How Much Home Can You Afford in Today’s Market?
Figuring out how much house you can really afford has always been important — but in today’s market of fluctuating mortgage rates and shifting home prices, it’s become essential. Many buyers are discovering that what once felt affordable may now stretch their budget. Here’s how to think about affordability today and what you can do to maximize your buying power.
Why Affordability Is Tighter Right Now
Mortgage rates have moved higher compared to recent lows, which can increase monthly payments quickly. For example, on a $400,000 loan, even a 1% rate increase can add hundreds to your monthly cost. Combine that with home prices that climbed over the past few years, and many buyers are rethinking their price range.
The Silver Lining: Buying Power Can Improve
It’s not all bad news. A few factors can make a noticeable difference:
Small Rate Changes Matter: Even a small improvement in your mortgage rate can boost what you can afford.
Market Adjustments: In some areas, home prices have leveled off or softened slightly, giving buyers more room to negotiate.
Loan Options: Programs like adjustable-rate mortgages (ARMs) or temporary rate buydowns can help lower payments initially.
Exploring all available loan options with a knowledgeable lender can reveal opportunities you might not know exist.
Calculating a Realistic Budget
A good starting point is to look at your total monthly budget — not just the sticker price on a home. Lenders typically consider your debt-to-income ratio (DTI), meaning how much of your monthly income goes to housing plus other debts. A common guideline is that your total monthly housing payment (including taxes, insurance, and HOA if applicable) should stay around 28–31% of your gross monthly income.
But these are just guidelines. Every situation is different, especially if you have student loans, variable income, or large savings reserves that could change the equation.
Why Timing Still Matters
If you’re on the fence about buying, keep in mind:
Waiting for lower rates could help — but home prices might rise again if demand increases.
Locking in a home now might mean slightly higher payments, but you can always refinance if rates improve.
Shopping during periods of softer demand may give you more negotiating power and seller concessions.
Bottom Line
Your affordability depends on more than just today’s rate — it’s a mix of your personal finances, local market conditions, and creative loan options. A quick affordability review with a lender can clarify your price range and help you shop confidently, even in a changing market.
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