The new (and old) rules of home buying
Posted
Mar 10 2008, 03:48 PM
by
Karen Datko
Lots has been written about whether this is the right time to buy a house, but regardless of your decision, you should know this: The past has became the present, and the pre-housing boom guidelines for how much house you can afford are now back in play.
So says Michael B. Rubin of Beyond Paycheck to Paycheck. In case you've forgotten the guidelines, we'll give you a little refresher.
What should your down payment be? The boom answer was: "Those loose coins in your car and in your couch? That's plenty!" Michael writes. The "way it is and ought to be: You should be able to put at least 20% down."
What monthly payment can you afford, including mortgage, insurance and taxes? Boom answer: "If you could answer yes to the question 'Do you intend to one day consider going back to work?' the loan was yours!" Michael writes. "Seriously, you didn't have to show proof of anything."
How it is now is a two-part answer, he says. Your monthly payment should be no more than 28% of your gross monthly income, and your total monthly debt -- including house, car, student loan and credit card payments -- should not be more than 36% of your gross income.
