How Much Home Can We Really Afford?

How Much Home Can We Really Afford?

It’s one of the biggest financial decisions you’ll ever make, and yet the guidance most people get is dangerously simplistic. Punch your income into an online calculator or talk to a mortgage lender, and you’ll learn that you can “afford” a mortgage that feels… uncomfortably massive.

That’s not because lenders are trying to mislead you, but they are operating with limited information. Their job is to tell you the maximum amount they’re willing to lend you, not to help you figure out what’s wise for your situation.

Here’s what they look at and what they miss entirely.

What Lenders and Calculators Consider

Lenders typically look at your income, credit score, debt-to-income ratio, and current interest rates. They’re asking, “Will this couple likely make their payments on time?” 

What they’re not asking is, “Will this mortgage make them feel financially trapped or unable to pursue other life goals?” 

And let’s not forget that lenders are incentivized to make you take on more debt, not less.

So, what should an aspiring homeowner do? Here are seven questions to help you hone in on your true affordability figure.

1. Are we willing to commit to continuing to earn this level of income?

It’s easy to assume today’s income will always be there. But what if one or both of you are already feeling burnout? What if there’s a desire to change careers, work fewer hours, or start a business? A large mortgage can lock you into a lifestyle you may not want long term. Instead of assuming you’ll always earn what you do today, consider basing your affordability on an income level that aligns with your future plans and your desire for flexibility.

2. Do we have other goals we need to plan for?

Buying a home might be just one piece of the puzzle. Are you hoping to travel more? Take a sabbatical? Support aging parents? Fund future education? Retire early? These goals all require money and flexibility. 

Homeownership is one goal. It is not the only goal.

3. Is our income steady or variable?

If a big chunk of your income comes from bonuses, commissions, equity comp, or freelance work, your true take-home pay can swing quite a bit from year to year. Lenders will often average your income over the past couple of years, but averages can be misleading. 

You want to base your mortgage payment on modest assumptions of your expected income, not your best year. Otherwise, you risk feeling squeezed in a slow year or needing to make major lifestyle sacrifices just to keep up with your mortgage.

4. Are we relying on just one income stream?

More diversified income often means more resilience. If your household depends heavily on one job or one person’s income, that’s riskier and should be factored into how much fixed expense you’re willing to take on. This is especially important if the primary earner works in an industry that is cyclical or prone to layoffs.

5. How important is future flexibility to us?

A high mortgage might be manageable now, but what if one of you wants to change careers in your 40s or 50s, take time off to care for loved ones, or go part-time while your kids are young? Buying too much house today can limit your future options. What you want today in terms of lifestyle and work may not be what you want later. A more modest mortgage can preserve more of your freedom down the road.

6. What’s about to change in our life or budget?

Having a child, moving to one income, changing careers, or simply facing rising costs like healthcare or childcare can all shift your cash flow. Your mortgage shouldn’t leave you with no margin to absorb change. This is also where tracking your cash flow becomes invaluable. Tools like Monarch Money or Tiller can help you get a clear picture of where your money is going today. That awareness makes it much easier to anticipate how your spending might evolve in future chapters of life and to pressure test whether a larger mortgage would still leave room for what matters most.

7. How much risk are we really comfortable with?

Even if the numbers technically work, ask yourselves: Would we still sleep well at night with this payment? Would we feel okay if home values stagnate or fall? Are we prepared if repairs cost more than expected?

And remember, you don’t have to buy a home at all. This is a topic for another day, but renting is a totally viable option, even for people who could otherwise afford to buy.

A Final Thought

Just because a bank says you can afford it doesn’t mean it fits your life. True affordability means having enough space, financially and emotionally, for the rest of your goals, not just your monthly payment. This isn’t the kind of choice to make in isolation. A good financial plan connects the dots between your values, your cash flow, your goals, and your capacity for risk. If you’re thinking about buying a home and want to make sure it fits your bigger picture, we’d love to help.

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