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Home Buying

What to Do When You Can't Afford Your Housing Market

Thinking about buying a home, but frustrated by rising prices?

You’re not alone. Home prices have gone up every month for over 10 years!1 And in May 2022, the median sales price for an existing home was $407,600—up 15% from the year before.2 (By the way, an existing home is just a house that’s already been built and lived in before you buy it—not a brand-new one.)

Those rising prices really increase the pressure when you’re trying to save for a house. You may be starting to feel like you won’t ever be able to afford a house unless you do something drastic.

It’s tempting to pursue “creative” financing (aka terrible home loan options) or overspend just so you can get a home. That may be how some people are affording houses right now, but it’s dumb! Buying a house you can’t actually afford puts you on the fast track to going broke.

So before you dive headfirst into a financial disaster, know you have other options that don’t involve stretching your budget. Here’s how to find a home you can afford, even in a hot housing market.

Housing Market Affordability

Home prices have been rising like a flash flood. Take a look at what’s happened recently:



Median Existing Home Price

May 2020


May 2021


May 2022


That’s right—existing homes cost around $124,000 more today than they did in 2020. No wonder so many people feel like they can’t afford a house!

See how much house you can afford with our free mortgage calculator!

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And newly built homes are even more expensive. In fact, the National Association of Home Builders (NAHB) estimates that new homes will cost around $412,500 in 2022. And out of 126.7 million American households, 87.5 million of them won’t be able to afford that median price.6 So even if we see a ton of new houses go up, 7 out of 10 households would have a tough time paying for one.

But here’s the good news: You don’t have to buy a crazy expensive home. You can find a home you love at a reasonable price—and we’re going to show you how to make that happen.

Defining Your Financial Boundaries

Before you can look for homes, you have to know how much house you can really afford. And that number should be based on your financial situation, not pressure caused by the rising prices in your housing market.

If you can’t pay cash for your home, the next best option is getting the right mortgage loan. Follow these guidelines:

  • Choose a 15-year fixed-rate conventional loan—the cheapest, quickest type of mortgage to pay off.
  • Keep your monthly payment to no more than 25% of your take-home pay.
  • If you’re a first-time home buyer, put at least 5–10% down. If this isn’t your first rodeo, aim for 10%—but 20% or more is even better!
  • Pay for closing costs and moving expenses with cash.
  • Steer clear of FHA and VA loans.

Want to see what you can afford? Try our mortgage calculator. And if you’re married, make sure you and your spouse are on the same page about what that looks like for you.

Then be prepared: A lender will probably approve you for a much higher amount, but just because you qualify for more money doesn’t mean you can afford to take it. Stick to the 25% rule, and you’ll be golden.

Once you know what affordability looks like, share your boundaries with your real estate agent and don’t budge.

What to Do When You Can’t Afford the Housing Market

After you create your home-buying budget, you may find that you can’t afford your housing market. But don’t freak out just yet. Here are three options to help you afford a house:

Option #1: Save Longer

Let’s cut to the chase. If you don’t have the money, you shouldn’t buy a house. Period. That’s just asking Murphy to show up and bring his three cousins—Broke, Desperate and Stupid! But you can start saving.

Now, if you live in an unaffordable market, it’ll probably take you longer to be financially ready to buy a home. Maybe you’re still trying to pay off debt or save up a down payment. Maybe you live in an area where your home-buying budget can’t support a mortgage just yet. That’s okay.

Renting helps you build up your savings—and patience. Plus, you get to call the landlord when something breaks instead of spending your hard-earned money to fix it!

If you want to buy a home in an expensive market, waiting may be your smartest move. In the meantime, keep saving. Your area may seem more affordable three years from now when you have a hefty down payment saved!

Option #2: Reset Your Expectations

Another option is to revisit your must-have list. A remodeled four-bedroom craftsman home on an acre lot might be out of your price range, so think about what you can change. A three-bedroom home, a half-acre lot or a ranch-style house that needs a little work could be a perfect financial fit.

It may be tough to let go of the idea of having a luxury kitchen or gleaming hardwood floors, but it’s worth it to avoid getting in over your head. Remember, you can always upgrade your home’s features down the road.

When you work with a real estate agent to get your expectations in line with what you can afford, you may be surprised to find out you still have some great options!

Option #3: Broaden Your Search

You may want to live in the city or perhaps you have your eye on suburban life—but broadening your search might change your mind about where you actually want to be.

While the differences between housing costs in cities and suburbs might flip-flop in an unusual market, home prices are typically more affordable outside the metro area.

And that’s worth moving for. In fact, recent data shows that 91% of suburban counties are seeing more inbound migration (people moving in) than outbound migration (people moving out). But in cities, it’s the opposite: 82% of cities have more people leaving than moving in. That trend is most noticeable in expensive places, like San Francisco and New York.7

You may be stuck in a market where homeownership will always feel a little out of reach (we’re looking at you, Silicon Valley). But if you’re open to moving, relocating can fast-track your home-buying dream.

Moving out of a housing market you can’t afford gives you a chance to get the most bang for your buck and save up for a down payment in less time. And the good news is, you don’t have to go far—84% of people who moved in 2020 stayed in the same general area.8 It may just be a matter of moving a few miles across the county line.

Ask a real estate agent for advice about how to target your search to areas you can afford.

What to Think About When Buying a House (by Age)

Okay, first, we want to be very clear: No matter how old you are, we always recommend you save at least a 10–20% down payment (5% for first-time home buyers), keep your monthly payment to no more than 25% of your take-home pay, and only get a 15-year fixed-rate mortgage. But let’s face it—life changes as you go along. One day, you’re young and carefree. The next, you’re cruising along in a minivan singing “Baby Shark.” And the day after that, you’re at your own retirement party.

