‘House poor’ refers to spending a large percentage of income on housing, leading to financial strain and limited discretionary income. It can result from buying a property beyond one’s means or underestimating costs. This can strain relationships and credit records. To avoid this, people should buy wisely and choose a home they can afford.
When a person is said to be ‘house poor’, it means that they spend an unusually large percentage of their income on housing. The term is usually seen specifically in reference to the costs of home ownership, which include mortgage payments, insurance, and maintenance, although renters can also be home poor. Because a household-poor person devotes so much income to housing, she may find it difficult to meet financial obligations, and discretionary income is usually limited.
Classically, people become poor when they are encouraged to buy a property they really can’t afford. In extremely expensive real estate markets, people may be forced to pay a high price to find a property that meets their needs, and they rationalize the purchase by arguing that rents are equally high and that they need somewhere to live. People can also become home poor by simply straining their means and buying the home they think they deserve, rather than being realistic and choosing a property they can comfortably afford.
It’s also not uncommon for people to become poor because they underestimate the costs of home ownership, and unscrupulous real estate professionals and bankers may encourage people not to look closely at the costs of owning a home. For example, people might look at a mortgage payment and believe they can realistically afford it, but don’t think about the cost of utilities, home maintenance and insurance, which means they quickly find themselves under water.
The big problem with being poor in a household is that it strains finances to the breaking point, making people very vulnerable to things like job loss, rising cost of living, or changes in family circumstances, such as a divorce, where a homeowner is no longer supported by a dual income. It’s usually difficult to save money for unexpected events or for long-term investments like retirement funds and colleges, with all discretionary income going back into the house, and this leaves people in an unstable financial position.
Being poor at home can also strain relationships. When people don’t have money to spend on vacations and occasional entertainment, they can become very stressed, seeing home and relationships as a burden. Especially if one of the people in the relationship pushed harder than the other to buy a particular home, the relationship may not be able to survive. Credit records can also be put under strain in this situation, as people may not pay their bills on time and could eventually face foreclosure or foreclosure.
People can avoid becoming poor by buying wisely, by selecting a home they can comfortably afford, or by renting until they have the money to buy. Some warning signs that people may be making a poor real estate decision include having a very low amount of money for a down payment, being left with no money in reserve after handling down payment and closing costs, or feeling stressed about the amount of any loan installments.
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