Primary Residence Affordability Metric/Ratio
What metric or ratio does everyone use to determine how much primary house to buy (rules of thumb)?
From reading Millionaire Next Door awhile back, the author recommended total mortgage debt to be no more than double your annual income (pre-tax).
I was close to this when purchasing our first home a couple of years ago. I find this metric more useful than comparing monthly payments to income because it makes you more aware of the total purchase price of the home.
What are everyone’s thoughts?
Most Popular Reply
Seems like a no brainer. I’ve never come close to breaking that rule on any of the houses we’ve lived in. Not sure that we would qualify for a loan in a property that breaks that rule.