Buying a home is typically a good investment. However, sometimes buyers invest too much in their dream home and end up struggling to make ends meet. This unfortunate circumstance is often termed as being “house poor” and happens when buyers choose a lifestyle and home that are above their means.
However, working closely with mortgage companies to clearly understand how their home loan aligns with their finances can help buyers avoid this outcome. The first step is to make sure the home is within budget. The general rule is that monthly mortgage payments should be no more than 28 to 33 percent of the borrower’s monthly income. However, there is more to consider than finances.
Avoiding becoming house poor also means only buying a house when you’re truly ready. If moving in less than five years is a strong possibility, it may be smart to rent for the time being. Also, be sure your current income supports a mortgage payment and will continue in the future. Many people take paycheck hits and suddenly find they can’t afford the house they once thought was within their budget.
Don’t forget that a home also requires maintenance and upkeep. These will be costs that should be budgeted out each month in addition to any other payments. Keeping all of these things in mind while working with mortgage companies can save you from ending up “house poor”.
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