[cercis]

5) How much house can I afford?

Now, mortgage brokers will use all kinds of figuring, etc to tell you how much you can afford. The number they come up with may be right and then it again it may be too much.

My rule of thumb is to decide if I can easily afford my current house payment/rent and then look for the price range that fits that. If my rent is stretching me too thin, then I determine what I think would be right (usually $200 or more less) and work back from there.

If my rent is lower than I can afford and I can save money each month, I take the amount I'm saving/funneling towards other debt and cut it by 50-75% and add that to my rent amount.

The regular rule of thumb is no more than 1/3rd your gross income and no more than 40% of your net income to ALL debt payment - car, student loan, credit cards (I think that's right, Jodi, correct me if I'm wrong).

Now this is assuming that you don't put money away for special treats - eating out regularly, traveling etc.

What can happen if you follow that rule of thumb is that you become so tied to your house payment you find you have little money left for "fun" things. And if you lose a job or have a cut in pay, you can end up in foreclosure.

DH and I try to pay the bills with his income and use my income for debt reduction and fun.