The bank approved you for a number, and the number was bigger than you expected.

That approval feels like information. It arrives on letterhead, it comes from an institution with actual money at stake, and it seems to represent a considered judgment about what your household can carry.

It is a considered judgment. It is just not an answer to your question, and in one specific way it is a judgment about something the lender has not fully priced.

Because a large share of your income is a stock price. And the house you are about to buy sits on the same balance sheet as the position that generates that income, in the same region, in an economy driven by the same companies.

The lender’s question is not your question

Start with what the approval actually measures.

A lender is assessing the probability that you will keep paying, using documented income history, credit, assets and the loan’s relationship to the property’s value. Vesting equity is commonly included in qualifying income where there is enough history and evidence of continuation.

That is a defensible way to underwrite a loan. It is not a way to decide how much of your life to commit to a mortgage payment.

The lender’s downside is bounded. They hold a lien on an asset they can foreclose on, and they have priced the risk across thousands of loans. Your downside is not bounded and is not diversified across anything. You have one household, one primary employer, one concentration of savings, and one house.

So the approval answers the question “how much will someone lend against this?” and you are asking “how much should we commit to, given everything else that would go wrong at the same time?”

Those are not close to the same question.

Your job, your portfolio and your house are the same bet

Here is the part that gets missed, and it is the reason this article exists.

For most Bay Area tech households, the three largest financial exposures are not independent of each other. They are correlated, and they are correlated in the same direction at the worst possible moment.

Consider the ordinary bad scenario. Not a catastrophe. A sector-wide downturn, the kind that has happened more than once in the span of a normal career.

Your employer’s share price falls, so the vesting equity that qualified you for the loan is worth materially less. The company slows hiring, so the refresh grant is smaller and the comp review is flat. Layoffs become a real possibility in an environment where every comparable employer is also not hiring, so the job you would replace yours with pays less and takes longer to find. Your diversified portfolio, if it carries a normal technology weighting, is down too. And regional housing, which is driven substantially by the compensation of the people who work at these companies, softens at the same time.

Every one of those is the same underlying event. Your income, your savings, your replacement prospects and the value of your house are not five independent bets. They are one bet wearing several costumes, which is the argument we made in the piece on how much of your net worth belongs in your employer’s stock.

A mortgage payment is the one item on that list that does not move. It is fixed, it is monthly, and it does not care what happened to the sector.

The down payment is a sale

There is a second thing the affordability calculator does not see.

For most households in this position, the down payment is not sitting in cash. It comes from selling concentrated employer stock, which means the size of the house determines the size of a taxable event, and the timing of the purchase determines when that event happens.

That makes this partly a tax question, and it is worth understanding the options before you are under contract with a closing date, which is the ground we covered in the piece on selling concentrated stock without a giant tax bill. Whether you hold private company shares or public ones, whether the position is long or short term, and what else is happening in your return that year all change the answer, and none of that is something I can determine from here. Take it to your CPA before you make an offer rather than after.

There is a second-order effect too. Selling to fund a down payment reduces your concentration, which is usually good, and simultaneously converts liquid assets into the least liquid thing you will ever own. The concentration improves. The flexibility gets worse. Both are true and they are easy to conflate.

The costs that arrive with the house and do not flex

Buying also introduces a set of ongoing costs that behave like the mortgage rather than like discretionary spending.

In California, property tax is generally assessed based on the value at the time of purchase, which means your tax bill is set by what you paid rather than by what your longtime neighbors pay for a similar house. Verify the current rules and your specific situation, because the mechanics and any applicable exclusions are technical.

Then insurance, which in this state has become its own planning question rather than a line item to assume. Then maintenance on an older house, which is not optional and which arrives unscheduled.

None of that flexes down in a bad year. All of it lands on the same side of the ledger as the payment.

The frames that are more useful than a number

I am not going to tell you how much house you can afford. Anyone who gives you that figure without knowing your reserve, your concentration, your other obligations, your career stage and your household’s tolerance for a bad year is guessing with confidence.

What I can offer is four tests that are more informative than a ratio.

  • The cash test. Can the payment, taxes, insurance and maintenance be carried by your cash compensation alone, with every vest and bonus excluded? This is the rule we set out in the recent piece on lumpy income, applied to the largest fixed cost you will ever take on.
  • The bad year test. If one income stopped and no equity vested for eighteen months, what would you have to do? If the honest answer includes selling the house or liquidating a concentrated position into a weak market, the number is too big, regardless of what the approval says.
  • The correlation test. List everything in your household that depends on the same company or the same sector. Salary, equity, your spouse’s employer if it is also in tech, your portfolio’s technology weighting, and now the house. Look at the length of that list before you extend it.
  • The liquidity test. After the down payment and the closing costs, what remains in accounts you can reach without selling something at a bad price? A household can own a great deal and still be unable to absorb a single bad quarter, which is the whole argument in the piece on why the point of risk management is not to make you bet less.

Those four will not produce a number. They will tell you whether the number you are considering leaves your household with any room, and room is the thing that turns a bad year into an inconvenience rather than a forced sale.

What I am not saying

I am not telling you to buy less house than you want, and I am not making a prediction about housing or about anyone’s employer.

Plenty of households in this region have stretched and been fine, and a few years of a strong market makes stretching look obviously correct in hindsight. The house is also where your life happens, which is not a small consideration and does not belong in a spreadsheet.

What I am saying is narrower. The approval letter is not an opinion about your risk, and the largest fixed obligation of your life should not be sized against income that moves with the same forces as everything else you own.

Buy the house. Just size it against the part of your income that shows up whether or not the sector cooperates, and know which of your other bets you are doubling when you sign.