Do Not Be House Poor!
Just Because You Can Doesn't Mean You Should!
Have you ever heard that saying before? I know I have ... several times. From my parents saying it to me saying it to my kids! Just Because You Can ... Doesn't Mean You Should!
So what does that have to do with today's blog - Do Not Be House Poor! Well, you see a friend of mine, and the CEO of a publically traded real estate brokerage, posted about how there are conversations going around about being house poor is nothing more than a myth and that buyers should, in essence, buy the most they can afford according to their lender. Folks...to say that being house poor is a myth and that you need to buy as much as you can possibly afford is downright wrong!
So what is House Poor? It means that a large portion of your total income is on homeownership:
- You regularly worry about whether you’ll be able to afford your monthly mortgage payment
- You frequently have to dip into savings to cover the full monthly payment
- You don’t have an emergency fund saved up and you don’t have enough money left over each month to start contributing to one
- You don’t have the space in your budget to contribute to a retirement fund
- And the list goes on!
Now, why are we writing about this since you do not own a home yet? As an active REALTOR® in our community and being active in national groups, we are seeing a trend. The trend that we are seeing with REALTORs®, and this is my opinion, is that the only thing that matters is the commission they will be earning and not advising the client properly. You see, the difference between a buyer purchasing a home for $300,000 versus $400,000 can be as much as an additional $3,000 in income for the agent. For the new homeowner that can be a difference of several hundred dollars a month in payments. This does not include the higher taxes on the property, homeowners insurance, and upkeep of the property.
As REALTOR® we have a responsibility to you the buyer to help advise you and your needs not to our wants and needs. Granted we are also obligated to do as you ask (within limits of course) but we should always come from the advisory position. If you are qualified by your lender to a max of $425,000 but you let us know "we really want to keep our purchase price under $400,000", that is what we are going to do. We are going to show you the properties that YOU are interested in seeing and within the budget that YOU are looking for. All REALTORs® should be doing that ... and so should your lender! Remember that just because you can does not mean you should.
Set a realistic budget and stick with it. Take into consideration the down payment, interest rate, property taxes, etc. A rule of thumb is to keep your housing expenses to around 28%. Again just because you can go higher does not mean you should!
Our clients come first. Not our profits! We will be and want to be your trusted advisor today and in the future! Remember... Do Not Be House Poor!