Suze Orman's Simple Affordability Test

Let’s assume you pay $1,000 in rent and estimate that your mortgage will cost about the same. Over the next six to eight months, take $450 a month and put it in a savings account on the first of every month. That’s in addition to the eight-month emergency fund and the 20% down payment that Orman recommends having in place before you even start to look at local real estate ads.

“If in six to eight months from now, you are able to do it on time every single month, you can afford that home,” Orman says. Plus, after eight months, you’ll have almost $4,000 to put toward your closing costs.

She is saying additional cost of owning comes to 45% of mortgage payment. That seems too high to me from experience.

Her advice is for newbies that are clueless. I wonder if anyone takes her advice including her.

it’s probably correct for a $1000/mo mortgage.

She addresses all of North America?

She did say you can scale that $450 number proportionally. But no way did my maintenance + taxes + insurance come to 45% of mortgage. Maybe in states with higher property tax rate?

The maintenance costs are not scalable because in expensive areas most of the cost is land. Maintenance costs relate to the size and age of the structure excluding land costs.

Her advice is so broad it is meaningless.