BUY ONLY WHAT YOU CAN AFFORD, WHICH FOR HOUSES, MEANS WHAT YOU CAN FINANCE IN 15 YEARS AT A KNOWN FIXED INTEREST RATE
Note that this doesn't tell you how much of a house to buy—buy a million dollar mansion if you like—but only finance at most 15 years.
An easy way to finance over 15 years is to simply take a 15 year mortgage. But we are going to look into things more carefully and arrive at a few other options.
Tip Number Two says that you must know your interest rate over the full 15 years. So no adjustable rate mortgages. Why not? Because adjustable rate mortgages mean that the rate can—and will—change over time. In this low rate environment, if Jack and Jill's mortgage went up just 2% after five years—to a still "reasonable" 8% from years 6 to 30, that alone would cost them an additional $142,389.71, or about $500 per month for 25 years. That's enough to jeopardize their whole budget, and that breaks Tip Number One: Do not gamble your primary residence.