How to Avoid Being House Poor
Our team at Tailored by Woodhill is dedicated to helping those in our communities create homes that fit their lifestyle and budget. Your home should be a safe haven, not a financial burden.
Unfortunately for some, buying a home has put them in a situation where they are considered house poor. What does it mean to be house poor? Put simply, this term refers to a situation where a person has purchased a home that they cannot comfortably afford. Typically, the term is used to describe someone who is spending a large proportion of their income on their home's costs, such as mortgage payments, property taxes, and home maintenance expenses. This leaves little room for other expenses, which can cause financial stress and make it difficult to maintain a comfortable standard of living.
Like we said, your home should provide you comfort, not added stress. That’s why we want to share some ways that you can avoid finding yourself in this situation when house hunting in the future.
Determine a Realistic Budget
Before you begin house hunting, it's important to determine how much house you can afford. Consider your income, monthly expenses, debts, and other financial obligations. You can use online mortgage calculators to get an idea of what your monthly mortgage payments may look like. Bear in mind that the number your bank offers to you as a loan does not take into consideration what would be a comfortable amount for you to spend monthly. So, this is something you should determine after considering these additional monthly costs.
Don't Stretch Your Budget
It's important not to stretch your budget too thin when house hunting. Keep in mind that unexpected expenses can arise, such as home repairs or medical bills. You should also consider your long-term financial goals, such as saving for retirement or your children's education. Even if you do not have children, budgeting to allow for a savings fund will help you deal with unexpected expenses without undue stress.
Calculate Additional Costs
In addition to the mortgage payment, there are other expenses that come with owning a home, such as property taxes, insurance, utilities, maintenance, and possibly HOA fees. Calculate these additional costs and make sure you can afford them before purchasing a home.
Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage can help you determine how much house you can afford and give you a better idea of what your monthly mortgage payments will be. But like we touched on, remember that the number your bank is comfortable lending you may not be the number you are comfortable spending.
If you keep these points in mind when house hunting, you can avoid becoming house poor. If you want a custom tailored home and experience, contact our team today. We would be happy to help you create a home that matches your needs and budget.