What Is House Poor?


House poor is a term used to describe an individual who spends a significant portion of their income on costs related to owning a home. These expenses can include mortgage payments, utilities, and ongoing maintenance costs.

Key Takeaways

  • House poor describes someone who spends a disproportionate amount of their income on housing expenses.
  • Home-related expenses can include mortgage payments, utilities, and maintenance costs.
  • Individuals who are house poor often have a hard time meeting other financial obligations.

Understanding House Poor

If someone is considered house poor, this means the majority of their income is spent on housing costs each month. Most of their money goes toward principal and interest payments, utilities, and upkeep and maintenance. Being house poor can leave you with little money to spend on other necessary expenses, as well as discretionary expenses. 

Nobody plans on becoming house poor. Often, people become house poor when they have just enough money to buy a house, but then struggle to afford the additional expenses that come with homeownership.

“When your housing is half (or more) of your pay, you may not have enough money for basic needs, never mind having money for saving or enjoying,” Jay Zigmont, PhD, CFP, and Founder of Childfree Wealth, said. 


According to data from Batdongsan.com.vn, compared to the average income of people, house prices in Hanoi and Ho Chi Minh City are too high. With a price of 2,200-2,400 USD/m2, it takes workers in Ho Chi Minh City about 30 years and Hanoi’s 25-28 years to accumulate to buy a house.

Example of House Poor

Let’s say you bought an older home at the very top of your price range. When you bought the house, you did the math and knew you could afford to pay the principal and interest.

When purchasing the older home, however, you did not take into account how much extra maintenance work would be expected. And the square footage in this home is much larger than your previous home, so you’ll eventually need to purchase additional furniture. 

After several months in your new home, you realize that the expenses are much higher than you originally anticipated. The majority of your income goes toward taking care of the house, leaving little money left over for anything else. In this case, you would be considered house poor.

How To Tell If You’re House Poor

Being house poor can negatively impact your financial situation, and often leave little funds left over for investments and savings.

Calculating your debt-to-income (DTI) ratio is one way to determine whether or not you’re house poor. In general, experts recommend your DTI ratio to be less than 36 percent. For example, if you make $60,000 a year, or $5,000 a month, you should ideally keep your debt below $1,800 a month. That means if you have no other debt, you would pay no more than $1,800 a month on your interest loan. 

If you have other debt, like a consumer loan or unsecured loan, you’ll need to take that into account as well. If you’re already paying $200 a month in consumer loan debt, you should ideally keep your monthly home loan payment at $1,600 a month or less. 


Some lenders will allow a DTI of 43% or higher, but in most cases, a DTI of 36% or less is recommended for a homeowner.

What To Do If You’re House Poor

There are a few ways you may be able to reduce your monthly payments that go toward homeownership, including consolidating debt or refinancing. Learn more below. 


If you’re able to get a lower interest rate now than when you first took out your home loan, you may want to refinance your home. It’s often a good idea to refinance if you can get an interest rate that is at least 1% lower than your original interest rate. In that case, you’ll most likely save money on monthly payments.


Even if you’ll be able to reduce your interest rate by 1%, do the math before you refinance to make sure that the fees won’t cost more than you save. You’ll likely pay 2% to 6% of your loan balance in closing costs. 

If you have 15 or 20 years left on your loan, for example, you might want to refinance to change the length of your loan term. A longer loan term will lower your monthly payment, although it typically means you ultimately pay more in interest.

Get Another Job, If You Can

Having an additional stream of income can help you reduce your DTI ratio and make expenses feel more manageable. If you have the time and ability to do so, consider taking on additional work. Some examples to consider include tutoring, dog walking, or any other type of work you can do in your off-hours.

Sell Your Home

If you’re spending more than you can afford each month, you may want to look into changing your living situation by selling your home. 

If you can expect to save a significant amount of money on monthly payments by renting, you may consider this option until you can save up for a larger down payment. Or, you may consider purchasing a less expensive home, or one that requires less upkeep. 


A buy-or-rent calculator may be helpful in determining which option is best for you. Also consider monthly payments and your local housing market at the time you are looking to move. 

Reduce Discretionary Spending

If money still feels tight while your DTI is less than 36% and you’re spending no more than 28% of your income on housing costs, you might want to review your budget and monthly spending to see where you can cut back. Some wants to consider temporarily removing or reducing from your expenses include monthly subscriptions and dining out.

How To Avoid Becoming House Poor

As a homeowner, there are a few ways to avoid becoming house poor. The main one is to ensure you have a realistic picture of your day-to-day expenses, as well as housing costs.


Sanborn recommends utilizing the 50-30-20 budgeting method—put 50% of your income toward housing and other necessary expenses, 30% of your income toward leisure, and the remaining 20% can go toward savings and investments.


There are several budgeting methods to choose from. You’ll have to decide which one works best for you.

Don’t Over Finance

Zigmont recommends keeping your monthly housing costs, including your mortgage payment, taxes, interest, and insurance, to less than one-third of your take-home pay. Most banks will approve you for much more than that, so it’s important to know what you can actually afford.

Be Realistic When Purchasing a Home

To avoid being house-poor, experts recommends only buying a house when you can truly afford to do so. 

You are in an excellent place to buy a house when you have no consumer debt, and you are ready enough at least 30% equity to value of a house

Frequently Asked Questions (FAQs)

What homeownership costs should I budget for?

When you’re calculating the cost of homeownership, you’ll want to include more than just your loan and taxes. Consider insurance, upkeep, maintenance, and utility costs when figuring out what your monthly expenses will look like as a homeowner. Make sure you have money saved up for any unexpected repairs, like repairing your roof, too.

How much of my income should I spend on homeownership?

If you can, you’ll probably want to use the 28/36 rule for mortgages. That means you would spend no more than 28% of your pre-tax income on your mortgage payments, taxes, and other housing expenses. In addition, no more than 36% of your gross monthly income would go towards debt, including your mortgage payments.

How much money should I have saved in an emergency fund?

Experts recommend having three to six months of living expenses saved up in an emergency fund. That way, if you have a sudden expense or if you lose your job, you’ll have something to fall back on.

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