How Much House Can I Really Afford?

Let me clear something up right out of the gate, because this mistake ruins more buyers than bad inspections ever will: the maximum price a lender approves you for does NOT mean you can afford that house.

I’ve watched this play out for 30 years across Roseville, Sacramento, and Chico. Buyers get a shiny pre-approval letter, see a big number at the top, and assume that’s their safe zone. It isn’t. It’s the lender’s risk tolerance — not your lifestyle budget.

If you remember nothing else from this article, remember this: lenders approve based on formulas. You live based on cash flow.

There’s an affordability calculator at the bottom of this page. It’s not here to tell you what you can buy. It’s here to show you what you can buy and still sleep at night.

Why the Bank’s Number and Your Real Number Are Not the Same

Lenders don’t care if you like eating out, taking trips, saving for retirement, or helping your kids with college. They care whether your debt fits inside a box.

That box is usually defined by debt-to-income ratios. If your mortgage payment plus other debts stay under a certain percentage of your gross income, the bank is satisfied. Whether you’re miserable afterward is not part of the calculation.

I’ve had buyers approved for payments that left them with a few hundred dollars a month after necessities. Technically approved. Practically trapped.

That’s how people become house poor — not because they bought irresponsibly, but because they trusted the wrong number.

Affordability Is About Residual Income, Not Ratios

Here’s how I size up affordability when I’m protecting a client.

After your mortgage payment, taxes, insurance, HOA fees, utilities, car payments, groceries, and basic living costs… what’s left?

That leftover money — your residual income — is what actually determines whether a house fits your life. Not a percentage. Not a rule of thumb. Real dollars left over at the end of the month.

If buying a house means:

• You stop saving
• You avoid repairs because you’re stretched
• You panic every time rates, insurance, or taxes change

…then the house was never affordable, no matter what the bank said.

The Dangerous Comfort of “But I Was Approved”

I’ve had this conversation more times than I can count:

“Robert, we were approved for $850,000.”

My response is always the same: “Great. Do you want to live at $850,000?”

Approval means the lender believes you can make the payment on paper. It does not mean:

• You’ll enjoy your lifestyle
• You’ll handle emergencies easily
• You’ll be comfortable when costs rise

And costs always rise.

The Hidden Costs Buyers Forget to Budget For

Most buyers calculate principal and interest and stop there. That’s a mistake.

Real monthly ownership looks like:

• Mortgage principal and interest
• Property taxes
• Homeowners insurance
• HOA dues (if applicable)
• Utilities that cost more in a larger home
• Maintenance and repairs

I’ve seen buyers move into a house they “could afford” and immediately realize their utility bills doubled. Nobody warned them. The lender didn’t care.

Affordability calculators that ignore these items are fantasy machines. That’s why the calculator at the bottom of this article forces you to include them.

Why a Smaller House Often Feels Like a Bigger Win

Some of the happiest homeowners I know bought less than they were approved for.

They travel. They save. They upgrade on their own timeline instead of on credit. They don’t panic when the water heater dies.

Meanwhile, I’ve seen buyers max out approvals and spend the next five years stressed, skipping vacations, delaying repairs, and quietly regretting the decision.

A house that leaves you breathing room will outperform a bigger house that drains you. Every time.

Hot Markets Don’t Change Math — They Test Discipline

In competitive markets, buyers start bending their own rules.

“Just this once.” “We’ll figure it out later.” “Our income will go up.”

Sometimes income does go up. Sometimes it doesn’t.

What I’ve learned is this: markets don’t make houses affordable or unaffordable. They expose whether buyers are willing to abandon logic under pressure.

If you can only afford a home by assuming everything goes right for the next 10 years, you’re gambling — not buying.

The Question Buyers Should Be Asking Instead

Stop asking: “How much house can I afford?”

Start asking: “What monthly payment lets me live the life I want after closing?”

Once you know that number, the house price becomes a math problem — not an emotional one.

The calculator below is built around that philosophy. It works backward from lifestyle, not forward from lender limits.

Why Residual Income Is Your Safety Net

Residual income is what protects you when:

• Insurance jumps
• Property taxes increase
• A job changes
• A roof fails

If your budget only works when nothing goes wrong, it doesn’t work.

Buying a house should reduce anxiety over time, not increase it. That only happens when your payment leaves room for life.

Use the Calculator — Then Subtract

When you reach the affordability calculator at the bottom of this page, here’s my advice:

Take the number it gives you. Then step back.

Ask yourself:

• Can I still save?
• Can I handle repairs?
• Can I enjoy my life?

If the answer isn’t a confident yes, adjust downward. That’s not fear. That’s wisdom.

The Hard Truth

The bank’s approval is not a green light to spend. It’s a ceiling.

Your real affordability lives well below it — in the space where your lifestyle, savings, and sanity still exist.

Buy the house that supports your life, not the one that consumes it.

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Home Affordability Calculator

This tool shows a real home's value you can afford basing on your monthly expenses and net income. Use your actual monthly averages for best results.