How Much Home Can You Afford in Today’s Market?
Why Affordability Feels Tighter Right Now
If you’ve looked at homes recently and felt your monthly payment creeping up, you’re not imagining things. Mortgage rates have moved higher compared to the historic lows of the past few years, while home prices in many areas have held steady or grown. The combination has made monthly payments larger, even when the purchase price doesn’t change.
For example, a $400,000 home with a 3% interest rate just a few years ago might have been affordable for many buyers. At today’s rates, that same home could cost hundreds more per month.
Key Factors That Impact How Much Home You Can Afford
Mortgage Rate: Even a small drop in your rate — like 0.25% — can free up enough monthly budget to afford tens of thousands more in home price.
Down Payment: A larger down payment lowers your loan amount, which can reduce both your monthly payment and the need for mortgage insurance.
Debt-to-Income Ratio: Lenders look at your monthly debts compared to your income. Paying down high-interest debts can boost your buying power.
Property Taxes & Insurance: These vary widely by location and can change the monthly number more than people expect.
Loan Program: FHA, VA, USDA, or conventional loans each have different requirements and costs — choosing the right one can make a big difference.
Today’s Market: A Mixed Bag for Buyers
The good news is that while rates remain higher than the ultra-low levels of a few years ago, home price growth has cooled in many markets. According to CoreLogic (https://www.corelogic.com), national home price appreciation has slowed, and some areas are even seeing small price declines. This means buyers may have a chance to negotiate or find homes that were out of reach last year.
At the same time, small improvements in mortgage terms — like buying points to lower your interest rate or choosing a different loan type — can noticeably increase how much you can afford.
Smart Moves for Today’s Buyers
Get Pre-Approved Early: Knowing your exact buying power upfront helps you shop with confidence and avoid surprises.
Ask About Rate Options: Some buyers use temporary buydowns or permanent points to reduce their rate and monthly payment.
Compare Loan Programs: The right program can save you hundreds per month or help you qualify for more home.
Watch Local Market Trends: Prices aren’t moving the same way everywhere. Your market might be softening, giving you leverage.
Bottom Line
Affordability is tighter than it was a few years ago, but you still have options. The right loan structure, an informed strategy, and a close look at your numbers can open the door to homes you might not realize you can afford. If you’re considering buying this year, now’s the time to talk with a mortgage professional about your exact buying power.
Sources:
CoreLogic – https://www.corelogic.com
National Association of Realtors – https://www.nar.realtor
U.S. Census Bureau – https://www.census.gov
