What is it like to be “house poor”?
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Anonymous
Honestly, that seems like a stretch to me. You have other monthly expenses that you are not thinking about. Our monthly net is almost twice yours, our kids are older and in private school but otherwise we are in a fairly similar place and we capped our budget at $1.5M. |
Anonymous
What do you all consider "house poor"? I understand that it varies person to person/budget to budget, but whats a good ballpark on your definition? PITI more than 30% of gross? more than 40%? |
Anonymous
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A lot depends on how old you are and where you are in your career. If you are young and/or at a place in your career where you expect your incomes to increase (either with escalating bonuses or just base salaries) then this is totally doable. But get your mind right. We did this about 20 years ago. Bought a place that we could afford...but just so. We were both in careers where we expected incomes to increase. We didn't eat out. We didn't go on vacations. We kept our one car and never considered a new one. We had bare bones cable. We didn't furnish anything other than what was necessary.
It turned out to be the best decision we ever made. Our incomes increased and the value of the home skyrocketed. Bonus for us was that long after we were in super strong financial condition, we continued our good habits. We vacationed, but responsibly. And because we were living in way less house than we could then afford there was considerable excess for more 10+ years. That increased income went to savings that also was well timed. When we decided to trade-up we had a huge pile of liquid and a ton of equity. We bought, renovated and sold the other house. Our current house will be paid off before kiddos go to college. All because we were willing to stretch. Long ago one of my work colleagues (who made BANK) and was married to a biglaw partner told me you never know what life looks like behind closed doors. In her case, she and her husband were responsible for supporting a family member with special needs whose parents had long ago departed. That was a HUGE expense. The residential facility was consuming almost $200k (pretax) income annually. It is about your controllable expenses against income. If you assume every $100k in mortgage costs about $500/month, consider that the economics are a wash if you spend $200k more on a house or blow $1000/month on frivolous crap. Also, you have to live somewhere. I love talking to friends and family about the cost of starter homes in DC. They ask how or why anyone would buy a $700,000-800,000 starter home. I remind them that a 2 bedroom apartment or rowhouse could run them 3-4k, so it isn't $3500/month mortgage in a vacuum. |
Anonymous
| We lived this way for several years when I was in graduate school and then again after our first baby, when i was home full time for one year. It started to depress me in a subtle, but consistent way. If it can be relatively brief, (under a few years) i say yes. More than that....I found it was very depriving and it brought me down. Good luck |
Anonymous
I think there isn't a universal rule because it depends on income and other expenses. For instance, I have day care aged kids so 30-40% of gross is WAY too high, but that's because each kid's care is the equivalent of another mortgage payment. On the other hand, we have a low six figure HHI and we already don't have the disposable income for big vacations, eating out frequently, etc, or maxing out 401ks, so our current budget might look "house poor" to someone who makes a lot more. (Except it's not the house. We can't lower our housing payment by renting and downsizing, the mortgage is that low. It's the childcare.) |
Anonymous
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Sounds like a lifestyle choice. If you are frugal and used to not spending money, then you can do it.
If you are high maintenance and always spending, then no. On the other hand, plenty of people live without large amounts of disposable income |