Feeling Overwhelmed by Home Buying? Here’s a Simple Budget Formula for Buyers in Hudson, WI & the Twin Cities

Buying a home is one of the most exciting—and yes, sometimes overwhelming—decisions you'll ever make. But when it comes to budgeting for your new home, it doesn't have to be complicated. Whether you're house hunting in Hudson, Wisconsin, or exploring neighborhoods across the Twin Cities metro area, having a clear understanding of what you can afford is key to a smooth and confident homebuying journey.

Here’s a straightforward formula to help you estimate your homebuying budget and avoid surprises down the road:

Step 1: Start With Your Gross Monthly Income

Your gross monthly income (before taxes and deductions) is the foundation of your homebuying budget. This number helps lenders determine how much you may qualify to borrow and gives you a starting point for calculating affordability.

Tip: If you’re a dual-income household, be sure to include both incomes for a more accurate estimate.

 Step 2: Use the 28% Rule

A good rule of thumb is to keep your mortgage payment—including principal, interest, property taxes, and homeowners insurance (PITI)—to no more than 28% of your gross monthly income.

For example:

• If your household earns $6,000/month, your ideal mortgage payment would be around $1,680/month.

This helps ensure your monthly housing costs are manageable and in line with your income.

Step 3: Add Up Other Monthly Debt

Your mortgage isn’t the only expense to consider. Add up your monthly debts, such as:

• Student loan payments

• Car loans

• Credit card payments

• Personal loans

Try to keep your total debt-to-income ratio (DTI)—including your projected mortgage payment—between 36% and 43%. This is the range most lenders consider healthy and is often required for loan approval.

Lenders in the Hudson, WI and Twin Cities area often work within these limits, especially for FHA, conventional, and VA loans.

Step 4: Don’t Forget Savings & Upfront Costs

Budgeting isn’t just about monthly payments—you’ll also need to plan for:

• Down payment (typically 3%–20% depending on the loan)

• Closing costs (2%–5% of the home’s purchase price)

• Home inspections and appraisals

• Emergency and maintenance savings

Whether you’re buying a historic home in Stillwater, MN, a cozy new build in Woodbury, or a riverside property in Hudson, planning ahead can help prevent financial stress after you move in.

Ready to Start House Hunting in Hudson or the Twin Cities?

With this simple budgeting formula, you'll have a solid foundation for your home search. If you’re unsure where to start, or you’d like help estimating what you can comfortably afford, we're here to help! As local real estate professionals serving Hudson, WI and the greater Twin Cities area, we’d love to guide you every step of the way—from budget planning to closing day.

Let’s connect! Reach out today to schedule a free consultation or get personalized advice based on your goals.