2 Ways You Can Avoid Becoming House Poor
Buying a house is a very exciting time. Many people get caught up in the excitement of purchasing a new home without considering all of the financial implications. In fact, by not thinking it through, you could easily become house poor, which means you are throwing everything you have into the house. Here are some things that you can do to prevent becoming house poor and still get the house that you want.
1. You Decide Your Budget
One of the biggest mistakes people make is letting someone else tell them what they can afford. You know your personal budget and you know where you want your money to go. For instance, when you apply for the loan with a bank they will come back with a number of how much they will loan to you. You might have decided you wanted to buy a house in the $200,000 range and they came back with a number close to $400,000. You might feel as though you just won the lottery and go shopping for a house around $400,000. What many people don't realize is that although the bank will loan you that much, you are the one who has to make those payments.
Instead, take your time to decide exactly how much you want to put toward your house payment each month. Decide how much you want to put elsewhere like toward retirement, vacation funds, food, clothing and so forth. That way when you purchase the house, you won't have to pull from another fund, like retirement, to make your payments each month.
2. Don't Forget About Additional Costs
Another mistake that people make is forgetting about all the extra expenses associated with owning a house. For example, if you purchase a larger house, your utilities will be far more than if you were to purchase a smaller home. You will spend more money in electrical and gas to heat and cool the house. In addition, if there are more bathrooms, your water bill will be larger as well.
You also have to recognize that there will be costs for caring for the yard, furnishing the house, and so much more. You may have to pay someone to mow your yard, buy lawn equipment, buy more couches and beds cause you have more rooms now and so forth. All of these things must be considered with the house that you buy.
By considering these things you can avoid becoming house poor.