How Much House Payment Should I Really Get?

How much house payment should I REALLY get?
Alrighty, then, Folks! Here's where I get paid to tell you some hard but good advice.

Naked Truth Number 3: Your Loan Officer is wrong (usually)!

Let me explain that: While your LO is great at calculating your theoretical maximum loan amount, and hence your monthly Principal, Interest, Taxes and Insurance Payment, that usually isn't the best choice for you, no matter what size loan you're getting.

Here's why:, your LO is probably calculating the income both partners are contributing. But what happens if one of you gets disabled, has a car crash (not your fault, but you're still unable to work)? All of a sudden one of you is trying to hold up an elephant in one hand, while taking on double duty on both the home and work fronts! (You're 6 times more likely to be disabled than to die before retirement age!...I know, I used to sell Insurance).

You should follow Dave Ramsey's advice, which is, roughly this: Never take a loan of more than 15 years, and never for more than 25% of your total monthly take home pay? (It could be 'gross monthly income' I don't have The Extreme Money Makeover book in front of me just now.)

Now that will drastically affect the size house you were planning to buy, I know. But when the economy does flip flops, or you're suddenly laid off, you're not facing a foreclosure! It will also force you to save up, responsibly, for a healthy down payment, like they did in the old days (when foreclosures were rare).

I sense some of your hearts are wilting in the face of this white hot truth! Courage Dear One! You will thank me later, when your kids get to take piano lessons, go on overseas trips, ride horseback each summer, and invest in areas of giftedness. And they will do that because you had discretionary income to pay for those things, rather than being a slave to your house.

And your home will be paid off quickly, too, so YOU get to go play sooner, as well. There are just too many positives to this plan to ignore it!

Imagine being so house poor you couldn't go on vacation, or give that budding artist lessons? (Sadly, I don't have to imagine it. I know first hand.) Here's a little secret I learned during the 120,000 deliveries I made for UPS. Stuff (read here: a bigger house) doesn't make you happy. It makes you comfortable while you're miserable. I have met people at the doors of multi-million dollar mansions, and at mobile homes. There is no corrrellation of peaceful, unstressed looks on their faces, based on the size of the house.

Less is truly more!

Thanks for reading the Dr. Phil of Real Estate!