How Much Home Can You Afford? (The 30/30/3 Rule Explained)

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How Much Home Can You Afford? (The 30/30/3 Rule Explained):
Today we discuss a lesser known rule of thumb for buying a home in the 30-30-3 Rule. This rule states that you should ensure that the cost of a home does not exceed 30% of your gross income, that you have 30% of the purchase price of the home in cash or some other equivalent (for 20% down payment and 10% cash cushion), and that the purchase price of the home does not exceed 3 times your gross income. It is meant to be a rule of thumb that you can safely follow even in the most uncertain of times. Does it succeed? Let's discuss.

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[cato]

I’ve always stuck with the <25% of net income rule. Worked well for me. House is almost paid off.

[CaitlynGoesHiking]

I’m hoping to buy before I turn 30 (almost 2 years from now). It’s just me and my 60k income - I’ll get a 10% increase in August - so finding any home that meets the requirements is going to be a struggle but for now I’m just saving every penny possible

[SeanBaker]

As soon as my house got to 80% LTV, I emailed my lender to remove the PMI. Luckily mine was only $36 a month, but it was annoying to pay it.

[StJimmy]

The key were I think a lot of younger people get screwed is the interest rates… I have no problem with all the costs on the front end but with interest rates still between 6&7% it would be a huge burden, even on a house less than the median

[ECrespo]

I’m under contract for a short sale. Between me and my wife we bring in 160k, home under contract is for 450k, yearly mortgage including property taxes and homeowners insurance would be a $36, 192. I’m putting down 5% and after closing costs will have 20k left. I live in NJ where homes are expensive and property taxes are above 2%(in my case 2.7%)annually. I fit the 28/36 rule perfectly, kudos to those who are at 25%< but I don’t see how this can be done in a high COL state.

[TheRetirementality]

This is timely for me. I was about to do a video on how many different "money rules" rules there are. But, I was dreading researching them all. So you consolidated some of them here for me. Thanks. I feel like there are enough rules you can just find one that fits your life, instead of the other way around.

[batemanmm]

I like the 100% rule. It's simple and keeps you out of trouble; never borrow money for anything.

[DCCooky]

Used our 2020 adjusted gross income.

Then just spouse's income.

Then just mine.

The 30% saved hurdle is a big one. We could achieve it in 2yrs on the lowest of those numbers.

All I can say is America needs more affordable housing.

Thinking we'll need land and factory built modular home in order to get 1800sq/ft for 180k.

[wolfrig]

The Dave Ramsey plan for saving takes far too long. I did the math on how long it would take to save for college without loans using Dave's plan and it would take me until 50yrs old to save enough cash to pay for college without loans (in 2020 money) and that's just unacceptable.

[TBIhope]

I had to break the rules when I purchased my house, but I got it at 2.75% and the property value has almost doubled, so I’m happy with my decision anyway!

[nickirios]

Do you know of a calculator/formula to determine financial independence?

[jeremyhershberger]

This is a really helpful rule as it covers three aspects related to housing experience.

[andrewb]

I would have loved to watch the 40 minute version :)

[gregcountryman]

I think this budget method for a house would be really difficult to achieve all 3. Though, 2 out of 3 doesn't seem to be that hard to achieve.

[Soxandnicole]

Thanks for an other great video. I'm curious, are you the one doing all the drawings?

[mikumikuiyada]

Silly rule. The rules ignore the 56/72 rule. the 60% solution, and the 50% method. Basicaly, these rules state that the house you want, is always 72% of your income, interest payments always higher than 60% and 50% of your take home pay

[joshuagarner]

Gross income 150k net housing cost 10800 yearly. I think im good

[oddixgames]

Home price = x3 of net income? Laughs in Vancouverian & Torontian...

[MatthewBuntyn]

You've got a imposter account replying to comments. I guess you've made it 👍🏽