Get ready to swap out those mindless Zillow scrolls is you’re serious about your house hunting hustle! There’s a whole world of difference between aimlessly browsing home listings for sale and getting down to brass tacks to figure out your real max home-buying purchase power. Taking those steps to stash away cash and dive into the market in CA? That’s like hitting turbo the turbo boost on your journey to becoming a homeowner! But hey, let’s not forget some of the really important items in between—saving up, strategizing, and scouting. The real magic happens by crunching those numbers to unveil just how much house you can truly snag on CA soil!

What often starts with casual musings, a glance at your bank statements, and maybe a casual conversation at the dinner table quickly changes to logistical and strategic thoughts about how to swing a mortgage payment, especially in CA where the purchase price is more than most other states. After you’ve got a number in mind that’s feasible — then it’s time to decide if you can truly afford that monthly payment or not and still maintain a lifestyle you can brag to your friends about. 

Luckily, working with a great loan officer, Aaron Knutson, and figuring out what your approximate interest rate, property taxes and homeowner’s insurance would be is a great starting point. Once you have that, your loan officer and a dozen different calculators across Google can easily crunch the numbers for you. Cali Mortgage can easily come up with some figures at no cost to you if you’re just playing around with numbers before contacting a professional to get the process started.

There are two main factors to consider when asking yourself how much house you can afford. One is how much monthly can you afford to pay towards a mortgage and the other is do you have the cash on hand (or coming) to fix what either needs to be fixed or you want to update. There’s not much worse than spending your hard-earned savings on a fixer-upper because it’s all you can qualify for and then not being able to make the improvements in a timely manner. 

EXAMPLE SCENARIO
While every home-buying situation is unique to the buyers, sellers, and the market — a few rules of thumb are good to follow. In general, most financially-savvy individuals advise to not spend more than 43% of your gross monthly income on home-related expenses. This includes your mortgage, property tax, homeowner insurance, utilities — everything. To make the math easier and for the sake of simplicity, take a yearly income of $100,000, whether between two people or individually is irrelevant in this case. With an annual income of $100,000, buyers should be aiming to spend no more than $3580.00 a month on their home mortgage or rent. Again, there are specific factors for every situation and that’s why it’s so important to discuss all of your options with your loan officer or mortgage broker before things get out of hand. 

Perhaps unsurprisingly, many do not follow the 43% “rule” and spend much more of their income on their housing situation — hence the term house-rich and cash-poor. Especially in metropolitan or coastal areas, homes are incredibly and increasingly expensive and many spend around 50% or more of their monthly income on housing costs of some sorts. The solace one can take if you’re in this boat, or about to be, is that if you’re paying an astronomical amount towards your mortgage in comparison to your monthly income, at least you’re paying towards something for yourself and increasing the equity you have in your home instead of renting and paying someone else’s mortgage. 

The Bottom Line 

There’s a lot to consider when deciding how much house you can afford and how much house you’re willing to keep a steady handle on. Factors like lifestyle, location, future plans and goals all come into play when making large financial decisions and buying a house is probably the biggest financial decision of them all. Get in touch with Aaron Knutson – Cali Mortgage to review your options before beginning your home buying search so we can make sure your in it to win it!