I'm sure this has been said before, but I couldn't find a basic answer.
Is housing "supposed" to be 1/4 or 1/5 of your income? If you own a home, is this figure supposed to include taxes, utilities, water, garbage collection, etc?
And do you estimate from your take-home pay or from your total income before taxes, health insurance, 401(k) contributions, etc.?
Good question. When i figure our percentage I just look at the total mortgage (including taxes, insurance and interest) and my total gross income. Ours is roughly 10% but i think i always read you didn't want to pay more than 25% and I assumed it was like I figure mine.
Unassisted birthing, atheist, poly, bi WOHM to 4 wonderful, smart homeschooling kids Wes (14) Seth (7) Pandora Moonlilly (2) and Nevermore Stargazer (11/2012) Married to awesome SAH DH.
Dave Ramsey and his followers will say no more than 25%. But IMHO, going lower is wise because you have wiggle room to pay extra on the principal.
“It is simply no longer possible to believe much of the clinical research that is published, or to rely on the judgment of trusted physicians or authoritative medical guidelines.” - Marcia Angell, M.D., former NEJM Editor Private Parts are Private Property!
Just keep in mind that any of these things are rules of thumb. It can vary a lot based on:
2) other debts
3) predicted income changes
4) total income
What works for one person may not work for another. To determine how much we could afford to spend on our housing costs, we added together what we were currently paying in rent and the amount we were currently saving towards our down payment. It worked fine for us, but more than doubled most recommended percentage levels.