{"id":707,"date":"2018-01-10T14:55:09","date_gmt":"2018-01-10T14:55:09","guid":{"rendered":"http:\/\/www.mikeclover.com\/blog\/?p=707"},"modified":"2018-01-10T14:55:09","modified_gmt":"2018-01-10T14:55:09","slug":"caution-dont-let-yourself-become-house-poor","status":"publish","type":"post","link":"https:\/\/www.mikeclover.com\/blog\/2018\/01\/10\/caution-dont-let-yourself-become-house-poor\/","title":{"rendered":"Caution \u2013 Don\u2019t Let Yourself Become House-Poor"},"content":{"rendered":"

\"Happy<\/a><\/p>\n

What is \u201chouse poor?\u201d It\u2019s that uncomfortable state of being in which you\u2019ve purchased \u201cmore house\u201d than you can comfortably afford.<\/p>\n

It\u2019s that state that prevents you from taking a vacation, going to a concert, eating out, or even eating the meals you\u2019d like at home.<\/p>\n

In other words, it\u2019s that state where you have to watch every penny, because every penny needs to go to that monthly mortgage payment.<\/p>\n

In general, financial advisers say you should not pay more than 30% of your pre-tax income for housing related expenses. That includes your mortgage payment, property taxes, HOA dues, homeowner\u2019s insurance, etc. According to a report by the Joint Center for Housing Studies at Harvard University, by those standards nearly 40 million U.S. homeowners are house-poor.<\/p>\n

Of course, whether that impacts you negatively depends upon your income and your other fixed or optional expenses.<\/p>\n

Meanwhile\u2026 why not be careful when you buy and avoid the problem? <\/strong><\/p>\n

Before you begin to shop for a home, calculate what you can afford. Do this by figuring your debt-to-income ratio. This is a comparison between how much you make and how much you owe \u2013 or will owe when the housing expense is factored in.<\/p>\n

Your mortgage broker can help you do this calculation, but do remember that your lender might not know about some of the optional spending that is important to you and your family.<\/p>\n

Debt-to-income, along with your down payment, your credit score, and your employment stability, is a factor lenders use in determining whether you\u2019ll be approved for a home loan \u2013 and if so, for how much.<\/p>\n

Remember that if you buy at the top of your allowable range, you could be putting yourself at risk of becoming house poor. While most of us expect our income to increase over time, sometimes unforeseen events come along to reduce our income. Be prepared for that.<\/p>\n

As you contemplate that purchase, note that your down payment will not be your only up-front expense. <\/strong><\/p>\n

You\u2019ll also need cash for closing costs, which typically range from 2% to 7% of the purchase price.<\/p>\n

Yes, in some instances the seller will cover some of these costs, but that is less likely in a tight market when there are more buyers than homes available.<\/p>\n

Here at Homewood Mortgage, the Mike Clover Group, we\u2019ll be happy to do the calculations and show you just what you\u2019ll need for a down payment and closing costs. Then, based on the interest rate we can offer, we\u2019ll help you determine the top price you should pay for a home.<\/p>\n

After that, remember that your mortgage payment, taxes, etc. are not your only household expenses.<\/p>\n

All homes require maintenance from time to time, and sometimes repairs are necessary. You\u2019ll also need to pay for utilities (which cost more, the larger the house is).<\/p>\n

Keeping an emergency fund is a wise idea.<\/strong><\/p>\n

None of us knows what the future will bring, and while we expect only good things, sometimes we get unwanted surprises.<\/p>\n

What if you (or your spouse) lose your job or become ill and can\u2019t work? What if the house needs some major repair? It\u2019s best to keep a reserve fund of 3-6 months\u2019 worth of house payments and living expenses, just to be safe.<\/p>\n

If you never have to use it, all the better. You\u2019ll have had peace of mind.<\/p>\n

Consider your overall dreams and goals before purchasing a house. <\/strong><\/p>\n

Yes, you\u2019ll either make a payment or pay rent each month, but before you use your savings to make a down payment, consider your other goals.<\/p>\n

Would you be better off saving to ensure a comfortable retirement? If retirement is coming in just a few years, would you rather save that money to purchase a motor home and travel the country?<\/p>\n

If you\u2019re a parent with school-age children – If you purchase now will you still be able to help your child get a college education? If you\u2019re about to become an empty-nester, would you like to have the option to pick up and move to a different climate \u2013 without having to wait to sell your home?<\/p>\n

Purchasing a home is a life-altering event, so consider all the angles before you make the decision.<\/p>\n

And then, if the decision is \u201cYes,\u201d give us a call at Homewood Mortgage, the Mike Clover Group. We offer some of the lowest rates and fees available in Texas, along with short closing times \u2013 all served with a smile.<\/p>\n

 <\/p>\n

\"mike-clover-group-email-signature-muy-grande\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

What is \u201chouse poor?\u201d It\u2019s that uncomfortable state of being in which you\u2019ve purchased \u201cmore house\u201d than you can comfortably afford. It\u2019s that state that prevents you from taking a vacation, going to a concert, eating out, or even eating … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/707"}],"collection":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/comments?post=707"}],"version-history":[{"count":1,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/707\/revisions"}],"predecessor-version":[{"id":709,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/posts\/707\/revisions\/709"}],"wp:attachment":[{"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/media?parent=707"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/categories?post=707"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mikeclover.com\/blog\/wp-json\/wp\/v2\/tags?post=707"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}