Solving the income-to-mortgage equation

Clients should know the importance of the PIR as well as the debt-to-income ratio (DTI), also known as the “back end ratio.” DTI shows what percentage of an annual gross income is required to pay all debts. The other side of the debt coin is the “front end ratio.” This is commonly called the “mortgage-to-income ratio” (MIR). It’s a measure of the percentage of the annual gross income that will be earmarked for a mortgage payment.

Ask your clients what their debt load looks like. Are they making car payments, carrying credit card balances or other loan responsibilities? Bank of America recommends keeping total debt payments below 36% of their gross monthly income.^Footnote1 Taking on a higher ratio of debt will likely lead to more difficulty in getting an affordable mortgage, or one at all. The general rule is a mortgage that’s 2x to 3x the annual gross income is the key.^Footnote2

A monthly mortgage payment is a combination of four components: principal, interest, taxes and insurance (including private mortgage insurance, or PMI, required by some lenders.) This four-piece bundle is known as PITI and industry experts advise this should not be higher than 28% of the annual gross income.^Footnote2 Also, buyers should have funds in reserve for up-front costs such as the down payment and closing costs. Equally as important as how much a buyer makes is where they want to buy. Your expertise in your market can be the difference when they’re looking for homes in their price range.

Personal finance is a major piece of the home affordability puzzle. PIR is calculated by dividing the cost of the home by the annual gross income, and it’s an accurate assessment of a market’s health and value, predicting the level of affordability for buyers across a range of income levels. It also shows whether a home is undervalued or overvalued and if a market is healthy or under stress. A general rule is a home price that is 3x to 5x the annual gross income is ideal.

By comparing PIR across the country, we can get a clearer picture of how attainable home ownership is for the typical household in each state. Realtor.com used PIR to create a “National Housing Report Card”^Footnote1 assigning school-like letter grades to each state and the District of Columbia.

Leading the pack was South Carolina, the only state to receive a Realtor.com grade of an A. According to data gathered from Zillow and the U.S. Census Bureau by the Longview News-Journal and published April 30, 2025, South Carolina had a PIR of 4.3. The median home price there was $294,557 and the median household income was $67,804. Comparatively, the average PIR in the United States overall was 4.6, with a median home price of $357,138 and a median household income of $77,719.^Footnote4

Other states in the A group were Iowa and Texas, with grades of A- on the Realtor.com scorecard. The five lowest PIRs in the country, meaning where affordability was highest, were:^Footnote1

• West Virginia (4.1)
• Pennsylvania (4.1)
• Iowa (4.0)
• Illinois (4.0)
• Ohio (3.9)

Notably, West Virginia and Pennsylvania got a C, while Illinois got a B+, factoring in rising demand and the number of new building permits issued.

On the other end of the PIR scale were the states of Rhode Island, Massachusetts, New York, Connecticut, Oregon, California and Hawaii, all bringing home F grades. They were negatively affected by slower new construction activity and generally stricter zoning laws, the Realtor.com scorecard showed.^Footnote3

Highest PIRs in the U.S. in 2025:

• Hawaii (9.0)
• New York (8.2)
• California (8.2)
• Massachusetts (8.1)
• Oregon (7.2)
• Rhode Island (6.6)
• Connecticut (5.8)

The Realtor.com letter grades are meant to be a novel way to paint a picture of affordability. Just because your state got an “F” doesn’t mean it’s impossible to buy a home there. Also, there are often outliers discovered when generalized data is gathered across entire states. It’s not uncommon that enclaves of affordable homes tucked away in a cul-de-sac somewhere emerge. The best client-agent partnerships are ones where all avenues are explored and the client gets the best value for money on their new home.

As you can see, using PIR to help gauge home affordability for your clients is an insightful practice. Perhaps it helps someone look more realistically at buying a home in their area or — for relocators — get a preview of what buying in a new town would be like. To personalize your guidance even more, Bank of America has many resources.

From first-time buyer tips to down payment advice to decoding the debt-to income ratio, we have guidance for you and your client.

For an easy and comprehensive way to crunch the numbers, we have a Home Affordability Calculator that will help your clients answer the question, “How much home can I afford?”

Bank of America Mortgage Lending Specialists have the expertise to help home buyers review their individual situations and determine what kind of home loan will work for them.