How to avoid being ‘house poor’

One of the 21st-century crisis is being ‘house poor’, which means that your housing cost consumes most of your income and leave you with very little to spare. With a little planning and financial management, you can save yourself from this sticky situation. Read on to learn more.

Do solid research

When you narrow down on the neighborhood, find a really good real estate agent who will give you accurate insights on topics such as market trends, realistic budget, and what can you get with reasonable risk tolerance. You must use all of this information in determining your real budget and make a realistic offer on the home of your dream.

Know your mortgage well

Though a monthly mortgage installment comes up as a lump sum value, it comprises several components. There is a principle that you own to the bank for the home purchase, then there is interest payment i.e., the cost of borrowing the money. There are other components like brokerage, property taxes, insurance to name the key ones. Once you know them, you can play around with these variables to maximize value.

 Have as much cash as possible

The math is simple. The more you pay upfront, the less you will owe to the bank in form of principal and interest payouts. Moreover, at the time of purchase, many small but significant expenses crop up and have to be covered to get the key to the house. This will help you protect your monthly budgetary plan.

 Don’t run for the dream home

The realistic option is to go for a house that fits your budget well and doesn’t crush you with weighty EMIs. Your first home doesn’t have to be the dream home you would want to live your life forever. Go for starter home ideas such as single-family homes, slightly far away from downtown, etc.

Don’t forget about home maintenance

This is something that people ignore while buying a home and get a solid surprise later. When you buy your own home, there is no landlord to take care of a leaky faucet or broken tile; you have to account for all of these unplanned expenses. Another important component is the monthly maintenance that is quite substantial especially in plush gated societies!

To sum it all, choose a starter house, pump up down payment, optimize the bank loan and save cash for periodical expenses and surely dodge being ‘home poor’.

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