The 30–30–3 Rule: A Smarter Way to Buy a Home Without Financial Stress

By Megan & Erl Brown | Realtor Team | Maine Real Estate Experts

One of the most common mistakes buyers make is assuming that if a lender approves them for a certain amount, that’s what they should spend. In reality, smart homeownership isn’t about maxing out your approval—it’s about buying in a way that protects your lifestyle and your long-term financial health.

That’s where the 30–30–3 rule comes in.

This simple guideline helps buyers avoid overspending, reduce financial stress, and feel confident about their purchase from day one.

How the 30–30–3 Rule Works

1. Keep Housing Costs at 30% of Your Income

Your total monthly housing costs should ideally stay at or below 30% of your gross monthly income. This includes:

• Mortgage payment

• Property taxes

• Homeowners insurance

• PMI (if applicable)

This guideline originated from public housing standards in the 1980s and is meant to be a general benchmark—not a hard rule. While lenders often approve buyers based on a broader debt-to-income (DTI) ratio, approval doesn’t always equal comfort.

Why this matters: Staying near or below this threshold leaves room in your budget for savings, everyday expenses, travel, and unexpected repairs—without feeling “house-poor.”

2. Save 30% for Down Payment and Reserves

Ideally, buyers should aim to have 30% of the home’s value saved before purchasing. This typically includes:

• Around 20% for a down payment (to avoid PMI when possible)

• The remaining funds for:

  • Closing costs

  • Emergency repairs

  • Ongoing maintenance reserves

This financial cushion helps homeowners feel prepared and confident once they have the keys in hand.

3. Keep the Purchase Price Around 3× Your Income

A helpful rule of thumb is to keep your home’s purchase price at roughly three times your gross annual household income.

Example:

• $120,000 annual income → ~$360,000 home

Why it works: This helps prevent over-leveraging and keeps your mortgage manageable, while still allowing room for savings, investments, and day-to-day living.

How Buyers Benefit from the 30–30–3 Rule

The 30–30–3 rule isn’t about limiting your options—it’s about supporting your life after closing. Buyers who follow this framework are more likely to:

• Avoid financial strain

• Plan realistically

• Build equity comfortably

• Enjoy homeownership without constant budget stress

Bottom Line

Buying a home should feel exciting, not overwhelming. The 30–30–3 rule provides a smart starting point for making confident, sustainable decisions that protect your financial future.

If you’d like help applying this guideline to your own numbers—or want to understand how it fits into today’s market—a quick conversation can make all the difference!