HOW TO AVOID BEING “HOUSE POOR”

Written By Jennifer Wilson

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After working with hundreds of buyers, one of the most common phrases a buyer would use was “House Poor”. But what does this mean? Being “House Poor” is essentially using a large portion of their monthly income on housing expenses. Aside from a mortgage, this could also include other costs such as utilities, taxes, homeowners insurance, HOA payments and even maintenance of the home. Being ‘house poor” makes it difficult for them to achieve their other financial or personal goals, such as paying off debt or enjoying life in general. Did you know that 69% of homeowners feel “house poor”. 3 in 5 homeowners are sacrificing home-related essential  in order to afford their housing costs. 3 in 5 homeowners also didn’t expect repair, maintenance or upkeep costs to be as high as they are.

Many first-time home buyers fail to understand and consider the costs associated with buying and owning a home. So how can we prevent this?

1. Do your homework before buying

Aside from calculating down payment, closing costs and expected mortgage payment. Consider the following items as well: Utilities, Property Taxes, HOA dues, Potential repairs like a leaky roof, and maintenance of the property including tree trimming..

2. Know how much house you can afford

It’s important to figure out how much house you can afford, which may be different than what you can get an approved loan for. Even if you qualify for a higher mortgage loan, doesn’t mean you have to accept the full amount. Experts actually advise buying less house than you can afford but still meets your needs. Never go beyond your price range and stick to your budget.

3. Plan for maintenance and repairs

Even if you purchase a brand new home, it will inevitably need a big-ticket repair over the years. A home warranty is helpful to cover some of the unexpected breakdowns, but you can’t rely on it past a year or two. Don’t ever skip a home inspection. This will help you discover all current issues and any potential issues that may arise down the line.

4. Building a housing emergency fund

Setting aside money every month strictly for housing expenses is a good idea. This emergency fund will provide a cushion to cover unexpected circumstances, including even a job loss.

5. Make a larger down payment

Making a larger down payment will reduce the amount you need to borrow; therefore lowering your monthly payment. This also makes you considered a less risky loan, which results in a lower interest rate. You will also not need to pay private mortgage insurance with a larger down payment which can save you thousands over the life of the loan. Just make sure this doesn’t deplete your savings.

Buying and maintaining a home can be costly, for many, home ownership is still the right decision over the long term and is still worth it in the long run. Understanding the pros and cons of home ownership is important. You can always confide in a trust Realtor on helping you get the best deal.

 

 

 

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