How Much House?

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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

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About Author

Dave Ramsey

America's trusted voice on money and business, Dave Ramsey is a personal money-management expert and extremely popular national radio personality. His four New York Times best-selling books—Financial Peace, More Than Enough, The Total Money Makeover, and EntreLeadership—have sold more than 7 million copies combined. His latest book, EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches, debuted at number one on the New York Times best-selling list.

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