According to GeekWire, the median home price in Seattle hit a staggering $819,500 in March – the highest it’s ever been. For many borrowers, even if they are approved for that much, it’s more than they can reasonably afford.

Take a moment to crunch your own numbers to determine how much you feel comfortable borrowing. Because while a lender may allow you to borrow the maximum available, it doesn’t always mean you should.

Before you go house hunting, ask yourself the following questions so you can make sure you’re looking at homes within your price range.


Calculate Your TRUE Monthly Expenses

When your lender approves you for a mortgage, the look at your debt-to-income ratio (DTI). This ratio measures the difference between how much money you bring home and your monthly financial obligations (such as other monthly loan payments, credit card bills and car payments).

It doesn’t take into account what is considered variable spending. Items like your cellphone bill, gym membership, and dinner dates aren’t included in this ratio. But, they add up.

Make a list of all the items on which you spend money and record how much they cost. Don’t forget groceries, gas, and your 520 toll. Don’t overlook your daily coffee fix, happy hour with the gang or your Hulu subscription.

Then add up all of those expenses and the monthly financial obligations considered in your DTI. That sum is how much it costs to maintain your current lifestyle before you’ve even thought about paying rent or making a mortgage payment.

How much is left over for your basic living expenses? You’ll also want to save some extra for a rainy-day fund.


Keep Your Mortgage Payment to 30% of your Take-Home Pay

After you’ve crunched the numbers are you rethinking just how much you want to spend? You’re not alone. For most homeowners, keeping their monthly mortgage payment to no more than 30% of their monthly take-home pay allows for a comfortable lifestyle.

Depending your spending habits and savings goals, you might slide up or down this scale slightly. The idea is to be realistic with yourself. Being house-rich and cash poor isn’t a lifestyle most individuals enjoy. If being able to go out to dinner with friends or take a vacation is a priority, make sure you’ve given yourself enough of a financial buffer to make that possible.

The first step is to get preapproved. Talk to Dan to start planning today.