How Much House Can You Afford?

Posted on March 30, 2008

Or maybe how large a car payment can I handle?

Every were you turn online calculators and salesman are always telling us the maximum we can spend on any given purchase.

It’s the wrong question!

So you can afford a $200,000 house that has the extra big yard that, but it is 50% of your take home pay. Or maybe you can afford the next size SUV that gets 15 - 18 miles per gallon for a mere $450 a month. What the salesman and free online calculator from a site that is is trying to lend you money forgot to mention is that we are being set up for financial failure. What there aren’t telling us is that the payment is probably more money than we can handle. What they forget to mention is what happens when the dual income family loses one of the incomes or some extra medical bills roll in.

It’s the wrong question, but what are the right questions?

» Filed Under Materialism, Psychology of Spending, Spending

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Comments

4 Responses to “How Much House Can You Afford?”

AJC @ 7million7years (3 comments.) on March 31st, 2008 9:43 pm

Great post and great question; I look at it this way:

http://7million7years.com/2008/02/04/how-much-to-spend-on-a-house/

I call it the 20% Rule … it’s just a rule of thumb, but it works for the rich - and those who aspire to become rich.
Mr. Debtbeater (4 comments.) on April 2nd, 2008 10:04 am

Lemme tell you, it really sucks to be in the situation where 1/2 your check every month goes straight to the house. Even if the other half is pretty big, it just hurts to throw away that much money every month.

The biggest killer to me was the fact that we still had debt when we did it. I think w/o all the other debt, we could have paid down on the house pretty quickly and been in a good spot, but now we have both and that’s where it’s really tight.
Credit Crunch (1 comments.) on April 4th, 2008 7:32 pm

I would never want to be in the position where half my earnings every month went to a mortgage. It’s definitely important for me to buy my own house when I leave home though as I don’t see the point of feeding my money to a landlord. I would be comfortable paying 25% of my paycheck to a mortgage though and think I could manage off that.

-Scott