Housing costs include taxes and insurance
You recommend that no more than 25 percent of your monthly income go toward a house payment. Does this figure include taxes and insurance too?
Dear Dave,
You recommend that no more than 25 percent of your monthly income go toward a house payment. Does this figure include taxes and insurance too?
-Ryan
Dear Ryan,
Yes, it does. Your housing payment should not exceed 25 percent of your monthly take-home pay on a 15-year, fixed-rate mortgage.
When it comes to buying a house, the goal is not to live in the Taj Mahal or have something so expensive you end up being "house poor." When buying a home, especially for first-time homebuyers, you should look for something nice - in a decent area - that you can get paid off as quickly as possible.
It's really not a big deal if you cheat a couple of percentage points one way or the other. But 25 percent is a good rule of thumb to ensure you'll still have money left over to live on, save and invest!
-Dave
Dave Ramsey is America's trusted voice on money and business. He's authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. His newest book, written with his daughter Rachel Cruze, is titled Smart Money Smart Kids and is out now. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.