What Kind of House Can I Afford? What to Consider While You Shop

Maybe you’ve been saving, crunching numbers, studying neighborhoods, and building Pinterest boards for interior decorating and landscaping ideas for that first home. Or maybe the 2020 mortgage rate dive is making you seriously consider upgrading your existing home.

Either way, you’re asking yourself, “What kind of house can I afford?” Of course, you need to know what your budget realistically buys in hard dollars, but you also want some guidance about exactly what type of home you should be looking for.

Our expert-backed primer will help guide you in the direction to figure that out. With feedback from top-selling agents, here’s our guide meant to help you understand what types of homes might be a good fit just for you, your lifestyle, and your budget.

Fixer-uppers

The moniker fixer-upper is assigned to homes in need of — you guessed it — fixing up. Typically, this means substantial improvements beyond just the cosmetic.

You might get a great deal on a home with “good bones” if you choose to purchase a house like this. Buying a fixer-upper allows people with lower budgets to get into the real estate market, and improve the home over time. This strategy works especially well if you have the interest, inclination, and know-how — plus a healthy dose of patience — to handle major projects over time.

But you might find fixing up a home is especially challenging during a pandemic, as materials can be expensive and hard to come by amid a disrupted supply chain and modified labor force.

“There was a big appliance company in Kentucky that was shut down to make ventilators for a couple of months,” explains Tom Jacobs, a top-selling agent based in Tallahassee, Florida, as an example of the struggle. “They started ramping up again, but haven’t been able to catch up yet.”

Foreclosures or bank-owned homes

If you choose to purchase a foreclosure or bank-owned home, you might get an even better deal with incredible room for return on investment. But know that you’re buying the house as-is, and the cost of repairs might be extreme — as well as hard to forecast.

So to afford this type of purchase, you’ve got to have cash available to make the repairs or are able to get a loan. And you should be smart and savvy about selecting the house itself so you don’t wind up with problems you can’t address.

Townhouse or condo

Townhomes are defined as multi-level single-family residences that share one or two walls with adjacent units, but not ceilings or floors.

A condominium — condo for short — is a privately owned individual unit located in a building among other units. Owners of these units jointly own and share common areas, including hallways, elevators, pools, gyms, rec rooms, and the like.

In these types of arrangements, you’ll be looking at a homeowners association (HOA) with its associated dues. This is a group of owners that establishes and enforces rules and regulations for the development — think landscaping, pool maintenance, and more. You’ll pay your share of monthly dues to make this happen.

So you can afford this kind of home if you can cover those HOA dues (also known as COA, for condo owners association).

And you should make sure you’re comfortable enough with any limitations in space — or anything else — to stay for at least a few years.

Single-family homes

A single-family home is just as it sounds: a set-apart structure with a ground-to-roof wall, a separate heating system, individual meters for public utilities, and no units located above or below it.

The pros to buying a home like this include — again, just as it sounds — the fact that it’s a standalone structure that is all your own. You are less likely to have to pay dues to an organization than you would in a multi-unit condo building (although you still might pay HOA fees in some developments). And you can typically make any changes or improvements you like. (There are some exceptions here, too — such as in areas designated for historic preservation.)

Among the potential cons to buying a single-family home for some buyers: You’re on your own for the upkeep, inside and out.

Jacobs notes that buyers who think they can afford certain bells and whistles must be prepared for that maintenance. “A dirty pool becomes a liability when it comes to selling,” he notes.

You can afford to buy this type of home if you can comfortably pay the insurance and any necessary dues.

Modular homes and manufactured homes

A manufactured home is a prefabricated home outfitted with a permanent chassis so it can be moved again after it is initially transported to a site. (This is the modern version of a mobile home but there are new standards for building them.) You may hear these referred to as double- or triple-wide, depending on their size.

Like a manufactured home, a modular home is a house that is pre-fabricated in a factory setting and transported to a building site. But unlike a manufactured home, modular homes are manufactured in multiple sections, and assembled on cinder-block foundations at the destination site. These sections are arranged to fit on a semi trailer, but up to six can be connected to make up a modular home, so some of them have multiple stories and can look quite different from typical manufactured homes.

A manufactured home is likely the most affordable type of structure you can get. Ideal buyers might include a family that wants to maximize the amount of space they can get for their budget, explains Jacobs. “Or they really want the land; they want more acreage then square footage. So they’ll buy a 10-acre tract with a mobile home on it, and love it.”

