Becoming House Poor: A Growing Trend You Can Avoid

House poor is the condition of owning a home you can only just afford.  Being house poor has become a trend among many people who sign on to a mortgage that takes so much of their income there is little left over to fill it, go on vacation, or even for emergencies.  It’s natural that people want the best home they can buy especially when viewing it as an investment; however, homeowners also need to live life and have some money in the bank.  If you’re looking for a home to buy, follow these tips so you can avoid being house poor and becoming a veritable slave to the mortgage!

Use a Mortgage Calculator

Using a mortgage calculating resource like the Kanetix affordability calculator can help you figure out a realistic price range.  Often banks will approve people for a certain amount and many buyers look for homes that are right at that price limit.  People might be approved for a certain amount, but that amount may leave precious little money left over each month to buy groceries, home expenses, pay other bills, shop for holiday presents, etc…Use a calculator to figure out your monthly expenses and be sure to list everything from haircuts to babysitters.  It’s important to find a mortgage that suits your lifestyle and a calculator like this one can help.

Buy All the House You Can—Not!

It’s important to ignore what lenders or realtors will advise in some cases.  Their motto is typically buy all the house you can and they’ll talk a good game convincing you that your annual raise will come through or that you’re getting a great interest rate so why not splurge for more house and so forth.  Every home buyer has to come up with the mortgage payment and no one else knows that home buyer’s habits when it comes to money so it’s really an individual call.  The best advice would be to buy the best home you can afford that is not at the utmost limit of your budget. 

Consider the Future

Many people have decent jobs which is typically why they get approved for a mortgage in the first place.  But lay-offs happen as do tough economies.  If you have a working spouse, could you afford the mortgage on one salary?  That’s a question many people consider.  Also, other big expenses might affect your decision to shop for an affordable house; you might need a new car, you might want to send the kids to private school, or save for major maintenance projects like a new roof, for example.

Consider how you want to live your life over the next twenty-odd years before you agree to a mortgage.  If you don’t want to be tied down to your mortgage with little left over for much else, avoid becoming house poor and choose a comfortable payment for an affordable house.  Homes often require so many surprise expenses and people get into further financial trouble when they must pay for those expenses by credit.  Instead, live comfortably and don’t be enslaved by your monthly mortgage.

Donald Ayers is a property investment consultant. He enjoys blogging where he gets to share his insights on the industry with others.