Don’t End Up Being House Poor

Couple having not enough money

Couple having not enough moneyIf you’re thinking of buying a new house, you should strive to avoid being house poor. People who are in this situation may have grand or extravagant homes, but in reality, they don’t have any other asset apart from their property. This is a result of overextended borrowing or buying too much house of what they can actually afford.

Rich and not-so-rich people can become house poor if they bought a house that is way out of their salary or budget. A rich person, for instance, could buy an enviable home, but then struggle to make mortgage payments because of living or maintaining an extremely extravagant lifestyle.

Primary Residential Mortgage Guilford and other mortgage lenders in Guildford share how you can avoid ending up house poor:

Choose a loan below your maximum pre-approved amount

After getting pre-approved and finding out the amount the lender is willing to loan, it’s best to shop for homes below the maximum amount. You may want to determine the monthly payment that works best for your budget and salary. You should also borrow a loan that lets you own a house while still being able to enjoy some luxuries in life.

Mind closing and other associated costs

Down payment and monthly loan payments are not the only expenses you need to shoulder as a homebuyer. You should also mind closing costs, which can be around 2% to 5% of the home’s purchase price. Other expenses you need to consider include private mortgage insurance (if your down payment is less than 20%), property taxes, homeowner’s insurance, maintenance, and utility bills.

Be careful when buying a house that needs renovation

If you’re thinking of buying a house that needs a lot of work, you have to remember that the cost of renovation can be bigger than what you expect. This is especially true if you don’t have any experience in this aspect and you’ll need to hire contractors to do the job. It’s best to ask yourself if you have the cash ready to do the renovation or if it’s better to buy a livable house and renovate in the future.

It’s never advisable to have all or most of your income tied on housing expenses. Be sure to do some research first and work with a reliable lender can who help you make an informed decision.