So let’s talk about what affording a house actually looks like for your generation—and how you can use your life situation to your advantage.

Baby Boomers

Most baby boomers are nearing retirement, and you’re likely looking for a house because you want to downsize or move closer to those adorable grandbabies. You’ve got a huge advantage in the housing market because you’ve had a lifetime to build up equity in your current house. You can use that equity wisely by selling your current home, then paying cash for something smaller.

Don’t have much (or any) equity? Think carefully about how you plan to pay for your new home. After all, you don’t want your mortgage to take up too much of your income—or keep you from retiring.

Generation X

You’re about halfway through your career, the kids are growing up and heading off to college or trade school, and it feels like the right time to move.

The best part is that you’ve got 10–20 years left in the workforce, so you can comfortably pay off a 15-year mortgage just in time for retirement! The trick here is to make sure your new home doesn’t put your financial future at risk. Make sure you still put yourself in a good position to retire in a few years—without risking the kids’ college funds.


Millennials are building their careers and families. You may feel like you’ll never be able to afford a house by the time you’re done paying for groceries and diapers. But you can. Your generation is now the backbone of the American workforce—so you’ve got tons of opportunities to earn money and save for a home.

That earning power is a huge advantage, but keep in mind, it doesn’t mean you have to buy right now. Don’t rush into a purchase you feel pressured to make. First, take control of your money—then you’ll be able to afford a house. 

Generation Z

Okay, we’re super impressed that you’re already thinking about how to afford a house! Your biggest advantage is that you’ve got loads of time. Your whole life is still ahead of you—which is why you probably shouldn’t buy just yet. It’s smart to wait until you have a good idea where your career, spouse and passions might take you.

But you can still start setting yourself up to buy a house in a few years. The best way to do that is by working the 7 Baby Steps. They’ll help you save, stay out of debt, and pay for your dream home. 

Hunting for a Home? You Need a Pro on Your Side.

One of the biggest factors affecting home affordability is a shortage of homes for sale. Housing inventory across the country has been down for years.9

Remember the law of supply and demand—low inventory increases competition for the available homes, which drives up price. So not only is it tough to find a home you can afford, but chances are, you’ll also be up against other buyers when you do. That’s where an experienced real estate agent comes in. They’ll:

  • Know about properties before they hit the market, giving you a competitive edge
  • Share knowledge about your local housing market so you have realistic expectations as you look for your perfect home
  • Be an expert negotiator and know how to get you the best deal on a home, even in a hot market
  • Help you navigate the paperwork so you can close on your house with as little stress as possible

Of course, the best real estate agents are RamseyTrusted. You can count on them to come up with a home-buying plan that works for you. And they’re part of our Endorsed Local Providers (ELP) program, so they know the ins and outs of the housing market in your area.

Find an expert real estate agent in your local market!

Frequently Asked Questions

How Do I Budget for a House?

The first step to budgeting for a house is to know how much down payment you need. Ideally, you’ll want to save a down payment of at least 20%. For first-time home buyers, a smaller down payment like 5–10% is okay too—but then you’ll have to pay PMI. Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost). And stay away from expensive loans like FHA, VA and USDA.

After you’ve set your savings goal, here are some tips on how to save for a house: Pay off all your debt, tighten your spending, hold off on your retirement savings (temporarily), start a side job, and sell stuff you don’t need.

Let’s say you want to buy a $200,000 house. Your down payment savings goal is $40,000 (or 20% of the home price). To budget for this house in two years, you’d need to set aside $1,700 each month ($40,000 / 2 years / 12 months = $1,700).

Where Should I Stash My Down Payment?

You could stash your down payment in a simple money market savings account. You’re not going to make tons on interest, but you won’t lose money either. Keep in mind: Saving a down payment is not the same as investing for retirement. Saving a down payment should only take you a year or two—so you want to keep your savings in a place that’s easy for you to access.

When Should I Start Saving for a House?

As soon as you think you’re ready to buy a house, start saving for one! For reference: You’re only ready if you’re debt-free and have an emergency fund of 3–6 months of living expenses. It’ll probably take some intense saving over a period of time—we’re talking a year or two just to save for a down payment—so you’ll want to get started right away.

How Can I Save for a House Quickly?

If you want to save for a house fast, you need to be debt-free and have an emergency fund of 3–6 months of expenses saved. With your income freed from debt payments and an emergency fund to protect you from life’s unexpected surprises, you can save for a house much faster. Here are some other ideas to help you save money fast.

I Can’t Afford a House—What Do I Do?

Trying to buy a house when home prices keep going up can be frustrating. But with the right plan, you can do it! One big thing that holds people back from saving for a house is debt. Debt is dumb! So focus on cleaning up all your debt—and never go back. Then save up an emergency fund of 3–6 months of living expenses to protect yourself from life’s unexpected surprises. After that, you’ll be ready to save for a house.

To buy a house you can afford, never buy one with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate conventional loan (stay away from FHA and VA loans). Ideally, you want to save at least a 20% down payment. For first-time home buyers, a 5–10% down payment is okay too—as long as the extra PMI fee doesn’t jack up your monthly payment beyond the 25% rule.

After you’ve set a down payment goal, it’ll take time to save toward it. Give yourself a year or two of intense saving. Try these smart ways to save for a home down payment.

Once you have a strong down payment saved up, work with an experienced real estate agent who knows your area. The best agents will work hard to find you a house that fits your budget.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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