Is the 30% homebuying rule still the rule?

Buying and Selling

You may have heard it—the old rule that says, “Homeowners shouldn’t spend more than 30% of their gross monthly income on housing.” The idea is to ensure they still have 70% of their income to spend on other expenses.

The intent is good. But is it realistic today?

That depends on your financial situation. If your yearly income is $500,000, you might be able to pay 40% on housing. If it’s $30,000, 30% might be pushing it.

The 30% rule, in real dollars. 

The chart below shows what monthly housing expenses would be for a homebuyer, based on the 30% rule. Keep in mind that in addition to mortgage payments, monthly housing expenses also include property taxes, homeowners insurance, private mortgage insurance, and any homeowners association fees.

Gross annual income (income before taxes) Monthly housing expenses (30%) Monthly money for other expenses (70%)
$25,000 $625 $1,458
$50,000 $1,250 $2,917
$75,000 $1,875 $4,375
$100,000 $2,500 $5,833
$125,000 $3,125 $7,292
$150,000 $3,750 $8,750

Consider comfort levels.

Buyers are coming up with their own rules these days, based on their individual goals, priorities,and other debts. While the 30% rule may still work for some, each individual homebuyer should feel comfortable and confident with what they choose to spend on housing.

Find out how the Truist Correspondent Lending team can help you connect with your clients.