Buying a Home and NOT Being House Poor

The best way to Keep from Becoming House Poor

Becoming house poor has little to do with the valuation of your property. You may live in a beautiful house worth $6 million, and you would still be considered house poor if your house takes up a disproportionate ammount of your salary. Typically, you’re deemed house poor if you devote too much on your home payments and home upkeep. But what’s too much?

While there are several rules of thumb by which lenders assess the reasonableness of your real estate costs, the valuation of your property and the ammount of your mortgage payment are only half of the picture.

You’re viewed as house poor if your property costs stop you from:

• Saving the equivalent of 3 to 6 months income in an unexpected emergency money reserve account
• Planning for your retirement
• Accumulating a diversified investment portfolio
• Budgeting for additional life events, such as paying for your child’s schooling
• Buying the furniture you will need for your new home, or eating anywhere other than in your new kitchen

If you’re thinking of buying a Fort Worth home, do some early planning to prevent becoming house poor. Talk with a financial professional who can help you clarify your goals and come up with a method for meeting them. Examine your budget with an eye toward trimming discretionary expenditures and saving more toward your objectives.

As you go through the mortgage preapproval procedure, see how much you meet the criteria for on the basis of just your normal yearly income, without thinking about overtime, bonuses, part-time employment, or alimony or child support you collect. That way, although you may not qualify for as significant a mortgage as you would otherwise, you’ll be in a much better position to afford the home you buy, and you’ll avoid the added stress of constantly balancing your financial obligations.

Be very cautious about using creative financing measures, such as interest-only mortgages or optional ARMs, to buy more property than you can otherwise pay for. If home valuation increases decline and interest rates rise, you may find yourself stuck between the rock of making the mortgage payment each and every month and the hard place of not being able to sell the property for enough to cover paying back the loan that secures it. You don’t want to lose your home to property foreclosure because you bit off more now than you can chew.

Finally, resist the urge to purchase a home Fort Worth Real Estate with an eye toward making a killing in a couple of years on its anticipated appreciated worth. Think of your home as a necessity — a place to live — rather than a speculative investment.

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