With a variety of mortgage loan options available, a strong credit score and positive credit history can give you a lot of buying power. But, how much should you consider spending on a home? Financial planners recommend less than 2.5 times your gross annual salary or income OR less than 30% of your take-home pay.
A reasonably priced home should cost less than 2.5 times your annual gross income, the amount you earn from all sources before taxes. If you have significant debt, like student loans, you may need to adjust your price range to leave room in your budget for other loan payments.
Another rule of thumb is to have your total monthly housing expense – including your new mortgage payment, property taxes, home insurance and mortgage insurance – make up no more than 30% of your take-home (after-tax) income.