Lending Club Blog

How Much Home Can You Really Afford?

Go to nearly any bank or mortgage website and you’ll likely find a calculator for how much house (i.e., mortgage) you can afford. While the result will likely be a number large enough to put you into the home of your dreams, you’ll have to decide if that dream is worth the price.

The question that arises is whether or not you should borrow the full amount, or anywhere near the full amount, that is offered to you. What the calculators typically do is determine the maximum amount that you would be able to survive paying each month. Taking such an amount is basically asking the bank to place you on the brink of financial disaster. If anything should interrupt your assumed income or expenses, even temporarily, then you would likely not be able to afford your home any more.

Like so many aspects of personal finance, there is a mindset that can predispose borrowers to taking on too much debt. The question to ask yourself is: Would you rather live in a house that you can easily afford or in a “better” house that you can barely afford?

To get around the problem of taking on more than you can comfortably afford, I recommend the following course of action: When using an online calculator, factor in your savings goals. When you are entering monthly expenses, increase one of them to include your desired savings. That savings goal could be what you hope to invest in P2P loans at Lending Club, place in your savings account each month, contribute to your retirement plan, or have available if an unexpected expense should occur. You could even add in the sum of all such expenses.

By treating your savings goals as an expected expense, you’ll be shown how much house you can afford while still maintaining healthy savings habits. If your assumptions later turn out to be flawed, you would have the option of reducing your savings allocations rather than losing your home.

Proper planning when determining how much to spend on housing can offer you flexibility in times of trouble. Rather than buying a house at the absolute limit of what you can afford, using some self-control and including your savings goals in your calculations will likely leave you in a much better financial position.

Tuesday, December 11th, 2007 at 5:46 am

Comments (0)


Welcome Home

Lending Club named #5 on Forbes’ Most Promising Companies List

Get ready for tax season with Lending Club’s Tax Form Guide

New Adjusted Return Metric

See more
Lending Club Awards
  • Archives z

Recent Posts

Bloomberg Markets Names Renaud Laplanche on its 2015 “Most Influential” List

Read More »
October 6, 2015

Congratulations, Carrie! Named 2015 Financial Woman of the Year by The Financial Women of San Francisco

Read More »
October 5, 2015

Congratulations to Carrie Dolan – Named one of American Banker’s 2015 Most Powerful Women in Finance

Read More »
September 22, 2015

Welcome Nebraska, Kansas, and Indiana Investors!

We recently welcomed residents of Nebraska, Kansas, and Indiana… Read More »
September 21, 2015

Lending Club Job Spotlight: Technology & Member Support

Our Technology team develops and… Read More »
September 14, 2015

What $11 Billion Can Do

In celebration of surpassing $11 billion in loans and… Read More »
September 3, 2015

Welcome Arkansas, Iowa, and Oklahoma Investors!

We recently welcomed residents of Arkansas, Iowa, and Oklahoma… Read More »
July 14, 2015

Renaud Talks Marketplace Lending on Jo Ann Barefoot’s Podcast

This week, CEO Renaud Laplanche… Read More »
June 24, 2015

Lending Club Teams Up with Sam’s Club to Deliver Small Business Financing

Read More »
June 8, 2015

New Lending Club TV Commercial Makes its Debut!

Last week we began testing a new TV commercial showcasing… Read More »
May 26, 2015


We went public today!

Ringing the bell this morning at the New York… Read More »
December 11, 2014

New and Improved Statistics Page

We recently redesigned our Loan Statistics page to make… Read More »
November 13, 2014

Lending Club Honored with Economist Innovation Award

This month I was honored… Read More »
October 15, 2014

Welcome Vermont Investors!

Today, we’re thrilled to welcome residents of the state… Read More »
September 4, 2014

We filed to go public today

We filed a registration statement with the SEC today… Read More »
August 27, 2014

Our Billion Dollar Quarter

We’re excited to announce  that we’ve facilitated over $5… Read More »
July 8, 2014

Is Lending Club Available in My State?

Is Lending Club available in my state? That is… Read More »
July 7, 2014

Lending Club Joins Senator Cory Booker to Discuss Improving Access to Capital for Small Businesses

Read More »
June 20, 2014

Lending Club Named a CNBC Top 50 Disruptor for a Second Year

For the second year in… Read More »
June 17, 2014

PRIME is now Automated Investing

Lending Club is excited to announce that PRIME has… Read More »
May 14, 2014
View All w