Rule of thumb If your non-housing debt is 10 percent or less, you're in great financial fitness.  If your non-housing debt is 10 to 20 percent, then you'll probably be able to get credit, but as you approach 20 percent, you may need to start thinking of reducing your debt load. There have been many attempts to devise formulas for setting limits on the amount of real estate debt one should carry.  One rule of thumb is two ( or 2.5 to 3) times your annual income.  If the annual household income is $70,000, a mortgage company might loan up to $210,000, provided the house is worth the money and the other credit factors are satisfactory. However, be careful.  Just because a lender may be willing to extend credit doesn't mean that you should necessarily borrow that amount.  You should also factor in your own specific fixed and variable expenses to determine your own ability to pay.  How much you spend on real estate may depend on which country you live in.  Remember, if you're high on the real estate debt, you many want to lower the debt/income ratio to compensate.   Back to Top | Next (The 28/36 rule)