How Much House Can You Afford and Still Enjoy Your Life

A lender may tell you how much you qualify to borrow, but that figure does not account for every goal in your budget. The more useful question is what home payment you can carry comfortably while still saving, traveling, or simply enjoying your day-to-day life.

Start with your full monthly housing cost

The principal and interest on your mortgage are only part of the cost. Add estimated property taxes, homeowners insurance, any mortgage insurance, and homeowners association dues. Then make room for utilities, maintenance, and repairs. A home with a manageable loan payment may still stretch your budget once those other costs are included.

Work backward from your own budget

Look at what you currently spend each month and what you want to keep spending. Subtract your regular bills, debt payments, savings goals, and a cushion for unplanned expenses from your take-home pay. The amount left gives you a starting point for a housing payment that fits your life. If you are relocating, consider whether your new location will change commuting, childcare, taxes, or other everyday costs.

Keep cash for life after closing

The down payment and closing costs are substantial, but moving expenses and early home repairs can arrive quickly too. Spending every available dollar at closing may leave you little flexibility. Compare several down payment options and see how each affects your monthly payment and the savings you will retain.

Use preapproval as information

Preapproval can help you understand a possible price range, subject to the lender’s review and loan requirements. You still decide where in that range you feel comfortable. Ask a mortgage professional to show you estimated payments at more than one purchase price, including taxes and insurance. A little room in your budget can make the new house feel more like home.

Want to test a few home prices against your budget? A Premia Mortgage Consultant can walk through the estimated payments with you.

Further reading

• CFPB guide to deciding how much to spend

• CFPB guide to choosing a down payment