If you're thinking about buying a home in Montgomery County, Maryland, you've probably asked yourself the same question almost every buyer asks:
"How much house can I actually afford?"
And here's the problem: the answer isn't simply, "Whatever the bank says you qualify for."
There is a big difference between qualifying for a mortgage and being comfortable making the payment every month.
That's especially important here in Montgomery County, where home prices can vary dramatically depending on whether you're looking in Gaithersburg, Germantown, Damascus, Rockville, Silver Spring, Bethesda, Potomac, Olney, Brookeville, Clarksburg, Montgomery Village, Derwood, North Bethesda, Kensington, Takoma Park, Poolesville, Chevy Chase, Burtonsville, Laytonsville, or Sandy Spring.
The goal isn't to buy the most expensive house a lender will approve.
The goal is to buy a home you love without making your mortgage payment the thing you love the least.
One of the biggest mistakes buyers make is starting with a price:
"We want to stay under $600,000."
That's a good starting point, but it doesn't tell the whole story.
Two $600,000 homes can have very different monthly payments depending on:
That's why I like to work backward.
What monthly payment feels comfortable for you?
Then we can figure out what purchase price makes sense.
Let's say we're looking at several different household incomes.
These are illustrative examples, not loan approvals, because everyone's debts, credit, down payment and taxes are different.
At $75,000 per year, gross monthly income is about $6,250.
A buyer at this income level may want to focus on keeping their total housing payment somewhere around the $1,900–$2,200/month range, depending on their other debts and financial goals.
That could potentially put them in a much different price range than someone making $150,000.
And that's okay.
The goal isn't to stretch just because you can.
Gross monthly income is approximately $8,333.
A comfortable target might be somewhere around $2,500–$2,900/month, depending on the buyer's overall financial picture.
That could open up opportunities in places like:
Germantown, Gaithersburg, Montgomery Village, Damascus, Clarksburg, Derwood and parts of Silver Spring.
And remember — Montgomery County isn't one giant price tag.
There are pockets of the county where your dollar can go considerably farther.
Now we're at approximately $12,500/month in gross income.
A buyer earning $150,000 may have considerably more flexibility, potentially looking at a housing payment around $3,500–$4,200/month, depending on debts and other expenses.
That can open the door to a much broader portion of Montgomery County, including areas such as:
Rockville, Olney, North Bethesda, Kensington, Potomac, Bethesda and Chevy Chase, depending on the specific property and financing.
But again, qualifying for a higher payment doesn't mean you should automatically take it.
Your mortgage isn't your only monthly expense.
You still have:
Car payments.
Student loans.
Daycare.
Utilities.
Groceries.
Home repairs.
College savings.
Vacations.
The occasional "why does the house need a new water heater?" expense.
And then there's the dog who apparently believes the backyard landscaping is their personal excavation project.
So when I talk to buyers about affordability, I don't just want to know:
"What can you qualify for?"
I want to know:
"What payment allows you to still enjoy your life?"
That's a much better question.
