Decide How Much Home You Can Afford With the 25% Rule
One big lesson we’ve learned from the housing crisis: Don’t buy more homes than you can afford. There are several rules for determining this amount, but this includes additional costs beyond the cost of the house. According to this rule, all of your housing expenses should not exceed 25% of your gross income.
Business Insider shares this rule from the personal finance book On My Own Two Feet . In it, the authors explain exactly what these costs are:
- Mortgage payment
- Property tax
- Insurance
- Maintenance
- Content
As with any rule of thumb, your mileage will vary and you should consider all the factors that can affect your finances. But the general idea is that if your housing costs exceed 25%, you will not have enough funds to cover other expenses. For a quick reference, Business Insider offers a chart (see above) to see how much you should typically spend on a home based on rules and interest rates.
Check it out at the link below.
How much should you spend on a home | Business Insider