Imagine this, you find yourself with no extra money to pay for emergencies, cover your expenses, or even money to save for the future because the mortgage payment you have is too big. Now you are house poor. To be house poor it means that your mortgage payment above 30% of your take home pay. Experts say your mortgage should be at most 25% of your take home pay, unless you have no critical debt then 30% could be doable. However, anything over that amount and you could be house poor. Now you can become house poor over a variety of reasons but no matter what the situation, it’s imperative to get yourself out of that situation as soon as possible. The first thing you must ask yourself is what could be the cause of this. Was it something that happened later after you bought the home? Did you not expect the payments to cost as much? One thing that is super important before buying a home is to make sure you can afford it financially. Make sure to take into consideration all of your finances beforehand.
If you come into a situation where mortgage payments are beginning to be too much and you’re at a point where you might consider yourself house poor a question to ask yourself is whether or not the situation is temporary. If you think that this situation is going to last more than 3 years you should begin to consider other options because being house poor can take away from your other financial goals including retirement and any sort of savings. If you truly want to keep this home you will most likely have to start making some short term sacrifices. Anything that will bring you extra income to keep you afloat will help. If you are not able to make enough income month to month to make the payments you may be at a point where selling might be more ideal. Once you know this you will want to put it on the market as soon as possible. At all costs you want to avoid rushing the selling process.
If you rush it, you may not get an offer that will suit what your home is worth. if you rushed while selling your house you may get desperate and accept a low ball offer, you want to get the most out of your house so don’t decide the day it needs to be sold. Here are some tips on how you can avoid being house poor. Make sure that you have a budget set and stick to it when you are buying a home. Make sure your payment is at most 25% of your take home pay and set your maximum house budget at 2.5 times your salary. I hope this helps if you find yourself in this sort of situation and if you come to need anymore advice when it comes to real estate, please feel free to contact any of our agents. We would all be more than happy to assist you.