Newlywed Questions About First House?

How much of your income should go towards paying for a house?

QUESTION: Mark and his fiancé are getting ready to purchase a home and have a few questions.  What percentage of their take-home pay should they allocate for a house?  Should they take out two mortgages to avoid PMI?  Should they do an interest-only mortgage?

ANSWER: You should not take out more than one-fourth of your take-home pay on a 15-year fixed mortgage.

You should not do two mortgages.  Avoiding the PMI insurance is a good idea when you can, but taking out a second mortgage with a higher rate, an adjustable rate, and/or a balloon on it messes up your financial picture.

You should not do an interest-only mortgage.  It means you pay only the interest and you’ll be paying for the rest of your life. 

You should not buy a house with someone you’re not already married to.  I would suggest you only buy a house after you’ve been married for one year.  Getting a house with someone you’re not already married to creates a financial, relational, and legal mess.