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Recent data from Realty Trac indicates more than 1.1 million U.S. homes are currently in some stage of foreclosure. Foreclosure is of course the worst case scenario, but an over-budget home can cause house rich and cash poor syndrome. Whether you rent or own your home, living in a house that is budget friendly can only help you both short- and long-term.

When your home payment is within your means, it makes room in your budget for additional savings, emergency funding, and retirement funds. However, with around three-fourths (76 percent, according to CNN Money) of Americans living paycheck to paycheck and around 50 percent having higher rent payments than they can afford, many Americans do not fit into this “living within their means” category.

Your home cost consists of more than just your mortgage or rent payment. You also have additional costs, such as repairs and insurance. Using CNN’s Home Affordability Calculator, combined with information from other reports, we compiled information on what an ideal situation looks like for the average person. How do you compare?

## Income

As of the most recent Census, the median household income in the U.S. is \$51,371 per year. However, median income varies widely based on location, ranging from \$37,095 in Mississippi to \$71,122 in Maryland. For the purpose of this discussion, let’s assume the average household earns an annual income of \$51,000.

## Monthly payment

Assuming an average situation — that is, an annual gross income of \$51,000 (right around the median household income), an average property tax rate, and homeowners insurance cost of \$978 per year — what type of house is affordable?

Using the home affordability calculator, an affordable home purchase would be a home that costs \$180,000 or less, with monthly mortgage payments of \$900 or less. This is also assuming zero debt, zero down payment on the home purchase, and an interest rate of 4.23 percent (the current 30-year fixed average rate). When you add in costs for insurance and taxes, this monthly payment goes up to around \$1,190 (\$14,280 per year). In this situation, the cost of the home, including taxes and insurance, equals right around 28 percent of annual household income.

According to a publication by the U.S. Department of Housing and Urban Development (HUD), a renter that is paying a rent payment that is in excess of 30 percent of their monthly income is “cost burdened.” An affordable rent payment is under that 30 percent. Therefore in an average situation (an annual income of \$51,000 and renters insurance costs of \$185 per year), a person can afford a maximum monthly payment of \$1,260. This payment amount accounts for renters insurance.

Life occurrences, such as illness, job loss, death of a primary breadwinner, and divorce may drastically change a household budget and therefore render a person unable to afford his or her mortgage or rent payments. These are all factors to consider when determining how much you can afford. Additionally, those who have large amounts of student loan debt, credit card debt, or those who have little or no retirement savings may also want to seek a lower home cost so that they may work toward an overall healthier personal financial situation.

## Property taxes and insurance

In the U.S., the average property tax rate is 1.38 percent. The amount of property taxes you pay also varies based on where you live. If you live in Louisiana, Alabama, or West Virginia, you are more than likely going to pay a lower property tax rate than residents of New Jersey, New Hampshire, or Texas, for instance. Property tax is paid by both homeowners, who pay this cost out of pocket, and by renters, who pay higher rent prices for the same property, only in a better community.

Homeowners insurance premiums in the U.S. average \$978 annually, according to one estimate. This equates to around \$82 per month. In some states, like Florida and Louisiana, premiums on average are much higher, at around \$161 and \$139 per month, respectively. Some renters choose to insure their belongings with renters insurance, with the average premium at \$185 per year, or around \$16 per month.