Buying and Selling

The 30% Rule for Home Buying

How sticking to this rule can help your budget stay balanced

Couple sitting in a hammock outside of their home

If you’re looking for an apartment to rent or a home to call your own, don’t overlook all of the costs involved. A good rule of thumb? Do not spend more than 30 percent of your gross monthly income (your income before taxes and other deductions) on housing. That way, if you have 70 percent or more leftover, you’re more likely to have enough money for your other expenses.

Seems pretty reasonable, right? The problem: Renters and homeowners are having trouble sticking to this rule. According to recent data from the Bureau of Labor Statistics, the average married couple with children between ages 6 and 17 spends 32 percent of its budget on housing, and single people spend almost 36 percent.1

Not only does that mean having less money for necessities like food and healthcare, it also makes it more difficult to achieve financial confidence and save for other goals. Spending too much on living expenses can disrupt how much money you dedicate to what truly matters to you.

The 30% Rule Up Close

The below chart shows what your monthly housing spending would be based on the 30% rule for different income amounts.


  Yearly Income (Before Taxes)  

  Monthly Housing Limit  

  Annual Housing Costs  





























Looking to buy? In addition to principal and interest, don’t forget to consider property taxes, private mortgage insurance, homeowners insurance and homeowners association fees, which should all be accounted for in your monthly housing limit.

If you are already locked into a living situation, or if a temporary circumstance (such as a job loss) means you have to live above the 30 percent mark for a bit, you should track your spending in other areas. See where you can cut in order to compensate for housing costs.

Keep in mind…

The 30 percent rule ultimately depends on your financial situation. For example, if your yearly income is $500,000, you might be able to pay 40 percent for housing expenses and still have adequate money left over. But if your yearly income is $30,000, 30 percent might be pushing it.

Ask yourself: Are you comfortable spending 30 percent of your income each month on housing? After considering your other payment obligations and how you want to spend and save your money, does it make sense for you? If not, come up with your own rule—maybe 25 percent feels better, for example. Only spend what you feel comfortable and confident with on housing (while trying to stay below 30 percent).

Keep balanced. Be confident.

Talk with a mortgage expert so you can approach the home buying process with confidence.

1 Bureau of Labor and Statistics, U.S. Department of Labor, The Economics Daily, “Married couples with oldest child under age 6 spent 36.3 percent of total expenditures on housing”, August 2017

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