Jacobs notes that this type of home might be great for a buyer whose real dream is about the land — not the structure itself. “They always say they’ll build their dream house one day, and they never do,” he says. “They live in that mobile home forever and love it.”

You can afford this if your budget is at the lower end. Pros here include that affordability factor, and the fact that you may be able to get more land for your budget. Cons include lower-end finishes, a less-customized product, and a smaller living space.

Historic homes

Older homes often offer historic charm, and sometimes unique characteristics and top-quality construction you may not find as frequently in newer homes.

As a pro, you might also get a deal on an older home — “more bang for your buck,” as Jacobs puts it.

On the flip side, “the maintenance on the older home is going to be much much higher,” Jacobs says. So if you think you can afford a historic home, make sure you have plenty of money available to make these necessary fixes.

Another con: You might find your older home has restrictions due to protections in certain designated historic districts. You might find any changes you wish to make to the exterior — even including swapping out old and inefficient single-pane windows, say — might not be permitted.

Note: You may also find this to be a pro! If your neighborhood is protected, you won’t be surprised by any unchecked eyesores popping up after you move in.

New construction

With a new construction home, you won’t face the same issues of aging features in an older home. (But that’s not to say you might not find any unpleasant surprises that could cost you.)

If you’re looking at a brand-new home, you should have a healthy budget. “We can’t build them fast enough,” Jacobs says of new construction homes in his area.

“Right now, we’ve got such a demand on inventory that new constructions are flying off the shelves as fast as we can get them built.”

He explains that he’s seeing these homes get multiple offers and sell for at least full price. So, “that would be somebody typically with a higher budget” looking at this category of home.

If you expect this type of home purchase to hold its value, plan to stay a while and make only neutral improvements with wide appeal.

Government programs

You might have a government program available to you to make your home search more affordable, and potentially open you up to homes you thought were outside of your availability index. Here are some to investigate.

Good Neighbor Next Door

The Good Neighbor Next Door program is available to buyers working full-time in certain professions, including law enforcement officers, teachers, and firefighters. The program designed to help these buyers get a home at a 50% discount in one of the Department of Housing and Urban Development’s (HUD’s) “revitalization areas,” defined by three criteria: median household income, homeownership rate within the neighborhood, and the rate of Federal Housing Administration (FHA) foreclosure activity in the neighborhood.

This loan can help you afford a home if you’re in one of the qualified professions, obviously. However, you’ll need to be in the house for at least three years, make any needed repairs yourself, and must also make sure you can also afford any taxes or HOA dues.

Fannie Mae HomePath

A Fannie Mae HomePath property is a house Fannie Mae is selling directly to an investor or a traditional buyer. (Fannie Mae, which is a government-sponsored enterprise that purchases mortgages from lenders, might own the house by way of foreclosure or deed in lieu of foreclosure.) Fannie Mae is a financial entity, not a property investor; it wants to sell these homes as soon as possible.

The pros for buyers: These homes are designed for lower-income buyers and are priced very competitively. (That means you need to move fast!) On the flip side, you’ll be buying the house as is. Plus, Fannie Mae doesn’t accept any contingent offers; so if you’re planning this home as an upgrade, you’ll need to sell your current home first.

A HomePath property might work for you if you don’t make more than the area income limit, and you can afford to make repairs to the home.

Lender or other programs

Many lenders offer special programs for lower-income buyers. To find out about whether you might qualify, you will likely have to research those through your lender.

General affordability questions to ask yourself

Schools and property taxes are funded locally and can have a huge impact on your home budget. Make sure you take that into consideration during your search.

Your agent should have accurate information about schools and taxes, so you can figure out the right fit for your family.

And, as with considering your potential return on investment for any property type, think about how long you might stay.

Jacobs explains that there is a large market of transitory state workers that come and go every few years. “So we look at areas that we think will resell well in a short period of time,” he says.

This helps make sure your purchase isn’t just affordable right now, but keeps you on top financially when it’s time to trade up.

The kind of house you can afford is going to depend on your budget and your lifestyle, but once you start narrowing down the kind of house you want, then you can begin exploring your options. Working with a top-ranked real estate agent is one of the best ways to determine if the kind of house you’re seeking is really the best fit for your budget and lifestyle.

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