Share buttons



Home Advice You Can Count On.

We make it easy to do everyday banking at Horizon, but everybody still needs some sensible advice from time to time to help with their goals and strategies for saving, investing wisely and making the most out of your financial journey. That’s why we provide fresh advice topics to help you along the way.

Looking for specific advice? Use our search feature to explore our various topics.

How Much House Can I Afford Based on My Income?

Person opening paycheck in envelope

If you’re in the market for a new home, the first question you have to ask is, “How much house can I afford based on my income?”

Assessing your financial situation is important. Two numbers are most important to lenders: the front end debt-to-income ratio (total housing expenses, which includes your mortgage principal and interest, taxes and insurance); and back end debt-to-income ratio (your total housing expenses plus any other debt you have – car loans, credit cards, etc.).

The experts at Horizon Bank have provided a few general guidelines:

Your total monthly housing costs should equal only about 28 percent of your gross income (the amount you earn before taxes). This includes your mortgage payment, homeowner's insurance and other related costs.

Your total debt, including mortgage, should not exceed 36 percent of your income. If your total debt exceeds this percentage, you should take steps to lower it before approaching a lender. Experts will tell you the best way to do this is simply to stop spending beyond anything that is necessary.

To establish a budget and determine what you can afford, take a close look at your current monthly expenses as compared to your income. Remember that utilities and maintenance costs may increase with home ownership (as compared with an apartment), so it's important that you have extra left over each month in your monthly budget.

If you have savings to use for a down payment, lenders prefer that you not completely empty your savings account to meet a specific down payment percentage. Again, the importance of having additional money left helps float your budget.

No stress, and no worries. We'll help you do the math and determine what you can afford. Visit our online Mortgage Center, or stop by your local Horizon Bank branch today for a consultation and free prequalification so you begin the search for a home in your price range.

The web site you have selected is an external site not operated by Horizon Bank. This link is provided for convenience and informational purposes only and Horizon does not endorse and is not responsible for the content links, privacy policy or security policy of this website or app you are about to visit.  Horizon Bank is not responsible for (and does not provide) any products, services or content for this third-party site or app, except for products and services that explicitly carry the Horizon Bank name. Click Proceed to continue or Cancel to go back.