Question of the Week
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How much should I spend on a house?
When you’re deciding how much house you can afford, one helpful rule of thumb is the 28% rule. This rule says mortgage payments — which often includes costs beyond the principal and interest like homeowners insurance and property taxes — shouldn’t exceed 28% of your pre-tax monthly income. So if you’re a dual-earning couple earning $300,000 a year, that means you’d want to put no more than $7,000 a month toward your mortgage.
NerdWallet’s mortgage calculator can help you get to a more refined number.
Of course, everyone’s budgeting needs are different, and there are valid reasons why you might want to spend more or less on a mortgage. Perhaps you live in a high-cost city with few other options or perhaps you have other significant expenses, such as child care, so you want to limit housing costs. It’s also worth factoring in other house-related costs not captured by the mortgage, such as home improvements, repairs and maintenance. You’ll want to leave room in your budget to cover those, too.
