There are several generally recognized rules of thumb to help individuals and families determine the amount of money to spend on housing. Housing expenses include not only the mortgage payment or rent, but also a wide variety of other household expenses such as utilities, water, telephone and even cable television. Many experts recommend that no more than 25 to 30 percent of total net monthly income be spent for total housing expenses. Another rule of thumb is that first-time buyers should not pay more than 2 times their annual gross income. Yet another rule of thumb is that the monthly housing expense combined with other installment debts should not exceed approximately 33 percent of take-home pay.
General guidelines can be useful in helping consumers evaluate their own situation.
In reality, however, your own situation needs to be carefully considered. Advantages of Renting Low initial investment. Buyers need 5 to 10 times as much cash to move into a home. Funds not used for a down payment or higher monthly payments may be invested in other forms of savings with higher returns, especially in situations where the property is kept less than four years. Problems and repairs are left to the landlord.