Dave Says: How Much House?

Dave Ramsey
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Posted: May 27, 2016 12:01 AM
Dave Says: How Much House?

Dear Dave,

Based on your annual income, how do you determine how much house you can afford?

Ryan

Dear Ryan,

I always tell folks never get a home loan where the monthly payment is more than a fourth of your take home pay. I’m talking about basing this on a 15-year, fixed-rate mortgage. Twenty-five percent of your monthly take home pay is the absolute most you should have going out the door toward a mortgage payment.

I realize that’s a pretty conservative number in most people’s minds. You can actually, technically qualify for almost twice that figure. But I think having that much of your paycheck going toward house payments is pretty dumb. Your shortest, quickest path to wealth is being debt-free. And when most of your money isn’t flying out the door to make payments on stuff, it’s easy to build wealth and increase your level of generosity!

—Dave