Figuring out how much house you can afford in Washington State starts with three things: what monthly payment feels comfortable for your budget, what a lender may let you qualify for, and how much cash you can bring to closing for your down payment and other upfront costs.
Those numbers are related, but they are not the same. A home price that looks manageable on paper might still feel too tight month to month. And a loan amount you qualify for might be more than you actually want to spend. Here’s how to think through affordability in a practical way.
These are two slightly different questions, and we will address them both in detail.
At a glance: Financial experts recommend keeping your combined housing costs at or below 33% of your monthly income. Some set the bar even lower. Mortgage lenders (and even some government housing agencies) prefer borrowers to have a total debt-to-income ratio (DTI) no higher than 43%. Your DTI plays a key role in your ability to not only secure a mortgage, but get approved at a lower interest rate, which can save you a ton of money over the life of your loan.
But these are just general “rules” that might not apply to your particular situation. You’ll want to create a specific home-buying budget for yourself. Here’s how to do it.
The important question is, how much house can you buy in Washington State without sacrificing your quality of life? You’ll want to determine this number before you even start house hunting. Fortunately, the math is pretty simple.
To begin, compare your net monthly income, or “take-home pay,” to your non-housing monthly expenses. (You only want to include your non-housing expenses at this point, because you’re trying to determine how much you’ll have left over for your housing payments going forward.)
Next, subtract these recurring monthly expenses from your take-home pay. The remainder is what you have available to put toward a monthly mortgage payment. Of course, you probably don’t want to use the entire remainder for housing costs. But this does give you a starting point for your monthly home-buying budget.
It’s also wise to keep some emergency funds in the bank for unplanned expenses, income loss, or other financial hardships. Financial experts recommend keeping three to six months of living expenses in the bank, for this very reason. So be sure to factor this in when determining how much house you can afford to buy.
When estimating affordability, don’t look at principal and interest alone. A true monthly housing payment can include several costs that affect whether a home actually fits your budget.
In addition to principal and interest, buyers should also account for property taxes, homeowners insurance, HOA dues if the property has them, and mortgage insurance if it applies to the loan. Some buyers also set aside a monthly maintenance cushion in their personal budget, even if that amount is not part of the lender’s mortgage payment calculation.
This is an important distinction. A home might seem affordable when you look only at the loan payment, but the full monthly housing cost can be meaningfully higher once these other items are added in. If you want a more realistic answer to the question, “How much house can I afford in Washington State?” use the full housing payment rather than just the base mortgage amount.
When buying a home in Washington State, you also have to consider your down payment and closing costs. These are up-front expenses that can affect your buying power.
Your down payment might fall between 3% and 20% of the purchase price, depending on the type of home loan you use and other factors. Military members can often qualify for 100% financing, through the VA loan program. Closing costs in Washington State tend to average between 1% to 3% of the purchase price, though they can be higher than this in some cases.
The point is, there are both up-front and long-term costs to consider when buying a home in Washington State. You must look at both of these factors to determine how much house you can afford.
Your debt-to-income ratio will also affect how much of a home you can buy. Mortgage lenders use this ratio to ensure you’re not taking on too much debt, with the addition of the home loan.
The debt-to-income ratio, or DTI, compares a borrower’s debts and income. Example: A person who grosses $4,000 per month and spends $1,500 on total monthly debts would have a DTI ratio of 37.5% (because 1500 / 4000 = .375, or 37.5%).
These days, most mortgage lenders prefer borrowers to have a total or “back-end” DTI no higher than 43%. But exceptions are often made for well-qualified borrowers with strong credit histories, significant cash reserves in the bank, etc.
The point is, if your back-end DTI ratio is a lot higher than 43%, you might have a harder time qualifying for a mortgage loan.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
A practical answer starts with three numbers: the monthly housing payment that feels comfortable for your budget, the loan amount a lender may let you qualify for, and the cash you can bring to closing for your down payment and other upfront costs. Those numbers are related, but they are not the same, so affordability should be based on both your monthly budget and your qualifying profile.
Salary is only one part of the equation. Lenders also look at your debts, and buyers should also consider what monthly payment actually fits their lifestyle. A common guideline is to keep combined housing costs at or below 33% of monthly income, but a personal budget is usually a better tool than a general rule.
For your personal home-buying budget, use take-home pay and compare it to your recurring non-housing expenses to see what is left for housing. Lenders, however, commonly use gross income when evaluating debt-to-income ratios and mortgage qualification.
Look beyond principal and interest. A more realistic monthly housing budget can include property taxes, homeowners insurance, HOA dues if the property has them, and mortgage insurance if it applies. Many buyers also add a maintenance cushion to their personal budget even if it is not part of the lender’s payment calculation.
They affect your buying power because they are upfront costs you need to cover at closing. The down payment might range from 3% to 20% depending on the loan type and other factors, and closing costs in Washington State often average about 1% to 3% of the purchase price. A home may seem affordable month to month but still be out of reach if cash needed upfront is too high.
Preapproval is mainly about how much you may qualify to borrow based on lender guidelines. That number does not always match what feels comfortable for your monthly budget. Many buyers choose to spend less than their maximum approved amount so they can preserve flexibility in their finances.
Many mortgage lenders prefer a total, or back-end, debt-to-income ratio no higher than 43%. Exceptions are sometimes made for well-qualified borrowers with strong credit histories or significant cash reserves, but a higher ratio can make qualifying harder.
It may still be possible in some cases, but it can be more difficult. Lenders often view a back-end debt-to-income ratio above 43% as a higher-risk profile, although exceptions may be made for borrowers with strong compensating factors such as good credit or substantial reserves.
Possibly, but salary alone does not give a complete answer. Affordability depends on your existing debts, the full monthly housing payment, your down payment, closing costs, and how much of your income you want to devote to housing. A buyer with low debt and strong savings may be in a different position than someone with the same salary and higher monthly obligations.
You may improve affordability by reducing other recurring debts, choosing a lower-priced home, increasing your down payment if possible, or targeting a payment level that leaves room in your budget for savings and emergencies. It is also wise to maintain emergency funds equal to roughly three to six months of living expenses.
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