Buying a Starter Home

What Does House Poor Mean And How Can You Avoid It?

26 April 2017

Capucine Leroux

Have you ever known anyone that had a huge, beautiful house but couldn't afford to go out to dinner once in a while? If so, this person may be what is called "house poor." Being house poor is a common problem today, but it is not a good place to be. If you are hoping to purchase a house soon, you should fully understand what this means and take the right path to avoid having this label.

What is house poor?

Being house poor means that most of your money goes to pay for your house and you are left without any extra money at the end of the month. You might have enough just to cover all your bills, but you may never have enough money to go shopping, buy new things, take a vacation, or save money.

The reason people become house poor is from buying a house that is too expensive for their budgets. The problem with this is that it often leads to long-term financial problems. Little by little, a person might go into debt to pay for things he or she wants or needs but cannot afford to pay cash for. Over time, it could even lead to major financial strain and other problems.

What can you do to avoid becoming house poor?

If you do not want to be house poor, there are things you can do to avoid this. The main thing is to carefully evaluate your budget before you buy a house so you can determine exactly how much money you can afford to pay each month. Once you do this, you will be able to calculate how much you can spend on a house, and this will help you narrow down the choices of homes for sale. If you stick with a house that is priced within your budget, you will not have to worry about being house poor.

A good rule of thumb is to choose a price range that would result in a mortgage payment that is no more than 25% of your take-home pay. If your paychecks are equal to $4,000 each month, this model would allow you to easily afford a house payment that is around $1,000 per month.

If you really want to buy a house, find one that is within your budget. This is the best way to avoid being house poor and still own a house. To start searching for the right property to purchase, talk to an agency in your city.

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