Even if they’re building equity with their home, their budget is stretched thin, with a little left over for other important expenses. Being house poor makes it difficult or impossible for them to achieve their other financial or personal goals, such as building a retirement fund, paying off debt, or enjoying life in general.
In a recent survey by ConsumerAffairs, 69 percent of homeowners consider themselves house poor. The survey defines house poor homeowners as having little savings left after paying their mortgages and associated monthly expenses. Moreover, 54 percent reported that house-related expenses were their largest financial burden.
Maybe you and your spouse decided that one of you will quit your job to become a stay-at-home parent. This setup could significantly change your financial situation since you’re dependent on one income source.
Likewise, a major change in your circumstances, such as a loss of a job or an unexpected illness, may stretch your budget to the max and make it even more difficult to pay your housing expenses.
You regularly worry about whether you’ll be able to afford your monthly mortgage payment.
You keep tapping into your savings to cover your mortgage payments.
It’s becoming difficult for you to cover other expenses, such as groceries and transportation.
You don’t have an emergency fund and can’t afford to start one because there’s no space in your budget.
You feel that the cost of homeownership prevents you from pursuing your other wants and goals, such as traveling to new places or even engaging in a new hobby.
HOA dues
Property taxes
Maintenance, including gardening, pool service, snow removal, house cleaning, tree removal service, etc.
Any potential repairs, like a leaky roof or water damage after a storm
Especially if you will be transitioning from being a renter to a homeowner, remember that there won’t be a landlord who will cover many of these costs.
This is another reason to never skip a home inspection. Some buyers in crazy markets have been waiving property inspections to be able to sweeten their offer and shorten their closing date. However, a home inspection is highly recommended since it will help you discover all the current problems and potential issues before you sign on the dotted line. The seller might get the issues fixed before closing, or you will receive a price reduction to cover those repairs yourself. But if not, at least you have an estimate for repair expenses and can determine whether they fit comfortably in to your budget. For example, you can figure out if the roof is nearing its lifespan, or maybe the cracks in the foundation are early signs of structural damage.
Moreover, there’s no need to pay for private mortgage insurance, which lenders use to protect themselves in the event you default on the loan if you can put 20 percent down. This can save you thousands of dollars over the life of the loan. You just need to make sure that this option doesn’t deplete your savings.
Despite the difficulties, 53 percent of correspondents from the ConsumerAffairs survey said that homeownership is difficult but better than other options, including renting. This shows that even though buying and maintaining a home can be costly, for many, homeownership is still the right decision over the long term, and is still worth it in the long run. Remember to do your research before stepping into the frenzied real estate market. By understanding the pros and cons of homeownership by hiring a local and experienced real estate agent to help you get the best deal, you can enjoy the long-term benefits of owning a home and be proud to call yourself a homeowner.
