How Much House Can We Afford? The Honest Way to Answer It
The number a lender will approve and the number you can live with are different. The gap between them is where people get in trouble.
Every couple asks me this question first, usually before they have told me their names. I am a mortgage broker in Oregon City, and this is how I answer it without a calculator that lies to you.
Why online calculators get it wrong
Most of them take your income and a guessed payment and hand back a number that looks like a budget. They do not know your student loans, your childcare, the truck you are still paying for, or that one of you is about to go part-time. They do not know what you spend on a normal month, and neither do most couples until they look.
Two numbers, not one
Qualified is what a lender will lend you. It comes from your income, your debts, your credit and the loan program. It is a ceiling, not a target.
Comfortable is what you can pay every month and still live the way you want to live. It comes from your real spending, your savings goals, and how much cushion helps you sleep.
I show couples both. The right house is usually somewhere under the first number and at or under the second.
How to find your comfortable number
Look at three months of real spending as a couple. Not the budget you wrote, the one you lived. Add up what goes out that will not change when you move: debts, insurance, phones, food, the things you actually do on weekends.
Then decide what you want to keep saving every month after you buy, for emergencies and for the next thing. Houses need repairs. The first year brings a surprise more often than not.
What is left is the room for a housing payment, and that payment includes taxes and insurance, not just the loan. If the number feels tight on paper, it will feel tighter in the house.
What moves the number
A larger down payment lowers the loan. Paying off a car or a card before you apply raises what you qualify for and what you can carry. Gift money from family can help, with rules. A stronger credit profile improves the terms. Most of those take months, which is why I like to start a year out.
The question under the question
When couples ask how much house they can afford, what they usually mean is whether they can buy at all. Most of the time the answer is yes, sometimes now and sometimes after a year of work. I will tell you which, on paper, with your real numbers.
I serve Oregon City, Clackamas County, Multnomah County, Washington County and the rest of Oregon. Message me and I will show you both numbers, qualified and comfortable, and the path between them.
Becky Chambers, Mortgage Broker, NMLS #2814018. Freestone Mortgage, NMLS #2613454. Licensed in Oregon. Equal Housing Opportunity. For informational purposes only. This is not a commitment to lend. Program availability and terms vary and are subject to credit approval.