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Current mortgage rates are the new normal, says Brown Harris Stevens CEO Bess Freedman

For potential buyers and investors, this increase offers expanded financing opportunities, especially in high-cost areas, enhancing accessibility to affordable housing options.

February 5, 2025

10 minutes

Why Traditional Savings Plans Often Fall Short

If you were told to save for 16 years for a home, would you feel confident that you could do it? Probably not. For most people, financial discipline is easier to maintain over shorter periods—like two or three years—before life’s unexpected twists derail the plan.

But this isn’t just about saving—it’s also about HOW you use what you’ve saved. Having funds readily available in your bank account, what some might call a “nest egg,” makes handling sudden, unavoidable expenses more manageable. Instead of draining a lifetime of savings, you can dip into that cushion for smaller, manageable amounts when unexpected costs arise.

And here’s the truth: having that financial cushion doesn’t just make life easier—it also makes homeownership feel less intimidating. Imagine moving into a new home and confidently knowing you’ve got the resources to handle any surprises that might come your way. That’s financial peace of mind.

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And here’s the truth: having that financial cushion doesn’t just make life easier—it also makes homeownership feel less intimidating. Imagine moving into a new home and confidently knowing you’ve got the resources to handle any surprises that might come your way. That’s financial peace of mind.

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And here’s the truth: having that financial cushion doesn’t just make life easier—it also makes homeownership feel less intimidating. Imagine moving into a new home and confidently knowing you’ve got the resources to handle any surprises that might come your way. That’s financial peace of mind.

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Table 1
RulePercentageExplanation
28% Rule28% of gross incomeHousing expenses (PITI) should not exceed this to maintain affordability.
36% Rule (DTI)36% of gross incomeTotal debt, including mortgage and other obligations, should stay below this percentage.
25% Post-Tax Rule25% of take-home payHousing costs under this limit provide more room for savings and discretionary spending.
43% DTI Threshold43% of gross income (max)The upper limit most lenders use; exceeding this may impact loan approval and financial stability.

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