Been Wondering, “What Kind of House Can I Afford?” We’ve Got Answers.
If you’ve been wondering, “what kind of house can I afford?” you’re not alone. From rising mortgage rates to home prices to inflation, it may seem like an impossible task to be able to afford a home in 2023. We are here to encourage you that there is always a way. There’s not much more “American Dream” than owning your own home, and it’s one of the smartest investments you can make in your lifetime. So let’s break it down.
Your Income
Your income, obviously, has a major role in the equation. But if you can afford rent, you can, most likely, afford a home. You’ve probably heard people say that renting is just throwing money away. This is because when you rent, your money isn’t paying you back in any way (besides having a roof over your head). When you own a home, you’re building equity with each mortgage payment. As you pay down your mortgage, and your home increases in value, you’re building equity. Woah, rabbitrail soapbox. Our apologies. But for real, if you want to understand equity more, take a look at this blog.
Mmmkay, back to your income. Income and priorities can also come hand-in-hand. If you have a lower salary but you’re ready to stop going out each weekend, stop getting your nails done twice a month and are open to a smaller starter home in the burbs, you may have no trouble paying that monthly mortgage payment. And, if you have a little nest egg you’ve built up for a downpayment, you may be surprised to find that your mortgage payment could be even lower than your current rent payment.
Image by Oleksandr Pidvalnyi from Pixabay
Mortgage Rates
With today’s mortgage rates, the “what kind of house can I afford?” question may have turned into, “Is it even smart to buy a house right now?” We get it. Mortgage rates have more than doubled in the past two years. However, they have hovered in the 6-7% range steadily for close to a year. And if we may make one more comment about renting…consider this: renting is like paying 100% interest with no return on investment. So, don’t let a current, higher mortgage rate stop you because you never know when they’ll keep rising. And, why not invest in a home you love now, and refinance later when rates drop again (because they’re bound to)?
House Prices
As we all are well aware by now, the year of the blasted pandemic brought record-low mortgage rates, on top of record-low inventory, which meant high buyer demand and even higher home prices. They all just couldn’t balance each other out. But, sadly, those record-low mortgage rates couldn’t stay around forever, and we’re now seeing more inventory, a little bit lower buyer demand, and all this means that the appreciation of house prices is slowing down. This is good news for buyers, and it helps to even things out with the higher mortgage rates we’re seeing.
Another thing to consider when asking the question of “what kind of house can I afford?” is to consider the market you live in. Although we’re seeing some home prices decline in areas of the US, other markets are still seeing price increases! It all depends on what’s going on in your local market.
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Choose the Right Agent
Everything we’ve discussed above is why it’s important to have a trusted agent in your market that is familiar with each area of the metro (if it’s a bigger city) and even each neighborhood.
ABC tells us that over half a million people have moved out of California in the past two years. They’re looking for a quality of life that can’t be found with their wages and the home prices there. So if you’re moving out of state, it’s even more important that you can trust the agent you’ve chosen to move your family to the right neighborhood and into the right house you can afford.
If you’re a first-time home buyer, all of this can be a bit overwhelming. It is easy to stay with what you know and just keep giving someone else your hundreds of dollars each month. But if you’re ready to at least have a conversation about it, reach out to one of our expert real estate professionals who can help walk you through the details.