What is the definition of “house poor”? Some might think it means a small house – maybe very few bedrooms, smaller than you need. What we really mean is buying more home than you can afford. Maybe you purchased a “mansion” and it’s more than you can afford, maybe you took out more of a mortgage than you can afford, maybe you had a mortgage that adjusted and now you can’t afford your home.
When I talk to clients that are looking to buy, I always ask, what are you comfortable with in a house payment? Just because you can qualify for a payment, doesn’t mean you can afford it. You may have expenses I don’t know about. You don’t want to change your lifestyle to live in a home that may be more than you can afford.
In today’s market, people are bidding over the list price on many homes, for some, they end up in bidding wars and don’t really think about the monthly payment. Remember there are other costs of owning a home – utilities are a good starting point – if the home is bigger than you are used to, your utility bill may be higher than you have had in the past. Is the yard bigger? Will you have more maintenance costs than before? Are there any repairs that you will have to make?
Think about the big picture – remember your lifestyle – your hobbies, things you want to continue to do. You don’t want to be “house poor” and not be able to have a life because your home is costing you more than you thought it might. Make a budget and decide what you are comfortable with in a house payment and stick to it. If you want to be able to travel, go out to eat, enjoy movies, etc – watch your house payment so you can continue to do the things you love to do!
To avoid being house poor, set a budget and stick to it. Get pre-approved and leave room at the top so you aren’t maxing out your approval. Consider the entire payment with taxes and insurance, remember that your taxes and insurance may go up next year – can you still afford the payment? Think about maintenance costs – are there changes you want to make to the home?
Remember that lenders don’t take into account things like daycare (unless it’s a VA mortgage), cell phone and cable TV bills, car insurance and any costs your hobbies might have. So just because we say you can qualify for the payment, that doesn’t mean it won’t affect your daily expenses. Look at your budget and decide what you can afford.
You want to enjoy your new home! I want you to enjoy your new home! I also want to make sure you can have the life you are used to having! Stick to your budget and have an emergency fund for repairs. That way you know you can enjoy your new home!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
