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How Much Mortgage Can I Afford in San Diego?

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With the rising cost of living in San Diego, you might be wondering yourself, “how much can I afford in San Diego?” Of course, everyone’s answer is different. Many different factors go into what you can afford. Before you start browsing homes online and daydreaming, you should first nail down what you can afford in San Diego. After discovering how much you can afford, make sure to give the Wolf Real Estate Team a call to begin your search for a new home! We are happy to help you find your dream home in San Diego neighborhoods like South Park, Del Cerro, and San Carlos.

Gather Your Financial Information

what can you afford in san diego

In order to determine what you can afford, you will first need to gather all of your financial information together so it can be evaluated. This includes any monthly bills you pay, credit cards, loan payments, car payments, student loans and even your monthly Netflix bill. Next, you will need to gather recent W2s or paycheck stubs. Make sure to include all of the income you receive!

You will gather this information and take it to a mortgage lending company. One of the lenders there will run your credit, insert all of this information and give you your answer of how large of a loan you can qualify for. Just because you qualify for a loan of up to a million dollars doesn’t mean you should try to make that your spending budget. Having a loan that is pre-qualified will allow you to have a max budget for your home search.

Determine How Much You Would Be Comfortable Spending

You can use an online mortgage calculator to get a ballpark idea of how large of a mortgage you can qualify for in San Diego, but this doesn’t mean that you should choose a mortgage that high unless it makes complete financial sense to you. If you’re spending $2,000 a month on rent right now, budget out the max amount you would be able to spend on housing costs without pinching pennies. This will give you an idea of what your max budget should be that won’t compromise other areas of your life. Don’t put all of your money into a house, it’s always smart to still maintain a savings account because emergencies do happen!

Limit Yourself to no More than 30% of Your Income

If you’re short on time and want to just get an estimate for how much you could potentially spend on a mortgage, do this simple math equation. Take your pre-tax monthly income and multiply it by 30. Divide this number by 100. This answer gives you 30% of your monthly take-home income. This should be the max number you should spend on your mortgage. If multiple people are going to be paying for the mortgage, make sure to combine all of your incomes together.

Legal Limits on Lenders

When you go into a lending office to get pre-approved for your mortgage, you should know that lenders are not legally allowed to approve mortgages that exceed more than 35% of your monthly income. This is all thanks to the Mortgage Reform and Anit-Predatory Lending Act. It’s common for a lot of lenders to not even approve mortgages above 28% until the debt-to-income ratio, employment history, income and credit history is strong.

How to Expand Your Budget

Reduce Your Monthly Debt

When you decide that you want to buy a home in San Diego, if time isn’t of the essence and you have a decent savings account and a lot of debt in your name, it might be wise to start paying down that debt before your home search. The less debt you have, the more you can spend on a mortgage every month. This will allow you to expand how much you can afford in San Diego. Paying down your debt will not only give you a bigger mortgage, but it will raise up your credit score which can help with interest rates! This will help save you money every month on your mortgage which is great news!

Save for a Larger Down Payment

savings

Although FHA loans only require 3.5% down on a house, the larger your down payment is, the less money you will need to borrow from a lender. This will help you expand your budget and even lower your monthly cost! In addition, when you put less than 20% down on a house, you will need to pay for mortgage insurance. This can add a few hundred dollars to your monthly payment. Although saving even more money for a down payment on an expensive home can take a while, you’ll thank yourself in the long run.

Choose a More Affordable Neighborhood

Although this isn’t a way to expand your budget, this is a way to get more bang for your buck. Some neighborhoods are more affordable than others in San Diego. Before you begin your home search, make a list of everything you want in your neighborhood. Examples include good schools, walkability, low crime, central location, and quiet. Make a list of your wants and present this to your real estate agent. If they are San Diego locals like we are, they should be able to give you different options that you will be happy with!

Ready to Begin Your House Hunt?

Now that you know how much you can afford in San Diego and got a few pointers on how to expand your budget, it’s time for the fun! The home search! Give the Wolf Real Estate Team a call to find your dream home in San Diego. We are locals to San Diego and know the different neighborhoods like the back of our hands. Let us know exactly what you’re looking for and we will help you find it! Give us a call at 858-722-6847 or fill out our online form and we will get back to you.

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