What is House Poor?
Poor house is a term used to describe a person who spends a large portion of their total income on home ownership, including mortgage payments, property taxes, maintenance and utilities. People in this situation lack money for discretionary items and tend to have trouble meeting other financial obligations, such as vehicle payments.
Poor households are sometimes also called rich in housing, poor in cash.
Key points to remember
- A housing poor person is anyone whose housing expenses represent an exorbitant percentage of their monthly budget.
- People in this situation lack money for discretionary items and tend to have trouble meeting other financial obligations, such as vehicle payments.
- Poor people may consider limiting discretionary spending, taking up other work, saving money or selling to ease their financial difficulties.
Understanding the poor of the house
A person poor in housing can be considered as any person whose housing expenses represent an exorbitant percentage of their monthly budget. People can find themselves in this situation for several reasons. In some cases, a consumer may have underestimated their total costs. Alternatively, a change in income can be the reason why housing expenses have become overwhelming.
Buying a home is part of the American dream and many homeowners are looking to become homeowners because of the many benefits it offers. Making payments to property can be a good long-term investment. That said, it can also quickly get sour if you’re having money problems and fail to account for the number of unforeseen costs that often arise when you make such a large commitment.
To avoid becoming poor, future homeowners should not let their dreams take over. They can start by considering the following unwritten directives:
- The maximum you should spend on a home should be 2.5 times your total gross salary. Of course, you could earn more in five years. However, you could also find yourself unemployed.
- Make sure you choose the right mortgage. If you don’t want to be caught by unexpected payment increases, choose a fixed interest rate.
- Payments should not exceed a quarter of your income.
- Keep some money aside for unexpected circumstances, such as maintenance fees or sudden changes in your financial situation.
House poor requirements
Experts estimate that consumers should plan to spend around 25% of their net salary on expenses. Alternatively, in the rare event that a homeowner has few other expenses or no additional debt, he could potentially spend up to 30%.
The general rule is that mortgage payments should never exceed 28% to 33% of your income. If you have other debts, your total debt to income ratio, all debts divided by income, should be less than 40%.
If a person spends more of their income on owning a home, they are most likely considered poor housing.
House Poor Methods
In some cases, unexpected circumstances can arise that make housing payments difficult to manage. Losing a job or having a child can completely change a household’s spending prospects, making them poor in the home with difficulty making mortgage payments.
If this happens, consumers may need to consider different options.
Limit discretionary spending
First, if housing expenses seem overwhelming, there may be areas of the budget where you can cut spending. Maybe canceling a vacation or swapping cars for a cheaper vehicle might help.
Take another job
If it appears that spending has gone over budget, many consumers will be willing to accept second jobs or secondary jobs that can help pay the housing bills.
Immerse yourself in savings
When buying a home, investors should open a savings account. Saving a little each month for unforeseen problems, such as home maintenance and repairs, can make a big difference, especially when people are running out of money.
If none of these options seem feasible, consumers still have the option of selling their home. The sale can allow you to move to a cheaper area or find a rental home with lower payments. While selling is not your best option, it does help you get the funds you need and potentially save money to buy a new home in the future.