One big lesson we learned from the housing crisis: Don't buy more home than you can afford. There are a handful of rules for figuring out what that amount is, but this one considers the additional costs, beyond home price. With this rule, all of your housing-related expenses should be no more than 25 per cent of your gross income.
Image via Business Insider.
Business Insider shares this rule from personal finance book On My Own Two Feet. In it, authors explain what exactly these expenses are:
- Mortgage payment
- Property taxes
Like any rule of thumb, your mileage will vary and you should consider all of the factors that might affect your finances. But the overall idea is that if your housing expenses are more than 25 per cent, you won't have enough to budget for other expenses. For quick reference, Business Insider offers a chart (above) to see how much, generally, you should spend on a home, considering the rule and interest rates.
Check it out at the link below.
How Much You Should Spend on a Home [Business Insider]