by Dell Claiborne
I’m a single woman living in Petersburg and I recently read a book about finance. It urged readers to buy their own home. I grew up hearing an old rule: Don’t buy a house if its cost exceeds two and a half times your annual income. Does this rule still hold true?
Buying a home is a great move toward financial health and building a sound financial future. Homeownership will provide you with many benefits. They include, but aren’t limited to mortgage interest deductions, increase in value of the home, and my personal favorite, the pride of ownership. Funny thing is that I grew up hearing that same rule of thumb, and I sometimes hear it now when I meet with homebuyer clients. I have to tell you honestly that I don’t put much stock in rules of thumb. I just don’t believe this rule can give an accurate account of how much you can afford to spend on a home. I suggest that you contact a mortgage professional to determine exactly how much you can afford. A trained, skilled and experienced mortgage loan professional can interpret all the factors involved, like the amount of your down payment and credit score and use those details to determine exactly how much home you can afford to buy. By getting an accurate assessment of your situation, you may be surprised that you can afford more or sometimes less than you discovered by simply multiplying your annual salary.
So in my opinion, using two and a half times your salary is good for getting a ballpark figure. I personally don’t like ballpark figures when it comes to finances. Ballparks are for baseball. Go Squirrels! Opening Day is April 7!