How Much House Can You Afford? A Simple Guide for Homebuyers in Hudson, WI and the Twin Cities

Buying a home is exciting—but let’s be honest, figuring out what you can afford can feel a little overwhelming. The good news? It doesn’t have to be.

Whether you’re browsing homes for sale in Hudson, WI, or checking out neighborhoods across the Twin Cities metro, having a solid understanding of your budget makes everything else easier—from getting pre-approved to confidently making an offer.

Here’s a simple, four-step 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 (that’s before taxes and deductions) is the foundation of your homebuying budget. Lenders use it to figure out how much you may qualify to borrow.

If you’re buying with a partner, make sure to include both incomes for a more accurate estimate.

Step 2: Use the 28% Rule to Estimate Housing Costs

A helpful rule of thumb is to keep your total monthly housing costs under 28% of your gross income. That includes:

• Mortgage principal

• Interest

• Property taxes

• Homeowners insurance

Example:

If your household income is $6,000/month, aim for a total mortgage payment of about $1,680/month.

This helps ensure you’re not overextending yourself and still have breathing room in your budget.

Step 3: Don’t Forget About Other Monthly Debts

Mortgage payments are just one piece of the puzzle. Most lenders also factor in your other recurring monthly debts, such as:

• Student loans

• Car payments or leases

• Credit card minimums

• Personal or business loans

Your total debt-to-income ratio (DTI)—including your projected mortgage—should ideally be under 43%. Many lenders prefer it around 36% for more favorable loan options.

What’s Included in Your DTI?

• Monthly debt payments

• Your estimated mortgage payment

• Any co-signed loans or obligations

Tip for local buyers:
Lenders in Hudson, WI and throughout the Twin Cities generally follow these same DTI guidelines, whether you’re going with a conventional, FHA, or VA loan.

Step 4: Plan for Upfront & Ongoing Costs

Budgeting isn’t just about your monthly payment—you’ll also want to prepare for one-time and ongoing expenses tied to buying a home.

Don’t forget to plan for:

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

• Closing costs (around 2%–5% of the purchase price)

• Home inspection and appraisal fees

• Emergency and maintenance savings (repairs, updates, or unexpected issues)

Whether you’re buying a new build in River Falls, a riverside home in Hudson, or a character home in South Minneapolis, setting aside funds for the “what-ifs” is key to staying financially comfortable after move-in.

Ready to Start Your Home Search in Hudson or the Twin Cities?

By following this simple formula, you’ll have a clear idea of what fits your budget—and that makes everything about the buying process smoother and more enjoyable.

Still have questions or want help running the numbers?

We’re local agents who live and work right here in Hudson, WI, and we’ve helped buyers across the Twin Cities metro find homes that fit their lifestyle and their budget. Whether you’re moving to the area or upgrading locally, we’re happy to walk you through every step—from pre-approval to closing day.

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.

Ready to make a move in Hudson or the surrounding area?
Let’s talk! Contact The Johnson Group at Coldwell Banker Realty today to start your journey.

📞 Call us today at 651-333-7656
🌐 Or visit www.johnsonhomegroup.com
📍 Serving Hudson, WI and the greater Twin Cities metro area

Written by Mark Johnson, REALTOR® and owner of The Johnson Group at Coldwell Banker Realty. With over 20 years of experience helping clients across Hudson, WI and the Twin Cities, Mark is passionate about delivering expert real estate guidance with a personal touch.