Mortgage advise…extra income, should it be our priority?

I am going back to work after several years off raising kids. This move will see our (modest) family income rise to more than double its current rate. We currently have a home loan of $ 85000. I want to match the repayments my husband has been making so we are effectively paying 200% our repayment requirements. Is this a good plan or would the additional income be better spent on a second mortgage for an investment (rental) property? Any advise would be greatly appreciated.
The bank says they would lend us $ 300000 based on our predicted combined incomes, is this too good to be true? I feel very wary about paying 50% of our income in loan repayments! Is that the norm?
Payments of 200% our required monthly repayment would be much less of an impact but will it make a big difference in our loan term?

My mother hasn’t been paying her rent and we may be getting evicted in the next week. I will have to move in with my sister but she only has 2 rooms and she already has a daughter so if this move is permanent I will have to stay in the living room with my mother. If this is the case I figure I could just get a place of my own but I work at borders and I do not make enough to rent an apartment regularly. So does anybody know which apartment buildings do the low income housing thing. I mean like I’d only have to pay like 200 a month for rent. Does anybody know how to get this. BTW I don’t want to live in the projects, they are horrible.

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