What Is House Poor and How to Avoid Becoming One

House poor, also known as house broke, is a term used to describe homeowners who can barely afford the typical expenses associated with their residence. It usually happens when homeowners have a high mortgage payment compared to their income or cash flow, or when they have little money left after paying off their mortgage and other home expenses. The homeownership costs drown out everything else.

You can become house poor no matter how much you earn if you are spending more on your home than your salary can comfortably cover. So, how does it impact your financial situation? And more importantly, how do you figure out if you are house poor? We will be covering that and more in this article.

How to figure out if you are house poor?

Your debt-to-salary ratio can help you figure out if you are house poor by measuring your income versus your obligations. Your debt-to-salary ratio is your monthly debt payments divided by your total monthly income.

Experts believe consumers shouldn’t spend more than 28% of their total income on housing expenses but it’s important to think about any debts a homeowner may have in such cases. Taking your mortgages into account, the ratio shouldn’t exceed 36% of your monthly income. This is called back-end debt-to-income ratio.

If you significantly exceed the back-end DTIs, you may very likely qualify as house poor.

What does being house poor mean?

Being house poor means you’re spending a huge chunk of your income on your home, at the expense of other needs. Often, it’s mostly the mortgage payment that causes this but other costs can have an impact too, such as:

  • Property taxes
  • Private mortgage insurance/FHA mortgage insurance premiums
  • Monthly maintenance
  • Utility bills
  • Standard upkeep expenses

All of these things adding up with your mortgage can leave you perpetually short on money.

How can you avoid becoming house poor?

If you are already house poor or think you might become house poor, there are some steps you can take to stop the situation from escalating completely-

  • Budgeting: Before you go ahead and buy a home, settle on how much you can afford to spend on it per month. Apply the 28 percent rule we have mentioned above.  28% of your income is the amount that you should not exceed in house-related expenses.
  • Over-finance: If you get preapproved for a loan, it can be tempting to ask for more money. Request the amount that you need, not the highest amount you can qualify for. More money would mean a longer repayment term and even higher interest rates. You might just end up with a bigger debt.
  • Be realistic: Don’t assume that your income will grow into the house. Center your house-hunting not on your dreams, but on what you have currently. 

What if you are already house poor?

If you are already house poor, these are some options you can look into-

  • Increasing your income: Is it possible for you to work a second job or sell some of your possessions? You can also think of a passive side hustle, like hosting Airbnb guests.
  • Lose the PMI: If you have more than 20% equity on your home, you can request to hold your private mortgage insurance payments.
  • Debt consolidation: Debt consolidation can help you reduce your monthly payments on various bills and credit cards. But you might end up paying a bigger amount throughout the debt payments.
  • Downsize: If nothing works out, it’s completely okay to shift to a house that is more affordable for you. There’s nothing wrong with that. You can always start over with a new home.


Buying a home is a dream for everyone but it’s not always possible to predict everything that comes with it. House poor is rather common in today’s economy. You may find yourself in this situation for several reasons. Maybe you underestimated the total cost or lost your job unexpectedly. These are things you can never predict. We hope this helps you feel less overwhelmed and get a better understanding of what it means to be house poor and how to avoid it entirely.

Facebook Comments

Be the first to comment

Leave a Reply

Your email address will not be published.