How do you know if a house is too expensive for you in Colorado Springs? The Colorado Springs real estate market continues to be competitive, with home prices that have many potential buyers wondering if they can truly afford their dream home. While finding the perfect property is exciting, it’s crucial to ensure your investment doesn’t become a financial burden.

In this blog post, Colorado Springs real estate expert Barb Schlinker and the professionals at Your Home Sold Guaranteed Realty - Barb Has the Buyers Team will discuss how to know if a house is too expensive for you.

To know if a house is too expensive for you, you should follow financial guidelines like the 28/36 rule, which states that housing costs should be under 28% of your gross income. Other signs are if it surpasses your lender’s pre-qualification amount, or would leave you with insufficient funds for other essential expenses, savings, and financial goals after making your monthly payment.

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing!

Key Takeaways:

• Use financial ratios like the 28/36 rule to determine your housing budget – housing costs should be under 28% of your gross monthly income, and total debt payments should remain below 36-43%.
• To calculate beyond affordability, look beyond the mortgage payment to include property taxes, homeowners’ insurance, HOA fees, maintenance costs, and potential interest rate changes.
• Consider lifestyle impacts – if buying a particular home requires significant sacrifices to your current lifestyle or prevents saving for other financial goals, it may be too expensive.
• Get pre-qualified with a lender to establish a realistic price ceiling before beginning your home search. That way, you can avoid emotional attachment to properties beyond your means.

How Do You Know If a House Is Too Expensive For You?

To know if a house is too expensive for you in Colorado Springs, several financial guidelines can help. The most common is the 28/36 rule, which suggests that your monthly housing expenses—including mortgage payments, property taxes, insurance, and HOA fees—should not exceed 28% of your gross monthly income.

On top of that, your total monthly debt payments, including your mortgage and other obligations like car loans and credit cards, should stay below 36-43% of your gross income.

For example, if your household earns $100,000 annually ($8,333 monthly), your housing expenses should ideally stay under $2,333 per month (28%), and your total debt payments should remain below $3,000-$3,583 per month (36-43%).

Exceeding these ratios significantly increases your risk of becoming “house poor” – having little money left after paying housing expenses. Colorado Springs real estate expert Barb Schlinker explains,

“One of the biggest mistakes I see first-time homebuyers make is focusing solely on the mortgage payment without factoring in all the additional costs of homeownership. When you’re calculating affordability, you need to include property taxes, homeowners insurance, possible HOA dues, and setting aside 1-2% of the home’s value annually for maintenance and repairs.”

What is the Pre-Approval Process?

Getting pre-approved for a mortgage before house hunting is crucial for understanding your price range. During this process, lenders will review your income, credit history, existing debts, and available down payment. Based on that information, they will determine how much they’re willing to lend you.

However, just because a lender approves you for a certain amount doesn’t mean you should spend that much. Lenders use generic formulas that may not account for your unique lifestyle, financial goals, or comfort with financial risk.

Barb Schlinker adds,

“I always advise my clients that the amount you’re qualified for and the amount you should actually spend can be very different numbers. You need to consider your other financial goals—retirement savings, college funds for children, travel plans, or just maintaining your current lifestyle. Sometimes the smartest decision is purchasing below your maximum qualification.”

What are the Signs a Colorado Springs Home is Too Expensive for You?

Several warning signs indicate a house may stretch your budget too thin:

• Monthly Payment Anxiety: If the thought of making your monthly payment causes significant stress or you’re calculating how to make it work by cutting essential expenses, the house is likely too expensive.
• Draining Your Savings: If purchasing would deplete nearly all your savings, leaving little for emergencies or other financial goals, reconsider the purchase. Financial experts recommend maintaining an emergency fund for 3-6 months’ worth of expenses, even after your home purchase.
• Local Market Comparison: The median sale price in Colorado Springs is around $475,000. If you’re looking significantly above this range while earning an average income, you may be overextending yourself financially.
• Lifestyle Impact Assessment: Consider how the purchase will affect your overall lifestyle. If buying means you can no longer afford activities you enjoy, contribute to retirement accounts, or save for other important goals, the home may be too expensive, regardless of whether you qualify for the loan.
• Interest Rate Sensitivity: If a small increase in interest rates would make your payment unaffordable, you’re likely pushing your budget too far.

The Emotional Factor in Home Buying

Many homebuyers make decisions based on emotion rather than financial reality. You might fall in love with a house that exceeds your budget and try to justify the expense, convincing yourself you’ll find ways to make it work. This emotional attachment can lead to financial strain later.

Remember that buying below your maximum budget gives you financial flexibility for unexpected expenses, home improvements, and other life goals.

What are Alternative Solutions to Buying an Expensive Home?

If you find that homes in your desired neighborhood exceed your budget, consider these alternatives:

• Expand Your Search Area: Some Colorado Springs neighborhoods offer better value than others. Areas like Fountain or certain parts of the northeast may provide more house for your money than downtown or the northwest side.
• Consider a Starter Home: Instead of stretching for your forever home now, purchase a more affordable starter home. This will allow you to build equity while staying within your budget.
• Look for Potential: Homes needing cosmetic updates often sell for less. If you’re willing to put in some work over time, you might get into a neighborhood you otherwise couldn’t afford.
• Wait and Save: Sometimes the best decision is to continue saving for a larger down payment. The more you can afford to put down, the more you’ll reduce your monthly costs.

How Should You Make the Final Decision?

Ultimately, determining if a house is too expensive requires honest self-assessment about your financial situation and priorities. While homeownership is an important goal, overextending yourself financially can lead to stress and potential financial hardship.

By using financial guidelines, getting pre-qualified, and evaluating the impact on your overall financial picture, you can make a decision that satisfies both your housing needs and your long-term financial health.

Barb Schlinker is the Best Realtor in Colorado Springs

At Your Home Sold Guaranteed Realty - Barb Has the Buyers Team, Barb Schlinker and her entire team have developed proven strategies for selling homes quickly and for top dollar after 27 years in the industry. Her weekly radio show, “Your Real Estate Voice,” demonstrates her deep market knowledge and commitment to educating clients about the selling process.

Barb has helped many clients sell their houses fast and for top dollar and has earned hundreds of five-star reviews over the years. This has earned her the reputation as the best realtor in Colorado Springs.

Plus, Barb’s Colorado Springs real estate agency offers a unique VIP Buyer Program that protects your interests. With this program, you get curated property hotlists, free home-buying resources, and our unique Buyer Satisfaction Guarantee. 

To learn more about buying a house in Colorado Springs with our team, reach out to us today at 719-301-1802 or [javascript protected email address]. We can help you find the best Colorado Springs homes for sale today!

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing!

Frequently Asked Question