How To Keep From Going House Poor

The only thing worse than not being able to buy a home when you want to is owning a home and not being able to do anything but sit inside because after your house payment, HOA fee, taxes, and household bills, there’s nothing left.

A few smart strategies can help you avoid becoming house poor.

Think hard about that preapproval amount

Just because the bank tells you that you can buy a $400,000 home doesn’t mean you have to spend all $400,000. It might be that you’re not comfortable with a payment that high if it means you won’t have a cushion and can’t continue to contribute to your savings

Things you’ll want to consider:

Can you continue to invest the way you want to?

Will you be able to keep up (or build) your emergency fund – “A savings account stuffed with six months expenses or more is a vital part of financial stability,” said Money Under 30.

Are you going to have enough money left over to establish a bank account buffer? “Whether you’re 15, 25 or 65, if you’re having trouble with your money and want to improve, the very first step you should take is to build a bank account buffer,” said Money Under 30. “A bank account buffer is my name for what other people may call a cash cushion, mini emergency fund, rainy day fund or back-up savings. When you have a bank account buffer in place, you don’t have to worry that a poorly timed Starbucks break you charged to your debit card will overdraw your account and trigger a $35 overdraft fee.”


Potomac Homes
Calculate your ENTIRE payment

Principle and interest will only tell you part of the story. Same with principle, interest, taxes, and insurance. If you’re not also taking into account any Private Mortgage Insurance you need to pay, your Homeowner’s Association fee, and any special assessments, you’re not looking at the whole picture.

Budget for additional expenses

This is not the place for that buffer referenced above, but, rather, a way to make sure you can really handle the home you want without living paycheck to paycheck or, even worse, going into even more debt just so you don’t sink. If you don’t currently have a yard or are renting, you may not be accustomed to paying landscaping fees. If your new home has a pool, don’t forget to budget for that pool cleaner. If you’re moving to a larger home, you may also have an increase in costs for your house cleaning service and utilities, and if your commute is longer, you may be paying more in gas and tolls. They are the little things that can creep up and affect your bottom line.

Don’t do improvements right away

You might want to wait a few months to see how your expenses pan out before you empty your savings on a new kitchen. Ditto for buying a houseful of new furniture. The desire to fix up the house to your standards or pack it with all-new everything is strong. But a little patience can go a long way. Spreading out your purchases while you increase your savings and waiting for sales and zero interest credit offers can help keep your budget in check.


Freshome
Be careful with an equity line

Having equity in your home is great if it means you made a smart investment. But using it irresponsibly can quickly make your budget spin out of control. The good news is that, according to CoreLogic’s January 2016 MarketPulse, the number of homeowners who are under water is dropping – now about a third of the 2010 total. The bad news is that equity can be tempting, and stripping your home of it—and making not-so-smart decisions with the money – can create an underwater situation. If you take out a line with the intent on doing some updates or renovations, you’ll want to make sure that you can comfortably afford the new payment and that the renovations you’re making will provide a return on investment.

Get a home warranty

Experts are on the fence about this—some say you absolutely have to have one while others find it a waste of money. But if you’re the type for whom coming up with thousands of dollars to replace the faulty air conditioner that’s no longer conditioning anything or a refrigerator that’s stopped refrigerating will be a hardship, the minimal monthly output is far outweighed by the peace of mind of knowing most of your large repairs will be covered.

Claim a homestead exemption

In some states, you can file a homestead exemption to lower your property taxes. Savings can add up to hundreds of dollars per year or more. You can get more information and learn who’s eligible here.

Change your tax withholding

One of the great benefits of homeownership is the tax writeoff. If you leave your withholdings alone, you may expect to get a big chunk of money back at the end of the year, as long as nothing else has changed. But by adjusting your withholdings, you can hold on to more of your money every month to help offset higher expenses.

After you buy a home, “payroll withholdings should also be reexamined and, perhaps, reduced to account for the reduction in net tax liability,” said HGTV. “Talk to your tax preparer or use the IRS withholding calculator, to get the numbers right.

 

 

Advertisements

About thenoelteam

As a Broker with RE/MAX Alliance, I work energetically for my clients whether they are a buyer or seller. I help you achieve your goal of owning a home or getting the best price for your home in the shortest time possible. After graduating from UCLA with a degree in communications and finance, I was licensed in 1977 and since then I have sold over 3600 properties amounting to over $1 billion in sales. I currently rank in the top 10 in home sales for Colorado. I offer the same quality of service and superior communication to all clients, ranging from starter homes to multi-million dollar estates, commercial and income properties, relocations and foreclosures My goal is to provide you with the best representation possible whether you are buying or selling. Over the years, one of the things that I've discovered is that there is a difference in the way individual Realtors do business. For me, I have always felt that honesty and personal integrity are the foundations upon which a successful business and career are built and sustained. I have an extensive background and knowledge base in real estate, including financing, which has enabled me to provide outstanding, quality advice and service not found with many agents today. My commitment to communication creates a positive relationship between my client and myself that results in a successful property sale or purchase. My passion for real estate, commitment to my clients and personal integrity has helped me to achieve success placing me in the top 1% of all brokers in nationwide. In my career, I have earned a number of awards and received considerable recognition for my success but the most significant recognition comes from the fact that over 75% of my business comes from past clients. My success is a true measure of my client satisfaction.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s