There is a certain amount of money you will need to buy a home, complete the transaction and maintain it, and there is no sense in rushing into homeownership before you can comfortably cover all those costs.
“If you can afford the mortgage on a monthly basis, can maintain an adequate emergency reserve and are at the right point in life, go ahead and buy,” said Noah Damsky, a chartered financial analyst with Marina Wealth Advisors in Los Angeles. But, he says, you need to carefully do the math first.
Damsky recommends that your monthly mortgage payment should not exceed 35 percent of your gross income. But that is the upper end of the scale. Other models are more conservative and suggest 25 percent, in order to keep your debt-to-income ratio lower.
A middle-ground recommendation says you shouldn’t put more than 28 percent of your monthly gross income toward your mortgage payment to free up funds for other needs.