What does it mean to be able to “afford” a home? Certainly, you’ll need enough money to buy the place, even if that means getting help from a mortgage lender. But what about all the other costs associated with homeownership—everything from taxes and insurance to HOA fees and having the cash on hand to handle repairs?
These “invisible” costs can easily add $500 to $1,500 or more to your monthly housing expense—the difference between comfortable homeownership and being house-poor. Suddenly, you’re wondering if this affordable home is something you can afford at all.
Here’s how to calculate what you’ll really pay when you buy a home, what costs you can actually negotiate or reduce to get to a more comfortable regular payment, and how to decide whether you should buy now or keep renting until you have more financial cushion.
The bottom line upfront: Can you afford this home?
It’s important to be honest with yourself when buying a home, and that means understanding the true costs of affordability when it comes to homeownership.
“One of the most important things I tell buyers is that home affordability goes far beyond the mortgage payment,” says Derrick Christy, CEO of ApprovedMortgage.com. “The total cost of homeownership includes upfront closing costs as well as ongoing property taxes, homeowners insurance, HOA fees when applicable, and regular maintenance.”
Here’s what that means in dollar amounts: Beyond your mortgage payment, you’ll pay property taxes (a few hundred to several thousand monthly, depending on location), homeowners insurance ($100 to $300-plus monthly, more in high-risk areas), and HOA or condo fees if applicable ($0 to $800-plus monthly). If you put down less than 20%, add private mortgage insurance—roughly $100 to $200 monthly on a $300,000 mortgage.
Then there are the costs of maintaining the home, which don’t have an exact price tag.
“Maintenance costs vary significantly based on the age of the home and the age of its major systems, which is why a professional home inspection is a best practice,” says Christy. “An inspection provides a realistic indication of upcoming repair or replacement needs and can uncover everything from deferred maintenance to larger issues such as roof damage caused by wind or hail.”
Many of these costs are what you’ll face immediately, but there will be others you’ll incur over the life of owning the home, including repairs, furnishings, and updates that can have a positive impact on the sale price if and when it comes time to sell.
If the upfront costs seem unaffordable, then the home itself is unaffordable—no way around it. The last thing you’ll want to do upon moving into your new home is default on your mortgage, or find that you don’t have the money to fix a broken HVAC system.
That being said, some of the costs mentioned above aren’t set in stone and can be maneuvered into a more palatable position.
Costs you can actually control
Some homeownership costs are negotiable. Others aren’t. Knowing the difference can save you thousands—or help you recognize when a property simply costs too much. The first place to start is with your insurance.
“Get at least three quotes. Work with an independent insurance broker who can shop multiple carriers,” says Steven Parangi, a licensed mortgage loan originator at Alpine Mortgage Services. “I’ve seen buyers save $100 to $200 per month just by shopping around.”
You can also bundle home and auto policies for additional discounts, or raise your deductible to lower monthly premiums.
Property taxes should be your next target. Though you can’t change your tax rate, you can challenge an inflated valuation. Research comparable sales in your neighborhood. If your home’s assessed value is significantly higher than similar properties, file an appeal.
“Most homeowners don’t realize property tax assessments can be challenged,” Parangi says. “I’ve advised clients who’ve saved thousands annually by presenting comps that showed their assessment was inflated.”
Finally, don’t skip your inspection—it can reveal issues that will actually save you money, rather than giving you more to worry about. If your inspection reveals an aging roof, dying HVAC system, or deferred maintenance, ask for a closing credit.
“Sellers often prefer giving you $10,000 off the purchase price rather than managing repairs themselves,” Parangi notes. “That credit effectively buys you time and a cushion for inevitable maintenance costs.”
Don’t forget to explore your loan options
Beyond negotiating individual costs, your loan structure itself offers opportunities to reduce monthly expenses. Considering the biggest chunk of your expenses will likely be your mortgage, finding ways to lower this number can have a huge impact.
Shopping around for a mortgage from different lenders is always a good move, but don’t overlook loan products that can work specifically for you. For example, VA loans offer no PMI and no down payment for eligible veterans, and some states and cities offer grants for first-time buyers.
If your loan officer isn’t walking you through every option—even the ones that require a bit more legwork—then you’re not seeing the full picture of what’s available to you.
Should you buy or keep renting?
After calculating your true costs and exploring what’s negotiable, you’re left with a decision: Move forward or wait.
You can make it work if you still have six months of expenses saved after closing, your total housing costs stay below 28% of gross income (the standard lending guideline), you can absorb a major unexpected expense without derailing your finances, and you’re planning to stay at least five years.
Walk away if your savings are nearly depleted after closing, you’re counting on future raises to make it work, or every “what if” scenario—job loss, major repair, property tax increase—puts you in crisis mode.
Renting for another year or two isn’t “throwing money away.” It’s buying time to build a proper financial cushion.
“Even an extra six months of expenses set aside can turn homeownership from stressful to manageable,” Parangi says. “It gives homeowners the ability to handle repairs without credit cards, panic, or regret.”
Christy agrees: “Setting aside a monthly maintenance reserve or maintaining a percentage of the home’s value for repairs and updates helps ensure that owning a home remains a long-term investment rather than a financial strain.”
If you’re stretched thin now, you’ll be in crisis mode when the inevitable happens. Better to wait and buy with confidence than to buy now and spend the foreseeable future being financially stressed.