If You Can Afford Mortgage Payments, Does That Mean You Can Afford to Own a Home?

If you're dreaming of owning a house, it stands to reason that you've thought at least a little about how much a mortgage loan might cost you. But unfortunately, it can be easy to think that the costs of homeownership begin with a down payment and end with your monthly mortgage payments.

This was me the last time I bought a home (spoiler alert: It ended badly for me). I looked at what my monthly payments were going to be, saw that they weren't much higher (maybe $100 more) than the rent I was paying on an apartment, and assumed I could afford a house. Even if buying a home will leave you paying a lot more per month for a mortgage versus rent, you might forget about the other costs you'll need to cover. Let's take a closer look at those costs and consider how you might actually determine whether you can afford to buy a home.

What costs are homeowners responsible for?

In my life as a renter, I've found that there are degrees of landlord. Some will neglect their duties so egregiously that you must find a new place to live just 10 weeks after moving in. Others are super responsive and cover maintenance costs at the drop of a hat.

This variance also extends to how much money you'll need to spend as a renter. In most cases, however, as a renter, your financial obligations are most often just your monthly rent payments, along with a deposit when you move in (often amounting to a month or two of rent). You might need to pay a pet or cleaning deposit, which may or may not be refundable when you move out. And as a renter, it's also a stellar idea to get a renters insurance policy. They are not expensive, and will protect your belongings in the event of damage to your rental home -- remember that your landlord's homeowners policy won't cover your items.

If you're the homeowner, on the other hand, your costs are vast and wide. In addition to that down payment and your monthly mortgage costs, you'll generally have to cough up money for closing costs when you get your mortgage loan. You'll pay property taxes, and depending on where you live, they could be hefty.

You'll also be responsible for homeowners insurance and repairs/maintenance on your home, and if you're buying an older home (as I likely will be), those costs could be unpredictable and more expensive than you expect. The Ascent's research team found that in 2019, homeowners paid an average of $8,609 more than renters on housing costs just like these.

How can you tell if you can actually afford a home?

In the interest of going into homeownership with eyes wide open, I recently ran my own numbers through The Ascent's mortgage calculator. Based on educated guesses (as there's no way to tell for sure exactly where my costs will fall when I buy a home next year), I expect my monthly costs to double when I go from renter to homeowner.

I recommend that you do this same exercise and put the figures you come up with into a mortgage calculator to get an estimate of your costs:

• Check your credit score, as it will inform what mortgage rate you get -- rates are up right now, but the better your credit, the less you'll pay.
• See what homes are going for in the area you want to buy. Remember to consider your needs in a home, such as neighborhood, number of bedrooms, and beyond.
• It might be harder to estimate homeowners insurance rates, but do your best. Some states cost more than others. I recommend asking homeowner friends in your area.
• You might be able to estimate property taxes by checking for-sale properties, as they are sometimes included in the listing details for a particular house.
• Don't forget about budgeting for repairs and maintenance. It's safe to plan for at least 1% of your home's cost per year -- on a $200,000 home, that's $2,000. But if you can put aside more than this, all the better.

I hope I haven't burst your bubble about affording a home, but it's far better to consider all your potential costs before you sign on the dotted line. Do your own math, and make the most informed decision you can -- buying a house is a big, expensive deal.