The question of “What house can I afford?” is complicated. There’s much more to buying a home than just being able to afford the monthly payment on your mortgage. If price were the only factor, there’d be no need to look at different houses — you could simply purchase the first one available in your price range.
Instead, it’s important to consider the characteristics of a house that will best suit your needs, lifestyle, and your budget. What house can you afford in terms of size, location, layout, and features?
While we can’t exactly answer this question for you, we can lend some guidance. With the help of real estate experts and location-based research, we’re walking you through the process of how to evaluate exactly what type of house you can afford — and what “affording” a house actually means.
What determines personal home affordability?
What’s considered “affordable” when it comes to housing has a different meaning for everyone. But, in general, how much home you can afford according to a mortgage lender is determined by:
- Your income
- Your debts
- Your credit history
- How much money you have saved for a down payment — which influences both your monthly mortgage payment and whether you’ll have to pay mortgage insurance
- The mortgage terms you choose (length, interest type, loan type, etc.)
- The specifics of the property (residence type, location, etc.)
To a certain extent, what you are personally willing to pay is also a factor. Buying at the very top of your budget can be financially risky, whereas buying at the lowest end can lead to dissatisfaction — especially if that saved money means accepting less space than you wanted, or taking on more renovations than you may have anticipated.
We’ll dive more into how to determine what is most important to you when choosing a house, but for most homebuyers, landing somewhere in the middle is the sweet spot. That said, with the low interest rates and rising home prices we’re seeing in 2021, you might be able to think outside the box when it comes to choosing your next home.
“I think buyers today can be a little aggressive on not necessarily finding their forever house on the first purchase,” says Jennifer Carstensen, a real estate agent in Memphis, Tennessee, who works with 70% more single-family homes than the average agent in her area.
She explains that with home equity increasing steadily, the house you’re buying now doesn’t necessarily have to be the last home you ever buy — nor does it necessarily need to appeal to hypothetical future buyers.
“Let’s say a homebuyer wants to explore living downtown,” Carstensen offers as an example. “I would suggest, ‘Hey, let’s go for a one-bedroom right now.’ Whereas 10 years ago, I would have said, ‘Well, let’s think about your future buyer and who that’s going to be.
“The conversation has shifted from spending time focusing on the future buyer in order to get the highest resale value to, ‘We can be a little selfish today.’ Let’s not worry so much about your future buyer because the market is so great.”
In other words, it may be a good time to buy a house that you actually want based on your lifestyle today — instead of thinking in terms of an investment to resell down the road.
What else goes into home affordability?
Regardless of who ends up purchasing a particular house, there are certain factors that always influence the cost of a home.
We’ve all heard “location, location, location” in relation to real estate, and it’s as true today as ever. Where a house is located impacts not only its sales price, but also the cost of property taxes and homeowner’s insurance — which are ongoing expenses.
Other factors that go into a home’s overall affordability include:
- Maintenance and repairs
- Floor plan
- Amenities (a garage, deck, finished basement, and so on)
- Landscaping needs
- Risk of natural disasters (think flood zones or tornado regions)
- Construction materials
So, bearing these factors in mind, let’s take a closer look at what house you can afford depending on where in the United States you live.
What house can I afford in the Northeast?
The median sales price of existing homes in the Northeast census region — which includes New England and the Middle Atlantic sub-regions — as of Q3 2021 is $387,200. For new-construction homes, that median figure increases to $502,300.
As we’ve just explained, location matters with real estate. Within the Northeast region, the median home prices vary quite a lot depending on your metro area:
- $176,100 in Syracuse, New York
- $309,800 in Philadelphia, Pennsylvania
- $428,800 in Portland, Maine
- $663,300 in Boston, Massachusetts
What house can I afford in the South?
The Southern census region is rather sweeping with its geography, comprising the South Atlantic, East South Central, and West South Central sub-regions.
Taking a look at a few different metro areas, those median prices are quite varied:
- $234,500 in Columbia, South Carolina
- $315,000 in Atlanta, Georgia
- $515,100 in Austin, Texas
- $571,500 in Washington, D.C.
What house can I afford in the Midwest?
Here’s a metro-area breakdown of the Midwest:
- $247,200 in Omaha, Nebraska
- $256,300 in Detroit, Michigan
- $348,600 in Chicago, Illinois
- $369,200 in Madison, Wisconsin
What house can I afford in the West?
Split between Pacific and Mountain sub-regions, the West census region median sales price of existing homes is $506,300, while new construction homes price at a median of $522,400.
Unsurprisingly, different metro areas around the West vary in their own median prices:
- $469,100 in Boise, Idaho
- $545,600 in Portland, Oregon
- $618,600 in Denver, Colorado
- $756,000 in Los Angeles, California
What should I consider when thinking about affordability?
So, we’ve looked at a range of home prices around the U.S. — but what does that really mean for you?
Well, no matter what home price statistics say about what is selling and where and for how much, the bottom dollar isn’t everything. When thinking about what house you can afford, you should be thinking in terms of your daily life — and understand that sometimes wants and needs are more similar than you might think.
Gain clarity on needs…
“You may need two bedrooms, but you really want four because you want an extra bedroom and an office — so we’ll talk about your lifestyle.” says Alice Cooper, a Daytona Beach-based top agent who doesn’t always take what her clients say at face value.
“Sometimes someone says they’ve got to have four bedrooms, but it turns out they don’t really need the fourth bedroom; what they need is a dedicated office. So now we can look at three-bedroom homes that maybe have an office, or an extra room somewhere that could be converted to an office.”
In other words, getting more clear on what you actually need in your home for it to be both comfortable and functional is key.
