Making a detailed budget plan can help you figure out what you can afford in terms of housing costs. It can also help you make educated decisions about what you might need to cut back on to accommodate higher rent or mortgage payments [source: Hoak]. Financial advisers recommend that you divide your monthly post-tax income into percentages according to how much you plan to spend. Take into account all expenses, including food, transportation, utilities, student loan payments, and deposits to savings or retirement accounts [source: Singletary]. According to experts, 20 to 35 percent of income spent for housing is a reasonable amount, with the sweet spot closer to 25 to 27 percent [source: Singletary]. The U.S. government defines housing as "affordable" if it costs a resident no more than 30 percent of after tax income [source: Singletary]. Spend much more than that and it can be difficult to afford other necessities, save money and of course, have fun. But according to a 2007 survey, more than 60 percent of Americans spent more than 30 percent on housing costs [source: Hoak].
Avoid any housing options that exceed the budget you can afford. There is room for flexibility, however. For example, if you live closer to work, you might be able to afford to pay more in housing costs, since you'll be paying less in transportation costs [source: Mint.com]. Or if you pay a rent that includes some or all of your utilities, you can take that into consideration, too.