More Than 1 in 4 U.S. Homeowners Is House Poor. Here’s How to Afford Your House AND Living Life

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Don’t let the cost of homeownership make the rest of your life miserable. Read on to make sure you’re not about to take on too much house. 

Buying a home has a host of benefits. Not only do you no longer have to follow a landlord’s rule, but you get to build equity in a place of your own. But a recent New York Times article reveals that 27.4% of homeowners are cost-burdened, or “house poor.” And that’s a scenario you’ll really want to avoid.

You don’t want your home to become a burden

Taking on too much house can have serious financial consequences. For one thing, it might result in a scenario where you fall behind on your mortgage payments and risk losing your home. That won’t happen right away, but if you miss enough mortgage payments, it could result in foreclosure.

Even if you manage to keep up with your mortgage payments, if you take on too much house, you might risk falling behind on other bills, whether it’s utilities, car payments, or personal loan payments. You might also end up having to cut back on many of the things you love, like travel, social events, or dining at restaurants. Scaling back in those areas might seriously impact your quality of life.

How to avoid becoming house poor

Having a comfortable home could make your life better. But not having any money to spend on the things you enjoy might have the opposite effect. As such, it’s important to do what you can to avoid becoming house poor.

As a general rule, you can steer clear of that fate by keeping your housing costs to 30% or less of your take-home pay. That won’t guarantee that you won’t struggle to keep up with your housing costs, but it might lower your chances of that happening.

To be clear, though, when we talk about housing costs, it’s not just your mortgage payments you have to take into account. That 30% limit should include peripheral expenses like property taxes, homeowners insurance, and HOA fees, should they apply to you. Basically, you want to include any predictable expense you’ll be on the hook for in that 30% threshold to buy yourself a decent amount of flexibility.

Of course, given how high mortgage rates and home prices are today, you might have a hard time finding a home that allows you to stick to that 30% limit. If that’s the case, you may want to consider putting off homeownership until your income increases or the cost of buying a home or signing a mortgage comes down.

Now, you may have some wiggle room with that 30% limit if you have other major expenses that are notably low. If you’re looking at buying a home in a walkable city where you won’t need a car and your public transportation costs will be minimal, then you may be okay to spend more like 40% of your income on housing, since you’re spending virtually nothing on another major expense.

But otherwise, don’t make the mistake of buying a home that will leave you house poor. Going that route could result in a world of regret and financial stress.

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