If you’re working from home regularly and would benefit from a quiet place to take calls and leaf through paperwork somewhere other than your kitchen table, it’s okay to shift from simply wanting an office to deciding that that space is a valid need.
If you’ve been promising your kids a dog for the past three years “just as as soon as we have a yard,” it’s okay to include a fenced backyard on your list of must-haves.
If your spouse is an enthusiastic home cook and wants a more usable area to prepare meals, it’s okay to prioritize a kitchen with counter space.
… And on wants
That said, unless your budget is unlimited, you will need to parse out which needs are actual needs, and which ones are passionate wants.
Or, perhaps, a misunderstood want.
“I had a client who told me they didn’t want any neighbors, they wanted some acreage,” says Cooper. “After looking at some property out in the county, we realized it wasn’t neighbors that were a bother, it was that they wanted to have a really nice view from the back of their home. They ended up on a golf course in a community with a beautiful, expansive view.”
One helpful tactic for discerning a want from a need is to think of each in terms of being a dealbreaker.
- If you think you need a two-car garage, would a home that checks every other box be struck from the list if it only has a one-car garage?
- A formal dining room might be nice to have, but would it be a dealbreaker if an otherwise perfect property lacked that dedicated space?
- That house you keep thinking about that only has two full baths — are you really going to let it go because there’s no downstairs half-bath?
Remember, too, that sometimes a perceived downfall of a home can be remedied later.
Unfinished basements can be finished, dated bathrooms can be remodeled, and disappointing refrigerators can be replaced. It’s worth keeping an open mind to afford an otherwise great home.
What about floor plans? Is layout really that important?
There are countless ways to configure a home and its interior, so floor plan ultimately comes down to preference and, again, your lifestyle.
While open floor plan homes remain popular, they can be noisy and distracting. Some people love having their kitchen open to the living room to interact with family and guests while cooking — others prefer the sanctity of a more private cooking space.
A two-story home is ideal for creating separation between living space and private bedrooms, but stairs can hamper mobility.
A one-level home makes for an easier move-in process and more convenient movement throughout, but do you really want your main bedroom sharing a wall with your teenager’s room?
Remember, size isn’t everything. A thoughtfully designed floor plan can maximize use of space, and just because a home is 3,000 square feet, that doesn’t mean the square footage is going to be as functionally spacious as you’d expect.
It’s impossible to walk through every nuance of every floor plan here, but be mindful during your home search process and think through the functionality of certain details. Some quirks you can probably get used to — that Jack-and-Jill bathroom from the ’80s perhaps less so.
What if I want a bigger, better house?
So you’ve determined what you actually need and want from a house, you’ve talked to a mortgage lender to figure out what you can afford on paper, and you’ve found yourself an experienced real estate agent. Great! You probably have a good idea now of what house you can afford.
But what if you’ve decided you want a bigger or otherwise better house than you can realistically afford right now?
Well, there are a few things you can do to maximize your ability to afford more home — in whatever way “more” means to you.
Buy a fixer-upper
If you’re willing to get your hands dirty, you could look for a fixer-upper home and save yourself some cash on the purchase.
Cooper confirms that fixer-uppers are still “a great entry point to build some instant equity in the property.” Though she does warn that many sellers in 2021 are taking advantage of the hot seller’s market and putting repair or renovation work into their homes before selling in order to maximize sales price.
So, it may be more difficult to find a fixer-upper house at this time, but they’ll always be out there somewhere if you have the patience — and the clear head — to wait for the right one.
“A lot of times when we have a house that is fully renovated and ready to go, we’ll get multiple offers, which can sometimes cause emotional bidding and lead to buyer’s remorse,” warns Carstensen. “But, typically, if you can find a house that is maybe a little overpriced for the market and a little bit dated, you can get into it at a lower price and then do some renovations yourself.”
Just remember that those repair costs will have to come from somewhere (spoiler alert: your pocket) and you’ll need to be okay with the idea of living in a construction zone for the duration of your projects. It’s often worth it to save cash and create the home you really want, but there’s a reason why many homebuyers seek out a move-in ready property.
Improve your credit score
Generally speaking, the higher your credit score, the better interest rates you’ll qualify for on your mortgage. This can mean affording more home for the same price, so it’s worth considering a strategy for improving your credit score — even if that means delaying your purchase by a few months.
Increase your income
It sounds obvious, but it’s worth mentioning: The more money you make, the more home you can afford. Whether you take on a temporary second job to boost your down payment savings or you finally have a conversation with your boss about that raise you’ve earned, if you can increase your earnings, you may be able to increase the scope of your next home.
Decrease your debt
This one goes hand-in-hand with improving your credit, sure — but it also means you’ll owe less money each month. Ergo? You can usually afford more house.
Your mortgage lender can help talk you through this as they review your credit history during the prequalification process.
Save up a bigger down payment
The more you can afford to put down on your home, the lower your monthly payment and, as we mentioned much earlier in this piece, the better your chances of avoiding — or at least shortening the term of — paying mortgage insurance.
There are also lots of down payment assistance programs out there that can add to what you’ve already saved (try Googling “down payment assistance [city, state]” to get started), and there are even zero down payment mortgages if that’s something you’d qualify for — but talk to your lender to determine what might be best for you.
Consider moving to a more affordable area
Whether it’s another part of town or another region of the country, as we demonstrated with the home sales median prices across the U.S. census regions, housing prices vary widely depending on where the home is located.
To really maximize your home bang for the buck, it may be worth looking into relocation.
What house can I really afford?
There are a number of variables that will influence what house you can afford, and some are more under your control than others.
The best way to get started is to talk to your agent and your mortgage lender about how to maximize your spending power in relation to your budget and your lifestyle.
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