Getting Your Ducks in a Row for Your First Home

March 06, 2020

If you’ve decided it’s time to buy a home, the first step is not to start looking for a house. The first step is determining how much house you can afford.

Here are a few tips to help you prepare before you start window shopping for your new home.

  • Evaluate Your Budget. As a rule, your mortgage payment should not exceed 28% of your monthly take-home pay.
  • Consider Your Debts. Keep in mind the 43% debt-to-income ratio rule: Your monthly mortgage payment, car loans, credit card bills and utilities should not exceed 43% of your gross annual income. Use the table below to help you calculate your debt-to-income ratio.
DescriptionExampleYour Amounts
Monthly Income
Your monthly gross income$4,500$______
Your spouse's monthly gross income (if applicable)$3,750$______
Other monthly income$0$______
Total income$8,250$______
Your Monthly Expenses
Vehicle payment(s)$600$______
Minimum credit card payments$350$______
Student loan payments$225$______
Personal loans$150$______
Other monthly expenses$0$______
Total expenses$3,325$______
Using the amounts you enter above, calculate your debt-to-income ratio: (your total debt/your total income) X 100 = your ratio. For the example, the calculation is (3,325/8,250) X 100 = 40%
  • Calculate Your Down Payment. The cash you have for a down payment will make a difference in your monthly house – the more you put down, the lower your monthly payments will be.
  • Review Your Credit Report. The sooner you review your credit report, the better. The earlier you check your credit, the more time you’ll have to clear up any blemishes or provide explanations about the items in your report.
  • Get Pre-Qualified. Contact the Heartland Bank Mortgage Banker nearest you. They’ll help you crunch the numbers and be able to tell you just how much home you can afford.

Once you’ve done these steps, you’re armed with everything you need to start searching for your dream home!

This content is for informational purposes only. Readers should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific advice from their own counsel.