woodbridge homebuyer guide explains the layers.
• Oak Creek: every home pays the master association, homes behind the gates pay a gate assessment, and most tracts add their own sub-association. The Oak Creek page has the tract-by-tract detail.
• Portola Springs: a newer village where I help buyers and sellers. Many homes there carry Mello-Roos on the property tax bill, on top of the association dues, and the amount can differ from one tract to the next. For a buyer there, the tax bill matters as much as the HOA. The Portola Springs page has more on the village.
• Northwood: some older neighborhoods have no HOA at all, while others do. You cannot assume either way from the village name.

So are homes in one village more expensive to carry than another? Not as a rule. It depends on the property type, the associations and the parcel, which is why I run each address on its own. When you compare, match the property type and a similar price first, or you end up comparing the homes rather than their carrying costs.

How to check HOA dues and Mello-Roos for a specific home

HOA dues. Ask for the current amount from every association the home belongs to, how often each is billed, what it covers, and whether an increase or special assessment has been approved. Use the association's figures or the current disclosure documents, not an old listing, because listing sites often show only one layer. My guide to HOA assessments versus special assessments in Irvine explains what to look for.

Mello-Roos. Look at the parcel's current Orange County tax bill and note the fiscal year it covers. Mello-Roos appears as a separate line, often listed as a community facilities district, and the amount and the year it ends can differ from one street to the next. The seller's bill is a good starting point, but ask your lender to estimate yours, because your property taxes will be based on your purchase price.

What about the mortgage rate?

Use a rate your lender actually quotes you, and treat anything else as a placeholder. At the same price, a higher rate raises the principal and interest, and a higher payment raises the income you need. Your credit, down payment, loan type and any points you pay all move your quote. If you are deciding when to lock, my post on whether to lock a mortgage rate now or wait walks through the trade.

How to find your real number before you start touring

1. Pick two or three homes you would actually buy. Keep the property type similar so the comparison is fair.
2. Get the association details for each. Current dues for every layer, what they cover, and any approved increases.
3. Pull the tax bill for each parcel. Look for Mello-Roos or other special assessments.
4. Get an insurance quote for each address. Do not assume one home costs what another does.
5. Ask your lender to qualify you against each home. Use the same rate, term and loan type for every scenario. The pre-approval is where this starts.
6. Decide what you are comfortable with. The income a lender will approve and the payment you are comfortable living with are not always the same number.

Cash at closing is a separate question from income. I cover it in my guide to Irvine buyer closing costs.

Frequently asked questions

What salary do I need to buy a house in Irvine?

There is no single salary that applies to every Irvine home. Your lender works it out from the full monthly payment on a specific home, including property taxes, insurance, HOA dues and any Mello-Roos, plus your other monthly debts. Get the dues and the tax bill for the home, then ask your lender to qualify you against it.

Do HOA dues and Mello-Roos affect mortgage qualification in Irvine?

Yes. Lenders count HOA dues and Mello-Roos special taxes in the monthly payment they qualify you on. As a round-number illustration, $500 a month in extra dues can mean roughly $12,000 to $14,000 a year more income, depending on the lender's limit.

How much income do I need for a condo in Irvine?

It depends on the price and the dues. A lower price does not always mean a lower income, because many Irvine condos pay both a master association and a sub-association. Confirm every layer of dues before you run the numbers.

Does every Irvine home have Mello-Roos?

No. Some areas carry it and others do not, and it can differ within a village. Woodbridge homes generally have none, while many homes in newer villages such as Portola Springs carry it. Check the tax bill for the specific parcel.

Can I qualify for an Irvine home with two incomes?

Often, yes, when both people are on the loan. The lender then looks at both incomes and also both sets of debts and credit. A second income helps most when the second person's debts are modest.

Get your real number, not an average

The income you need to buy a home in Irvine is built one address at a time, from the current dues, the parcel's tax bill and a rate your lender has actually quoted. I would rather help you get that right before you tour than after you have fallen for a home. Send me the homes you are considering and I will line up the dues, the tax details and the questions for your lender. Schedule a free consultation, and you can read what past clients say on my reviews page.

Equal Housing Opportunity. Debbie Sagorin, Sagorin & Associates, Coldwell Banker Realty, CA DRE #01411020. Licensed by the California Department of Real Estate (DRE). This article is general information, not legal, tax, or financial advice. The dollar examples are illustrations, not quotes or real listings. Lender quote used with permission. Please confirm your own numbers with your lender, escrow officer, or tax advisor.