How Much House Can You Really Afford? Looking Beyond the Mortgage Payment.

When you’re thinking about buying a home, one of the first questions is usually:

“How much house can I afford?”

It’s an important question—but the answer involves more than the price of the home or the amount a lender is willing to approve.

A lender can help determine how much you may qualify to borrow based on your income, debts, credit and other financial information. But there’s another question I encourage buyers to think about:

How much do you feel comfortable spending each month while still enjoying your life?

Those two numbers aren’t always the same.

Start With the Full Monthly Housing Payment

When buyers estimate a house payment, they sometimes look only at principal and interest.

Your actual monthly housing expense may also include:

• Property taxes
• Homeowners insurance
• Mortgage insurance, if applicable
• HOA fees, if applicable

Interest rates, loan programs, down payments, taxes and insurance can all affect the payment, which is why two similarly priced homes don’t necessarily cost exactly the same amount each month.

Don’t Forget Utilities

Your expenses don’t stop with the mortgage payment.

Consider what you may spend each month on:

• Electricity
• Water
• Natural gas or propane
• Internet
• Trash service
• Sewer, where applicable

The size, age and energy efficiency of a home can make a difference.

If you’re moving from an apartment or smaller home into a larger house, your utility expenses may also be higher than what you’re accustomed to paying.

Homeownership Comes With Maintenance

When you’re renting and the water heater quits, you call the landlord.

When you own the home, you call the repair company—and you’re responsible for the bill.

That doesn’t mean something will constantly be breaking, but every homeowner should expect occasional maintenance and repairs.

HVAC systems need servicing. Gutters need cleaning. Appliances eventually wear out. Roofs don’t last forever.

Leaving room in your monthly budget for maintenance and unexpected expenses can make homeownership much less stressful.

Think About Your Lifestyle Too

This is one buyers sometimes overlook.

A house shouldn’t consume your entire budget.

Do you enjoy traveling?

Eating out?

Boating?

Camping?

Attending your children’s activities?

Saving for retirement?

You shouldn’t necessarily have to give up everything you enjoy simply to make a house payment.

That’s why I believe there’s an important difference between:

“What can I qualify for?”

and

“What am I comfortable spending?”

Location Can Affect Your Budget

The home itself isn’t the only consideration.

Think about your commute and how often you’ll be making it.

A home farther from work may offer more house or land for the money, but additional fuel and vehicle expenses can offset some of those savings.

On the other hand, someone who works from home may be comfortable living farther outside town but place much greater importance on reliable high-speed internet.

Your lifestyle should be part of the home-buying equation.

Consider the Upfront Costs Too

The down payment isn’t necessarily the only money you’ll need when purchasing a home.

Depending on the transaction and loan program, buyers may also need funds for items such as:

• Earnest money
• Home inspections
• Appraisal
• Closing costs
• Moving expenses
• Utility deposits
• Immediate purchases or repairs after moving in

Your lender and real estate professional can help you understand which expenses may apply to your particular purchase.

You Don’t Have to Spend Your Maximum Approval Amount

This may be one of the most important things I can tell a buyer.

Just because you’re approved to purchase up to a certain amount doesn’t mean you have to spend that much.

There is nothing wrong with telling me:

“I’ve been approved for $400,000, but I’d really like to stay around $325,000.”

That’s valuable information.

My job isn’t to push you toward the top of your approval range. It’s to help you find the right property within the range that makes sense for you.

Start With a Lender Before You Start Looking at Homes

Even if you’re several months away from buying, talking with a reputable lender early can be extremely helpful.

A lender can help you understand:

• Available loan programs
• Down-payment options
• Estimated closing costs
• How different purchase prices affect your payment
• Steps you may want to take before applying for a mortgage

And if you’re not quite ready today, that’s okay.

Knowing where you stand gives you the opportunity to make a plan.

The Bottom Line

Buying a home should be exciting—not something that leaves you worried about making the payment every month.

Before deciding how much house to buy, look beyond the purchase price and consider the complete picture.

The goal isn’t to buy the most expensive house a lender says you can afford. The goal is to buy a home you can comfortably afford to live in and enjoy.

If you’re thinking about buying a home in Middle Tennessee—even if you’re not ready to purchase just yet—I’m happy to help you understand the process, connect you with trusted lending resources and start putting a plan together.

Sometimes the first step toward buying a home isn’t looking at houses.

It’s simply finding out what’s possible.

Betsy Smith, REALTOR®
Better Homes & Gardens Real Estate Town & Lake
615-828-8396