I’m a Real Estate Agent: 5 Warning Signs You’re About To Be House Poor With Your First Home
Written by
Laura Bogart
Edited by
Kristen Mae
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After years of saving, waiting, and hoping for the right house to come along, you finally found your dream home. The keys are in your hand, and you’re gazing into the space that will soon be your living room. The place where memories will be made.
Well, once you can afford new furniture. Looking at your budget, you might need to sit on your worn-out old sofa for a while — a long while. And your grocery list will likely have to include a whole lot of ramen. After closing costs and paying your monthly mortgage, you’re tapped out.
Unfortunately, you’re now “house poor” — all your financial resources are going into your home at the expense of everything else, from groceries to emergency savings to your retirement.
Your beloved home has become a financial burden. But there are ways to avoid falling into this trap in the first place. GOBankingRates talked to real estate agents to learn how you can spot the warning signs that you’re about to become house poor — and how to steer clear of it.
1. You’ve Taken the High End of Your Preapproval
For Levi Rodgers, retired Green Beret, real estate broker, and founder of The Levi Rodgers Real Estate Group, one of the most common and significant red flags he sees is when buyers eagerly jump to the higher end of their preapproval sum from the bank.
They don’t realize that just because the bank is willing to loan them a certain amount doesn’t mean they should spend all of it.
“That number’s usually calculated based on gross income and has no regard for things like rising cost of utilities, the age of the roof, or if the HVAC is in pain,” Rodgers said. He’s seen people get their dream house, only to be so strapped for cash they can’t even afford a couch.
His advice? Flip your thinking. Figure out how much you’d like to save per month, as well as how much you need to live like you want to — not just scraping by. That might mean buying less house, but it also means buying peace of mind.
2. Housing Costs Are Eating Into Your Gross Income
If anyone understands how easy it is to get caught up in the excitement of buying your first home, it’s Fred Loguidice, real estate expert and founder of Sell My House Fast LI. He’s seen many eager families unintentionally leave themselves vulnerable to becoming house poor. He has a simple rule of thumb that can tell you if you’re headed toward that threshold.
If your monthly housing costs exceed 30-35% of your gross income, you could be in for some financial trouble.
“That includes your mortgage, property taxes, insurance, and HOA fees,” Loguidice said. “Once you cross that line, you’re in risky territory. It might still work on paper, but you’re limiting your financial flexibility.”
3. You’re So Eager To Close That You Cut Corners
Buying a home is an emotional decision, and it’s all too easy to fall in love with a space. But, like any time you go all heart-eyes, logic can go out the window.
Loguidice has seen buyers skip critical steps like the home inspection or waive other contingencies just to win a bidding war. But skipping a home inspection can open the door — quite literally — to costly repairs down the line.
“If you’re sacrificing your financial safety net just to get the keys, it’s time to pause and reassess,” he said.
4. You’re Charging All Your Household Essentials
What’s the point of having a beautiful new home if everyone you invite over has to sit in folding chairs? Or, to furnish your home — and not with Williams Sonoma treasures, but a basic sofa — you’re going into credit card debt?
“If you’re swiping credit cards to buy a couch or fridge, that’s a big red flag,” Loguidice said. “You want to move into a home with enough financial breathing room to make it livable without going into debt.”
5. You Can’t Contribute to Your Emergency Fund
Everyone needs an emergency fund, but if affording your house prevents you from regularly contributing to yours, then you’re at risk of becoming house poor.
“If your house payment leaves no room to save, a single unexpected event — like a job change, medical bill, or a new roof — could create serious financial stress,” Loguidice said.
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Sources:
- Levi Rodgers, retired Green Beret, real estate broker, and founder of The Levi Rodgers Real Estate Group
- Fred Loguidice, real estate expert and founder of Sell My House Fast LI
