What is Mfi, and Why Does It Matter?
When purchasing real estate, several steps and considerations play an important role. In addition to finding a home you love, you’ll need to worry about financing and finding a lender. Many real estate seekers are unable to pay a significant down payment on a home and may search for affordable housing when it’s time to find a property to rent or purchase.
When purchasing affordable housing, understanding how eligibility is determined is essential to the process. Generally, affordable homeownership opportunities are intended for those who make 80% of the Median Family Income (MFI) or less. The city of Austin sets household income and asset levels as guidelines for rental and ownership. To better understand this, let’s discuss MFI and how to calculate it.
What is Median Family Income (MFI)?Median Family Income (MFI), also known as Area Median Income (AMI), is calculated every year and represents the area’s income distribution midpoint. This midpoint is the key to affordable housing and is determined by the Department of Housing and Urban Development (HUD). The MFI is generally referred to by HUD using a basic four-person household, and you can find calculators on their website for every area.
MFI is utilized to help assess the eligibility of individuals applying for affordable housing in Austin. Essentially, most eligibility requirements dictate that the applicant’s income must be less than a certain percentage of MFI. Individuals can only receive low-income housing tax credits if their income meets these criteria.
In addition, generally, affordable housing rent can be no more than 30% of a household’s monthly income.
What makes MFI important?This particular metric is so significant because most of HUD’s housing programs are centered around the value of a specific metropolitan area. This, in turn, impacts renter eligibility and affordable housing options.
The HUD uses figures based on a four-person household, meaning the numbers are not absolute and may be changed depending on household size. For example, a four-person household would have a higher income threshold than a household of just two people. If a property benefits from the Low-Income Housing Tax Credits (LIHTC) program, typically, owners must utilize MFI benchmarks to determine renter eligibility.
There are three separate tiers for housing under HUD’s Section 8 program used to determine eligibility for renters, based on their income.
Low income (at or below 80% of MFI)In Travis County, the income limit for a four-person household is set to $93,450.
Very low income (at or below 50% of MFI)In Travis County, this level for a four-person household is $58,400.
Extremely low income (at or below 30% of MFI)In Austin, this level for a four-person household is $35,050.
You can use the Travis County website to find your family’s eligibility requirements using the calculated MFI for the fiscal year 2023 here.
How is the Median Family Income (MFI) calculated?Each year, the Department of Housing and Urban Development (HUD) calculates the MFI based on household size for each metropolitan area in the country. The MFI is the midpoint of a region’s income, meaning that half the households earn more than that amount, while half earn less.
If you’re looking into affordable housing, understanding your area’s calculated MFI and percentage is as simple as going online. Speak to the trusted experts with HomeBase to get started on your real estate journey today.