Quote:
Originally Posted by ERCougar
I'll agree with you on my current limit--I can easily get a comfortable house for that and my tax burdern is higher, so it doesn't make sense to go much higher; for lower income brackets, it would make sense. However, 3-4x your income goes beyond what most advisors recommend spending. Banks will give you enough rope to hang yourself with, and hence our current meltdown.
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I can't imagine 3-4x income being that big of a deal. I'm moving into a house in a week that I had built. It's about 3.2 times my income. It's our first house and after taxes we're only paying about $500 more per month for about twice as much space than we were paying in rent. The monthly payment is about 25% of our gross monthly income.
I think what often gets lost with using simple income ratios is the fact that certain expenses don't have much variation with income levels. For instance, I largely pay the same amount for food, gas and health insurance that someone pays who makes less or more than me who has the same family size and is the same age. Of course, people can choose to eat out more the more money they make, but the same baseline can be achieved.