Paying the right amount for a house

Dear Dave,

I know you recommend that no more than 25 percent of your take-home pay should go toward rent or a mortgage payment. Should taxes and insurance be figured into this amount?

-Kayla

Dear Kayla,

Yes, they should. Mortgage companies will qualify you for twice as much house as you can realistically afford. They'll try to put you on a 30-year, adjustable-rate mortgage and leave you in debt up to your eyeballs for half of your life. Payments like that can easily equal 36 percent or more of your take-home pay. That's just nuts!

I see so many people who can't take a decent vacation or save anything for retirement or their kids' college fund because their mortgage payment is through the roof. That's called being "house poor." And I've even seen it push people into debt just to buy groceries.

It's fine if you want to follow my guidelines. But what I'm really trying to do is get you to think. Engage in some critical thinking when it comes to your finances. There's so much more to life than that building we call a house. I want you to think about your future and your family's future and make smart money decisions that will change your family tree for years to come!

-Dave

Dave Ramsey is America's trusted voice on money and business. He's authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. His newest book, written with his daughter Rachel Cruze, is titled Smart Money Smart Kids and is out now. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.