How Much Can You Afford When Buying a Home in Dane County?

by John Reuter

John Reuter with Integrity Homes talks with Tony Burns from Fairway Mortgage in Madison about how much homebuyers in Madison, Wisconsin can afford

Hi everyone, John Reuter here with Integrity Homes.  As someone who has worked with many homebuyers throughout Dane County, I know that one of the first and most critical questions people ask is: How much can I afford?

To help answer this question, I recently sat down with Tony Burns from Fairway Mortgage in Madison, a military veteran and one of the best mortgage professionals I know. Together, we broke down the key steps to figuring out what you can comfortably spend on a home, especially in today’s market.

Let’s dive in.


1. Start With Your Finances

Determining what you can afford starts with understanding your financial picture. You need to look at three main areas:

  • Your Income: What’s your monthly gross income?
  • Your Debts: This includes car loans, credit cards, or student loans.
  • Your Savings: Do you have enough for a down payment, closing costs, and an emergency fund?

Tony had some great advice on this:

“It’s not just about the numbers on paper; it’s about making sure the payments are comfortable for you long-term. Look at what your budget can handle, not just what you’re pre-approved for.”

As your real estate agent, I always recommend starting this process early—about a year before you’re ready to buy. That way, we can address any issues and create a realistic timeline.


2. Get Pre-Approved for a Mortgage

Once you have a solid understanding of your finances, the next step is getting pre-approved for a mortgage. This not only helps you understand your price range but also strengthens your offer when it’s time to buy.

Tony explained the benefits of starting with a soft credit pull:

“Fairway Mortgage in Madison now offers soft credit pulls, which give buyers a live look at their mortgage credit score without impacting their credit. It’s a great way to start the process without triggering unwanted calls or hitting your score with a hard inquiry.”

(What's the Difference Between a Hard Credit Pull and Soft?  Check watch our YouTube video HERE to find out)

A pre-approval also helps us work backward from your target move-in date. For example, if you want to buy in 9 months, we can map out exactly when to start looking at homes, saving for costs, and locking in your financing.


3. What’s the Dane County Market Like?

Dane County’s housing market has homes ranging from $300,000 to over $800,000, depending on the neighborhood and property type.

Tony and I often hear concerns about down payments, especially from first-time buyers. Many people think you need 20% down to buy a home, but that’s no longer the case. As Tony explained:

“You can buy a home with as little as 3-5% down on a conventional loan. VA loans, for veterans, even allow for 0% down. Programs like FHA and USDA loans also provide great options for buyers who qualify.”

For first-time buyers, we often explore programs like WHEDA (Wisconsin Housing and Economic Development Authority), which offers down payment assistance. As Tony described:

“WHEDA is a fantastic program in Wisconsin. It’s income-based, and for Dane County, a household earning up to $125,000 can qualify as long as they meet other criteria, like credit score and debt-to-income ratio.”


4. What’s Happening With Interest Rates?

Interest rates have been a big topic of discussion this year. Rates have been higher than in recent years, but there’s hope they’ll start to come down in 2024 and 2025 as inflation eases.

Tony shared some valuable insight on this:

“Rates are tied to Federal Reserve policies. Right now, rates hover around 7%, but we’ve seen predictions that they could drop as low as 5% or even 4.75% by the end of next year. While we don’t know for sure, this could create more opportunities for buyers to refinance down the road.”

I also shared my take on this:

“For sellers, 5-5.5% is the magic number where many feel comfortable listing their homes. If rates hit that range, we could see more inventory coming to the market, which would be a win for buyers as well.”


5. Don’t Forget About Additional Costs

When budgeting for your home purchase in Madison and surrounding areas it’s important to remember there are costs beyond the purchase price, including:

  • Closing Costs: These typically range from 2-5% of the home’s price.
  • Property Taxes: In Dane County, taxes average 1.76% of the home’s assessed value.
  • Homeowner’s Insurance: This varies by provider and property type.

Tony and I always stress the importance of understanding these costs upfront when buying a home in Madison, Wisconsin. As Tony put it:

“It’s not just about qualifying for a loan—it’s about making sure all the other costs fit into your financial plan.”


6. Work With a Trusted Team

Buying a home is a big decision, and having the right people in your corner makes all the difference.

As your real estate agent, I’ll guide you through every step of the process—from understanding your budget to negotiating the best deal. Partnering with a knowledgeable lender like Tony ensures you’re set up for success financially.

Tony summed it up perfectly:

“The process starts with a real estate agent to help you explore your options. Then, a lender steps in to provide pre-approval and financing options tailored to your needs.”


Conclusion

Figuring out how much you can afford when buying a home in Dane County doesn’t have to be overwhelming. By starting early, getting pre-approved, and working with trusted professionals, you’ll be well-prepared to make a confident purchase.

If you’re ready to start your homebuying journey, let’s chat! I’d love to help you find the perfect home.

đź“ž Call/Text: 608.669.4226
📧 Email: john@integrityhomeswi.com

And if you’re looking for expert mortgage advice, reach out to Tony Burns at Fairway Mortgage for personalized guidance. Together, we’ll make your homeownership dreams a reality!


 

John Reuter

Integrity Homes 

608-669-4226

john@integrityhomeswi.com 

www.integrityhomeswi.com 

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John Reuter

Broker Associate | License ID: 58480-90

+1(608) 669-4226

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