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Find answers to our Frequently Asked Questions.
Posted July 27, 2020

Dreaming of buying a new house? It’s fun to think of building, designing, and decorating, but one thing you don’t want is to find out you can’t afford your home while in the process of buying or after purchasing it. According to a 2019 report, about 70% of Americans can’t afford a home. Parts of the U.S. report that median home prices are more than the average wage earner can afford; in some cases, it’s over 100% of their income.

Be sure you can stay on top of your payments with the following tips.

Evaluate Your Budget

The general rule of finding a home is that your monthly mortgage payment shouldn’t exceed 28% of your monthly take-home pay. Ideally that’s around two to two-and-a-half times your gross income.

Buyers who don’t have additional debt to pay, like student loans, have more wiggle room than those who do. Also, remember that owning a home or purchasing a bigger one will likely increase your bills, and items like a pool and a large yard will require additional maintenance.

Use this calculator to determine how much you can borrow based on your income, purchase price, or total monthly payment.

Consider Debt

When factoring additional debt into a mortgage payment, use the 43% debt-to-income ratio or DTI rule. This means your monthly mortgage payment, car loan, credit card payment, utilities, and other bills shouldn’t exceed 43% of your gross monthly income.

Here’s the formula for calculating your DTI:

You can also use this calculator to help you simplify it.

Calculate the Down Payment

The cash you have for a down payment will make a difference in your future monthly mortgage payments. Just like with other loans, the more you put down, the lower your payments will be.

The standard rule is to put down 20% of the purchase price and obtain a loan for the additional 80%. However, certain programs allow you to put down less than 20% with Private Mortgage Insurance or PMI.

Use this calculator to determine your monthly payment total compared to your annual income and down payment.

Research Ways to Save

Saving money is important when purchasing a home. You’re going to need funds for a down payment, monthly payments, and even furniture and decorations. If you don’t already have a budget in place, start tracking your spending and consider making a long-term budget.

HomeAdvantage® can also help save you money throughout the entire home buying process. You can use this program to search for homes, find a real estate agent online, and receive a rebate.


Remembering these tips and setting realistic expectations will make sure you get the home of your dreams without going over budget. Ready to get started? Apply today for a mortgage pre-approval and let us know if you have any questions.