How much can I spend on a house?

If you’ve been pondering this question, you’re definitely not alone. A recent analysis by YSL News showed that many Americans have been searching for answers online regarding this topic in recent weeks.

This widespread interest is understandable; numerous factors contribute to home prices, including credit scores, debt-to-income ratios, property taxes, and local school districts, alongside your ability to secure financing.

Although asking this question online is simple, the responses may not always be accurate or personalized. That’s why we’ve gathered insights from several real-world experts to assist potential home buyers in gaining a clearer understanding of the home buying journey. The main takeaway is this: while there are numerous resources available, it’s wise to be more conservative than you might think about your budget.

Read on to uncover what to consider when wondering, “Can I afford this house?”

Look for expert (house-hunting) guidance

Whether you’re planning to buy a home soon or view ownership as a long-term aspiration, seeking help is a smart move.

Across the nation, you can find housing counselors trained and supported by the federal government’s Department of Housing and Urban Development. A notable place to start your search is NeighborWorks America, an organization with affiliates in every state, Washington D.C., and Puerto Rico.

Housing counselors offer a variety of services aimed at assisting average Americans in becoming homeowners. Acting like a combination of a real estate agent, instructional book, lender, and credit agency, they take a comprehensive approach. This could mean helping you improve your credit score and establish a savings plan now to prepare for future homeownership or guiding you through applying for financial assistance for a down payment if you’ve already found a property you’re interested in.

One key aspect of the HUD-approved counseling process is what experts refer to as ensuring “sustainable” homeownership.

In a competitive and pricey housing market, it might feel necessary to max out your budget to buy a home. However, Noelle Melton, who heads homeownership programs and lending at NeighborWorks America, emphasizes that new homeowners often encounter unexpected expenses after closing.

This is where counselors assist clients in budgeting not just for the home purchase itself, but for the ongoing costs of homeownership. They also maintain contact with clients and provide “post-purchase” support when unexpected repairs and expenses arise.

Housing counseling programs typically cater to low- and moderate-income individuals and require minimal fees. If you’re considering another type of professional, a financial planner might be worth looking into. Yet, unless you have substantial financial resources, it’s likely best to choose someone who charges by the hour or on a per-project basis.

One such professional is Heather Liston, whose business, Clarity Financial, operates in San Francisco, one of the most expensive cities for purchasing a house. Liston identifies herself as an “advice only” planner, stating that a consultation to help a client understand “how much can I spend on a house” – along with the subsequent steps – could be as low as $900.

Liston engages with clients by analyzing their financial situations, offering a more personalized and holistic approach than online calculators can provide. Additionally, she notes that part of the real benefit of collaborating with her or other financial experts lies in addressing the emotional aspects of such a significant life decision.

Some individuals may feel compelled to purchase a home due to societal expectations, while others may prefer to forgo ownership if it means remaining in a beloved area.

A proficient financial planner will assist not just with financial concerns, but also with the personal considerations surrounding this major decision.

Access housing resources

Another benefit of collaborating with a professional is their ability to provide access to various resources.

For instance, housing counselors can help identify resources for down payment assistance, affordable loan options, and more. They may also collaborate to combine multiple programs and funding sources, according to Melton of NeighborWorks.

Similarly, financial planners can assist in identifying tax-saving strategies, investment options, or other methods to enhance your financial resources. Both types of professionals can guide you in selecting the most suitable mortgage types for your situation.

If you’re still unsure about seeking assistance, there are self-service options available as well. One notable organization is Down Payment Resource, located in Atlanta. They maintain a directory of available aid for prospective home buyers.

Sean Moss, EVP of product and operations at the organization, emphasizes that “down payment assistance” goes beyond just funding for a down payment. Many programs allow these funds to be utilized in various ways to make homeownership feasible for first-time buyers or those who may struggle to obtain a home. This can include covering closing costs, lowering a high interest rate, or paying a real estate agent’s commission, and

For those who might think these assistance programs don’t apply to them, it’s worth reconsidering. A study by Down Payment Resource indicates that over 43% of all purchase mortgages could qualify for some form of down payment assistance.

Keep in mind that what is regarded as “moderate income” can vary based on location. For example, in certain regions of Virginia, a household of two or fewer making up to $176,000 might qualify for state-sponsored grants. (Most organizations assess affordability based on “Area Median Incomes;” you can find a national lookup tool here.)

Prepare for the Unexpected

While there may be plenty of assistance available, it’s also important to proceed with caution.

You want to avoid becoming “house rich, but cash poor.” This means you should strive to find a balance between investing in a house you love and having enough cash to keep it up in the long term. Even in a tough market where homes are often sold for far more than their asking price, you might regret borrowing the maximum amount possible just to buy a more expensive home.

Exercise caution when it comes to relying on estimates from online calculators or the prequalification amounts from lenders, advises Lisa Gill, a housing and mortgage expert at Consumer Reports. Typically, these figures reflect the highest amount you might qualify for, rather than your actual budget for monthly payments.

Setting aside savings for unexpected events is also essential, adds Gill. This isn’t just about emergency repairs like a leaking roof or a broken heater; it also includes preparing for unexpected job loss, pay cuts, and other life transitions. Remember, escalating home prices can also increase property taxes, and homeowners insurance costs are swiftly rising in an unpredictable climate.

However, Gill also emphasizes that owning a home shouldn’t feel like a burden. You might consider treating yourself to a fresh coat of paint, new countertops, or flooring—all of which can enhance your enjoyment of your home.

This is an important consideration. For the majority of Americans, owning a home is a wise financial move: it builds wealth and provides stability. Yet, the house you purchase for yourself should also serve as a true home. Embrace the experience and make the most of it.