8 rules of thumb on saving and retirement
How much house can you afford?
The rule: Don't buy a home more than 2.5 times your income.
Why it works: This rule can help remind consumers that income should be a primary criterion in the housing hunt and help them not to go overboard, as many did during the housing boom.
Grain of salt: One problem with this rule is it doesn't take into account how housing costs can fluctuate based on interest rates. A better guide to whether to buy a home may be rental prices in your area. If you could rent a home that meets your needs for less than it would cost to buy and maintain a home, then you might want to look more into renting.