How Much House Can I Afford?

As your local Thousand Oaks Realtor and real estate team, we often get asked, “how much house do you think I can afford?” Prior to starting your house hunting process, we highly recommend getting preapproved for a lender. We work with some of the most excellent lenders around and would be happy to point you in the right direction. We also understand how confusing the preapproval process can be. In general, things that you should take into account when considering getting preapproved for a home loan are: your monthly income, your monthly debt, savings for your down payment, and potential reserves available.
The best rule of thumb to follow is to have three months of payments in reserve. You will also need to consider your debt-to-income ratio. What is a debt-to-income ratio? This is a ratio based your monthly income in comparison to your monthly debts and lenders will use it to help determine how much home you can comfortably afford. The better your credit is the higher percentage certain lenders will allow your debt-to-income ratio to be. Typically, up to 45% debt-to-income is allowed. What this looks like logistically is if your monthly income is $5,000 you will multiply that by .45 to determine what you can afford monthly. In this example the answer is $2,250. This number needs to include your mortgage principal, interest, taxes, and monthly debts.
In general, what you can reasonably afford begins and ends with mortgage interest rates. As an experienced Thousand Oaks Realtor and real estate team, we understand how important interest rates are when it comes to affordability. Today, 30-year fixed interest rates are set at 6.03%. This is notably higher than this same time last year. If you have any specific questions about how interest rates have impacted your family’s buying power, we would be happy to help.