Alexander Chandler Realty's Fort Worth, TX Real Estate Blog

Being house poor has little to do with the cost of your house. You might live in a stylish residence valued at $3 million, and you would still be considered house poor if your house takes up a disproportionate ammount of your income. Generally, you're perceived as house poor if you devote too much on your house payments and home repair. But what exactly is too much?

While you can find some rules of thumb by which lenders assess the reasonableness of your real estate costs, the valuation of your property and the ammount of your mortgage payment are only half of the picture.

You're deemed house poor if your housing costs keep you from:

* Saving the equivalent of 3 to six months earnings in an unexpected emergency money reserve account
* Setting money aside for your retirement
* Acquiring a diversified investment account
* Budgeting for various other life events, such as paying for your child's education and learning
* Choosing the furniture you want for your new home, or eating at any place other than in your new kitchen

If you're considering buying a home, do some quick planning to prevent becoming house poor. Talk with a financial specialist who can help you clarify your objectives and come up with a strategy for reaching them. Review your budget with an eye toward lowering discretionary charges and saving more toward your goals.

As you go through the mortgage preapproval procedure, see just how much you are eligible for on the basis of just your normal yearly earnings, without considering overtime, bonuses, part-time employment, or alimony or child support you receive. That way, even though you may not meet the criteria for as significant a mortgage as you would otherwise, you'll be in a healthier position to pay for the home you buy, and you'll prevent the additional stress of constantly juggling your financial obligations.

Be very cautious about using imaginative financing measures, such as interest-only mortgages or optional ARMs, to purchase more property than you can really pay for. If home valuation increases decline and interest rates heat up, you could find yourself stuck between the rock of making the mortgage payment every month and the hard place of not being able to sell the residence for enough to cover paying back the loan that secures it. You don't want to lose your home to foreclosure because you bit off more now than you can chew.

Finally, resist the urge to buy a house with an eye toward making a killing in just a few years on its expected appreciated value. Think of your residence as a necessity--a place to live -- as opposed to a speculative investment.

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