How Much House Can You Afford in Ventura County? Don’t Max Out Your Pre-Approval
Your lender tells you what you qualify for. That does not mean you have to buy at that number. I am a Ventura County Realtor and a licensed mortgage loan originator, and this is a rule of thumb I share with every buyer.
Quick answer: You do not have to buy at the top of your pre-approval. Find the most you qualify for, work back to a monthly payment you are comfortable with, and shop at that price. Leave breathing room for the costs of owning a home, and search a little above your number.
Do you have to buy at your highest pre-approval number?
No. A lender tells you the most they say you can borrow. Maybe the monthly payment at that price is more than you want to take on. Or maybe you do not need that much house. If you do not need that much buying power, you do not have to use it.
What does that look like in an example?
For illustration only: say you qualify for $800,000, and the monthly payment at that price would put you in a financial strain. Look at homes at $700,000 or $650,000 instead. If you do not need that much space, look at condos, townhomes or smaller homes. The monthly payment at $650,000 may be much easier to live with.
Every buyer is different. Some people do need the max, and that is fine. But if you do not need it, do not do it.
How do you find a monthly payment you are comfortable with?
Work back from your max:
- Find your max. Ask your lender for the highest price you qualify for.
- Pick your payment. Decide what monthly payment you would be totally comfortable with. It is probably not the one at the top.
- Shop at the price that matches it, not at the max.
When you make an offer, ask for a pre-approval letter at your offer price, not your max.
Why leave breathing room in your payment?
Because a new home comes with new costs: appliances, repairs, and your supplemental property tax bill.
Helpful note
What is a supplemental tax bill?
In California, a home is reassessed when it sells. The supplemental bill is the tax on the difference between the old assessed value and the new one. It comes in addition to your regular tax bill, and it is mailed to you even if your lender collects your property taxes.
The California State Board of Equalization explains it on its supplemental assessment page.
It is better to have breathing room every month than to go all in and hope nothing breaks.
Why search a little above your number?
One more tip. Say your number is $650,000. When you search online, hopefully on my home search, do not cut off at $650,000. Add $15,000 to $25,000, so you see homes up to $675,000.
Why? Some homes are listed higher than buyers will pay, and they sit. If a home has been on the market 45 to 60 days, it may be worth offering the number you want. There is no guarantee the seller says yes, but you will see homes a strict search would hide.
The short version
Your pre-approval is a ceiling, not a goal. Work back to a payment you are comfortable with, shop at that price, leave room for surprise costs, and search a little above your number.
If you want to buy, sell or finance a home in Ventura County, or anywhere in California, consultations are free. I know both sides, the house and the loan, and you are always free to choose any lender. Send me a message. I am happy to help, so work with me.
Common questions
Should I buy a house at my maximum pre-approval amount?
No, you do not have to buy at your maximum pre-approval amount. Your pre-approval is the most a lender says you qualify for, not a target. Work back to a monthly payment you are comfortable with and shop at that price, so you keep breathing room for new costs.
How do I figure out how much house I can afford?
Start with the highest price you qualify for, then decide what monthly payment you are truly comfortable with. Ask your lender what price matches that payment. It is probably lower than your max. That price, not the max, is the one to shop at.
What costs come up after you buy a house?
Common costs after you buy a house include appliances that need replacing, repairs, and the supplemental property tax bill. In California the supplemental bill comes in addition to the regular yearly bill, and it is mailed to you even if your lender collects your taxes.
Should I search for homes above my budget?
Searching a little above your budget, about $15,000 to $25,000 in this example, can show you homes that have been on the market a while. Some of them may come down to the number you want. There is no guarantee a seller accepts a lower offer.
Is a pre-approval a guarantee that I will get the loan?
No, a pre-approval is not a loan approval. Final approval depends on underwriting, the appraisal and your qualifications. Your pre-approval gives you a clear idea of the most you can borrow, so you can shop with a number in mind and choose a lower price if it fits you better.
Sources
- California State Board of Equalization: Supplemental Assessment
Program details described here reflect lender guidelines and are subject to change without notice. Guidelines vary between versions of these programs and between lenders. This is general information, not a loan commitment, an offer to lend, or a guarantee of any rate, term, or approval. Every file is different. Speak with a licensed loan officer about your specific situation.
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