Over the past several years the housing market has been booming, and it became common for homeowners to have mortgage payments that required half of their income, or even more. It was easy to get carried away with home buying because prices were on the rise. The game became one in which the borrower often bought as much as he or she could possibly qualify for, and qualifying for a mortgage loan wasn’t hard to do.

Over the past 18 months, with home prices falling and millions of borrowers defaulting on their payments, people are wisely rethinking how much home they can afford. The mindset around buying a home has returned to a more reasonable standard, aided by lenders moving toward more responsible lending practices.

Recently, President Obama announced a plan to help struggling homeowners that would allow them to reduce their mortgage payment to 31% of their gross income for a period of time. This is much closer to the traditional amount of income that Americans have been comfortable spending on their homes.

There are a few “rules of thumb” that are commonly discussed when deciding how much of a mortgage payment you can afford. One of these is known as the 28/36 rule, which states that no more than 28% of your income should be spent on housing, and no more than 36% of your income should be required to pay all of your monthly debt obligations. If you haven’t run the numbers on yourself recently, take a look at your current ratios based on your income. According to the most recent statistics available, more than 38% of homeowners spend more than 30% of their income on housing, while more than 12% spend more than 50% of their income on costs related to their home.

The truth is that every situation is different and that you should probably sit down with a professional to determine how much house you can really afford. You should be setting goals for saving and being able to lead the life you’re comfortable with, and use those numbers when determining how much to spend on a home. Instead of buying the biggest, most expensive house you can get approved for, the time has come to buy the house you can actually afford.

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Tags: Afford, debt, Housing, Income, mortgage

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