3 Tips to Avoid becoming House Poor
The term "house poor" is when a house is so expensive that it's difficult to buy groceries, utilities, home repairs or medical emergencies. "Buy as much house as you can afford," is a common adage, but I've always recommended to buy under your max price point to avoid becoming house poor.
First, don't assume that your income will go up every year. You may not get that raise or you could have a job loss. Stay within your means and try to save some money each month for repairs or medical emergencies.
Second, don't over-improve the home. Make sure improvements keep the home in line with your neighborhood market. If you have to sell the home, you want to be able to recoup the costs you put into it.
Third, watch your homeowner's insurance premiums, property tax bills and mortgage interest rate. Insurance premiums can go up as your home value increases or ages. It's wise to a get updated insurance quotes every so often to see if you can save any money on the premium.Â With property taxes, make sure you pay attention to your assessment. If it prices your home unfairly, you can challenge it. Watch the interest rates, they are historically low right now so consulting a mortgage professional is a good idea to see if there are any benefits to refinancing. If your budget is tight, even $100 a month can put you in less danger of being house poor.
Robert Groves, Senior Mortgage Broker
5635 N.E. Elam Young Parkway, Suite 308
Hillsboro, OR 97124