Is the 30% homebuying rule still the rule?

Buying and Selling

You may have heard it—the rule that says “Don’t spend more than 30% of your gross monthly income on housing.” The idea is to ensure you still have 70% of your income to spend on other expenses.

Sounds good. But is it realistic for you?

That depends on your financial situation. If your yearly income is $500,000, you might be able to pay 40% for housing. If it’s $30,000, 25% might be a better target.

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.

Monthly housing expenses
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.

Talk to an expert.

We can help you feel confident in choosing the right mortgage option.