Even in a tight credit market, the fact that you can qualify for a mortgage doesn’t necessarily mean that you can afford it. In order to avoid becoming “house poor,” or in a worse scenario, putting yourself in position to one day deal with a short sale or foreclosure, you need to avoid loans that place you in a position to fail.
The author of Blonde & Balanced and her husband have culled together recommendations from trusted financial authorities and are determined to live by the 20/25 rule.
The 20 represents the percentage of the total price that your down payment should be, in order to keep monthly costs down and avoid having to pay mortgage insurance. And 25 is the maximum percentage of your total income that your payment should be. The requirements allow for you to suffer financial catastrophes and long-term budget disruptions and still keep a roof over your head.
While attaining 20/25 status isn’t realistic for everyone, those who stray outside its constraints should think hard about whether or not they’re taking on more house than they can handle.
Deciding What Percentage of Income Our Mortgage Should Be [Blonde & Balanced]