Money To Live

October 1, 2008

Reader Question: Income and Housing

Filed under: spending — by moneytolive @ 5:00 am
Tags:

A reader asked about a rule of thumb for how much to spend on housing.

From the Department of Housing and Urban Development:

The generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing. Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care.

For someone renting, it is certainly possible to rent a home and pay more than 30% of annual income (before taxes). When applying for a loan to buy a home, though, the applicants’ income may be considered as a factor when determining the size of loan allowed.

At one point in grad school, I was spending 45% of my income on rent (which was more than half of my monthly take home pay!). Though I would not recommend anyone spend so much of their income on housing, I decided to do it because I knew the situation was temporary and I had savings to cover other expenses.

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1 Comment »

  1. Do all the costs associated with housing – such as repairs, utilities, insurance, etc. – get factored into “housing costs?” I would think yes.

    Comment by Shannon — October 1, 2008 @ 10:46 am |Reply


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