How Much House Can I Afford?

Buying a house can be a very exciting time, but there is a lot of planning that goes into your purchase, long before you get to the closing table. You want to be comfortable with the neighborhood and location you choose, and find the style and size of house that works for you. Of course, there is also another big question when you plan to buy a house, which is how much house can I afford?

There are generally two answers to that question. The first one involves the maximum amount a bank or other lender agrees that you can borrow based on your financial situation. The second one is how much would really be safe for you to borrow, and would not put you at risk if you lost your job, became injured, or had unexpected expenses.

These two numbers are often not the same, especially if you live in a two-income household and are relying on both of your current incomes to purchase a house at the very top of your budget. So, how much house can you really afford? Here are some of the most important issues to consider.

The Kim and Lin Logan Real Estate team can flawlessly guide you in buying a home at Lake Oconee or Lake Sinclair. 

What Does Your Lender Say?

Working with your lender is the first step toward understanding your house-buying budget. Lenders want to minimize their risk, and they are not going to loan more money than they are confident you can repay. They are also not going to loan money on a property that needs a lot of repair, so you will need to purchase a home that is in good shape unless you plan to get a construction loan.

Getting prequalified through your lender before you start shopping for a house will show buyers you are serious when you make an offer. A prequalification will also help you work within your budget, so you do not end up falling in love with a home that is not in your price range and then feeling disappointed.

What Happens if You Lose Your Job?

While many people max out their budget when they buy a home, it is worth considering spending less. If you lose your job or become injured to the point that you are out of work for a while, you will want a mortgage you can still pay. Two-income families may also want to consider purchasing something with a mortgage that can be paid off of one income, as well.

It is not always pleasant to think about job loss, the loss of a spouse, or other serious life events. But when you are deciding how much house you can afford, it is a wise financial decision to take these kinds of risks into consideration. Buying below your means can help protect you during financial difficulties, and reduce any chances you may have to sell your home.

Should You Choose Something Smaller?

The size of your potential new home really matters, and a lot of people want to buy large houses. But do you really need a bigger home? You might want to consider what your requirements are, but also the level of upkeep and repair a larger house requires. Not only that, but heating and cooling more space can be expensive, too.

That does not mean you should avoid a bigger house if it is what you truly want, or you have a large family that needs the extra space. Just be aware of the extras that come along with more square footage, so you can be prepared when you buy your home, as you may have higher bills if you choose a larger space.

How Much Does Location Really Matter?

Location, location, location is commonly said to be the three most important things in real estate. While there are definitely other important aspects of determining how much house you can afford, the location will affect the price point. In many cases it is better to choose a less desirable house in a more desirable neighborhood, since it is easier to change the house than relocate it.

What’s the Bottom Line for Buying?

The bottom line when asking yourself how much house you can afford is that you should think carefully about all the expenses that come with owning a home. It can be wonderful to buy a great house and have control over your own space, but you also want to be able to have savings, make repairs and handle upkeep, and do other things, too. The right house (and the right purchase price) will make all that easier.