Can You Really Afford That Home?

What the bank won’t tell you, and how to know for sure

My wife and I are in the middle of house hunting right now, and I’ll be honest, it’s been an eye-opening experience.

Like many buyers, we received a pre-approval letter that told us what we “could afford.” But that number didn’t reflect our values, lifestyle, or long-term financial goals. It simply reflected what a lender was willing to give us based on their formula.

The truth is:

Just because the bank says you can borrow a certain amount doesn’t mean you should.

The Risk of Being “House Rich, Cash Poor”

Too many people buy the most expensive home they can, and it often backfires. On paper, they qualify, but in reality, they’re stretched way too thin:

• No breathing room in their monthly budget

• No money left for savings or investing

• No freedom to enjoy life outside their house

Yes, they “own a nice home.” But at what cost?

The Problem With Pre-Approval Letters

When a bank pre-approves you for a mortgage, they’re using one metric: your debt-to-income ratio. That’s it.

What they don’t know is:

• Your long-term savings goals

• How much you want to spend on travel or hobbies

• If you're planning for childcare or college

• Whether you want to retire early or switch careers

They don’t see your life or the things you want to accomplish. And that’s why the decision has to be based on your numbers, not theirs.

Reverse-Engineer Your Budget

A better way to determine what you can afford is to work backward from your lifestyle.

Let’s say your net (after-tax) income is $10,000/month, and you want housing to take up no more than 30% of your income (a good rule of thumb to try and follow).

That gives you a target of $3,000/month for all housing costs.

Now subtract property taxes, insurance, and HOA fees; let’s say that’s $1,000. That leaves $2,000/month for the mortgage itself, which might only support a $300,000 loan in this current interest rate environment.

Compare that to your much higher mortgage pre-approval, and you’ll see how big the gap is.

The Hidden Costs of Homeownership

Buying a home isn’t just about the mortgage payment. There are ongoing expenses that many buyers overlook:

• Property taxes (and they often go up annually)

• Homeowners insurance

• Maintenance and repairs (a good rule: ~1% of your home’s value per year)

• Utilities and upgrades (furniture, blinds, landscaping, etc.)

Pro tip: Add 10–15% to your estimated monthly housing cost to account for the unexpected. This gives you a cushion and should help to reduce financial stress.

Buy Comfortably, Not Maximally

At the end of the day, the smartest move isn’t to stretch for the biggest house you can technically afford. It’s to buy a home that fits comfortably within your life and priorities.

What does that look like?

• A monthly payment that doesn’t cause stress

• Flexibility to enjoy life, not just pay bills

• Room to save and invest for your future

The goal isn’t to max out your budget; it’s to buy a home that supports your life, not restricts it.

Ready to Run the Numbers?

Buying a home is one of the biggest financial decisions you’ll ever make, and it doesn't need to be made alone.

If you or someone you know is thinking about buying or wants to make sure a potential purchase fits within your/their bigger financial picture, I’d be happy to have a conversation.

Message me directly or book a strategy session here