Can We Afford This Home?

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couple admiring a homeCan we afford this home? It’s a question that many buyers ask themselves when walking through a home. If you are like me, you go to open houses “just to look.” You may get design ideas, imagine yourself and your family enjoying the yard, cooking in a completely remodeled kitchen, or sitting around the fireplace on a cold evening. Although I am a practical person who is financially conservative, I LOVE looking at homes, even the ones I am not sure I can afford.

My husband and I have had our eye on a particular neighborhood less than a half mile from where we currently live. The homes and yards are bigger and it’s across the street from the city’s sports park where my boys will eventually play soccer, baseball and football. Homes in that neighborhood usually sell for more than $1 million so when one came on the market last week for $950,000, we had to look at it. Of course we fell in love from the moment we stepped in the door and as we were leaving, my husband turned to me and said “run the numbers.”

Even though I was sure we couldn’t afford the home and still cover our monthly expenses, I was curious. Could we afford this home? Could we qualify for the mortgage? I ran the numbers and although our debt to income ratio was within the lender’s guidelines and we could probably qualify for the loan, I wasn’t confident we could afford the mortgage and still maintain our quality of life. The question became, should we even try to afford this home? Having enough left over every month for trips to the zoo, date night, swimming lessons, soccer team and other activities, is more important to us than the perfect house. End of discussion.

Purchasing a home is very emotional. You walk in and it’s everything you want. You get caught up in the idea of raising your children there, cooking Thanksgiving dinner in the kitchen, having your friends over for summer BBQ’s and pool parties in the backyard. When you determine you can’t really afford it, the realization can be heartbreaking and discouraging.

So, how does one avoid this kind of disappointment? My advice is to start planning at least six months before you are ready to purchase so you know how much you are really able to afford. Begin by having a conversation with a licensed loan advisor. Ask them to run different scenarios (with various purchase prices, down payment options, loan programs, etc.) so you know exactly what your monthly obligation will be after the purchase. Starting your search with a clear understanding of your options will guide you toward a home that fits comfortably into your budget and still meets your lifestyle requirements.

When you finally find your perfect home and it comes time to answer the question “can we afford this?” you want to be able to answer with a confident YES. Planning ahead with guidance from a licensed professional will ensure you are able to make an informed home buying decision that will allow you to maintain your current lifestyle, but also enhance it in ways you dreamed of the moment you walked in the front door.

lisa shaffer RPM

Written by Lisa Shaffer. Lisa is a loan officer at RPM Mortgage Inc. in Alamo, CA.