I often hear from people who, after buying their first home, quickly become overwhelmed by the financial burden of homeownership—especially when they purchase more house than they can realistically afford. It’s easy to get in over your head when buying your first home.
When we bought our first house, we were pre-approved for $150,000.
If we had bought at that amount, we likely would have become house poor—owning more home than we could comfortably afford. While $150,000 might not seem like much in some places, at the time it would have bought a solid starter home in St. Louis, where we lived.
That pre-approval felt risky because we were very young—around 20—and had modest jobs. Even though we both worked full time, our combined take-home pay was only about $30,000 a year, and I don’t think we should have been approved for that much.
Fortunately, we chose a much less expensive home because we didn’t want to be strained by mortgage payments we couldn’t manage.
Reports and coverage of housing trends show that buyers are spending more to buy homes. Many people are opting for larger homes, and that often pushes buyers beyond their true financial capacity. According to recent reporting, Americans spend roughly 37% of their take-home pay on housing on average. That’s a significant share of income, and if buyers don’t realize how that affects their finances, they’re at risk of becoming house poor.
House poor means you’ve tied up so much of your cash in mortgage and housing costs that you don’t have enough left for everyday living and unexpected expenses. While owning a home is valuable, failing to research the total costs beforehand can lead to serious financial stress.
Many people chase housing as a status symbol without considering the financial consequences. A nicer house doesn’t necessarily mean a better financial situation—often the opposite. Below are ways being house poor can limit your life and what to consider when buying a home.
Are you house poor or house broke?
Can you afford all of your home expenses?
Buying a home can easily make you house poor if you don’t account for the full cost of homeownership. Even if you can manage the mortgage payment, additional costs—insurance, taxes, utilities, maintenance—can push you beyond your means.
Before you commit, make sure you can afford every recurring cost that comes with the house, not just the monthly mortgage. Many buyers forget about ongoing expenses, and those add up quickly.
Industry data show that U.S. homeowners spend, on average, more than $9,000 per year in homeownership and maintenance costs. That includes about $6,042 per year in unavoidable costs (homeowners insurance, property taxes, utilities) and roughly $3,435 per year in optional annual costs (cleaning, yard care, gutter cleaning, carpet cleaning, pressure washing).
Think about how a home will affect you long-term. Consider these common expenses:
- Property taxes – These vary widely by location. Two similar houses can have vastly different tax bills, which in turn can add hundreds per month to your long-term costs.
- Gas – Many homes use gas for water heaters, stoves, and heating.
- Electricity – Larger homes usually mean higher electric bills.
- Sewer – Often a modest monthly bill, but it’s recurring.
- Trash – Another routine cost that adds up over time.
- Water (and possibly irrigation) – Water bills can vary significantly depending on usage and local rates.
- Home insurance – Premiums differ dramatically by region; you may need additional coverage for floods, earthquakes, or hurricanes, which increases costs.
- Maintenance and repairs – Even new homes require upkeep, and major repairs like roof replacement are expensive. Optional services like cleaning and yard care add to annual spending.
- Homeowners association fees – HOA dues and rules can be restrictive and costly.
- Home furnishings – A larger home requires more furniture and household items; owning an expensive house without furnishing it is impractical.
Always add up the total cost of ownership—not just the purchase price—before deciding on a home.
Can you still afford the rest of your life?
If a large portion of your income goes to housing, you’ll have less money for other goals and pleasures. This can derail plans like early retirement, travel, career changes, or pursuing dreams. Being house poor can leave you feeling trapped by monthly payments and limit financial freedom.
Common consequences of being house poor include:
- Delaying or being unable to retire when you want.
- Missing vacations or other life experiences.
- Feeling stuck in a job you dislike because you need the income.
- Being too afraid to take risks that could improve your life.
- Inability to afford other priorities or emergencies.
- Persistent stress and lack of financial flexibility.
Will the house add stress?
Mortgage lenders often approve loans that push monthly payments to 30%–35% of gross income, and in some cases as high as 50%. While high-cost cities may make these percentages common, in most situations keeping housing costs lower reduces stress and vulnerability to job loss, unexpected expenses, or reduced income.
Even when our mortgage was about 25% of our income, I felt uneasy. The lower your housing costs, the more resilient you are to life’s ups and downs.
If you are house poor and want to change your situation, consider options like renting a room, reducing living expenses, or increasing income through side work to ease the burden.
If you haven’t purchased a house yet
If you’re planning to buy, take steps to avoid becoming house poor. Ask important questions about affordability and your long-term goals. A helpful approach is to answer practical questions before buying—can you truly afford a house, and are you accounting for all the factors involved?
I recommend buying less house than the maximum you’re pre-approved for. Lenders don’t determine what you can truly afford; they calculate a limit based on formulas that don’t reflect your personal comfort level or financial priorities. Many buyers are approved for more house than they should realistically purchase.
Pre-approval is a tool, not a directive. Don’t equate the bank’s approval with what’s best for your financial health.
Please build an emergency fund
An emergency fund protects you not only from job loss or income reduction but also from unexpected home repairs—roof leaks, fallen trees, burst pipes, electrical issues, and more. Having savings set aside prevents you from relying on debt when problems arise and gives you peace of mind.
Are you house poor? How much of your monthly budget goes toward housing?