At 2.5% interest, the monthly payment on a 450k home is $1,778. At 9% interest, the monthly payment on a 240k home is $1,931. Mortgage interest rates were high

At 2.5% interest, the monthly payment on a 450k home is $1,778. At 9% interest, the monthly payment on a 240k home is $1,931. Mortgage interest rates were higher than this throughout the 1980’s. They got as high as 18% which would yield a $3,617 monthly payment. This means that the person who followed the “3x your income” rule in the 1980’s has a harder time paying the bills than the person who bought the home for 450k with a low interest rate. This is a badly-formed rule because it ignores a key variable - the interest rate. Sometimes, it will prevent someone from buying a home they can afford. Other times, it will cause them to buy a home they can’t afford. There’s no need for such a rule, because mortgage payment calculators that take into account the interest rate are easily available. It’s like picking a shoe size based on how much you weigh instead of measuring how big your feet are. If it gives you the right answer, that’s out of sheer luck. Of course, it’s necessary to also take into account factors like taxes and other expenses which vary from place to place and person to person, but a simple mortgage payment calculator is a good place to start.