{"id":15655,"date":"2020-04-03T09:37:50","date_gmt":"2020-04-03T16:37:50","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=15655"},"modified":"2020-04-03T09:37:50","modified_gmt":"2020-04-03T16:37:50","slug":"buyer-i-am-house-poor","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-i-am-house-poor\/","title":{"rendered":"I Am House Poor \u2014 Now What?! 8 Solutions to Your Problem"},"content":{"rendered":"

After going over your budget again and again, trimming the excess yet still feeling the squeeze for months, it\u2019s time to face the facts: You\u2019re house poor. Your mortgage payment<\/a> is eating up so much of your monthly income that you\u2019re struggling to pay the rest of your bills. This way of living isn\u2019t exactly what you signed up for as a homeowner \u2014 so what can you do about being house poor?<\/p>\n

Though it may not feel like it right now, your mortgage payment does not have to ruin your life. Although you\u2019re house poor, you do have options.<\/p>\n

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Source: (Lukas \/ Pexels)<\/figcaption><\/figure>\n

But first, let\u2019s talk about how to prevent being house poor<\/h2>\n

A sudden job loss or a medical emergency can send even the most financially responsible person into a tailspin.<\/p>\n

\u201cUnexpected things happen in life,\u201d says Dawn McCurdy<\/a>, a top-selling real estate agent in Albany, New York. That\u2019s why McCurdy says that one of the first things she does with her clients is help them determine a budget<\/a>.<\/p>\n

\u201cWhat the bank and financial advisors will tell you<\/a> is that people should spend no more than 28% of their gross monthly income on their housing expenses \u2014 that includes principle, interest, taxes, and insurance<\/a> \u2014 and no more than 36% on debt, including student loan, car, and credit card payments,\u201d says McCurdy.<\/p>\n

She also recommends having a six-month emergency fund. \u201cYou should have that tucked away just in case anything happens,\u201d she advises.<\/p>\n

This is great advice, of course, but it may be too late for you right now. Keep it in mind, however, so you don\u2019t find yourself here again.<\/p>\n

But let\u2019s meet you where you\u2019re at. If you are house poor today, here are some options.<\/p>\n

Option 1: Pay as much toward your mortgage as you can<\/h2>\n

This might feel counterintuitive, especially when you\u2019re already struggling to make your monthly payments, but the lower your mortgage principal balance is, the faster you can clean up your situation and stop being house poor.<\/p>\n

That\u2019s because if you put less than 20% down on your home when you purchased it, you\u2019re paying private mortgage insurance (PMI) each month. PMI rates vary but are generally between 0.5% and 1% of your loan amount<\/a>.<\/p>\n

The good news about PMI is that it disappears when you accrue 22% equity in your home (and you can also apply to have it dismissed when you reach 20% equity). So, the more you put toward the principal of your mortgage each month, the quicker you can drop your PMI and save money on your mortgage payment each month.<\/p>\n

Even if you aren\u2019t paying PMI, paying down the principal on your mortgage balance will put you in a stronger position for refinancing and lowering your monthly payment down the road.<\/p>\n

Option 2: Limit your spending<\/h2>\n

Your mortgage is most likely a fixed expense \u2014 but there are probably plenty of other places in your life where you can trim your spending.<\/p>\n

\u201cLook at the household goods you are purchasing,\u201d advises McCurdy. \u201cDo you really need to go to Starbucks every day? A $5 or $6 coffee doesn\u2019t seem like a lot, but the compound effect of that is over $100 a month. Whether it\u2019s Wal-Mart or Target, if you eliminate the little things you buy, it can save you hundreds per month.\u201d<\/p>\n

McCurdy also advises cash-strapped homeowners to see if there are ways to consolidate their debt. \u201cRight now, many people have extravagant student loans. Although debt consolidation doesn\u2019t have anything to do with your house, your consumer debt is probably one of the reasons you don\u2019t have enough money for your household needs,\u201d she says.<\/p>\n

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Source: (Joslyn Pickens \/ Pexels)<\/figcaption><\/figure>\n

Option 3: Reduce the cost of your monthly bills<\/h2>\n

Cutting back on your spending is one way to keep more money in your pocket, but another helpful way to accomplish the same thing is to reduce the cost of your monthly bills. Take a close look at the bills you pay each month. Is there any way to lower or eliminate some of them?<\/p>\n

For example, could you bundle your home insurance<\/a> and car insurance and save some money? Could you lower your thermostat or reduce your cell phone data plan? McCurdy says that she will often gift her clients with a professional home-energy audit, which points out ways they can save electricity (and money).<\/p>\n

\u201cI know it\u2019s simplistic, but if you are house poor, you\u2019re in the position where every $50 or $100 really does matter.\u201d<\/p><\/blockquote>\n

McCurdy also points out that many states and counties have grants that assist homeowners in their efforts to become more energy-efficient \u2014 which will save you money in the long run. \u201cYou may find grants to put new windows in your home, help with siding, or replace your heating system,\u201d she says.<\/p>\n

In fact, McCurdy says one of her clients installed a gas water heater and saved $150 per month by making the switch. \u201cIn less than six months, she will recover the cost of the purchase and install \u2014 just by switching from electric to gas.\u201d<\/p>\n

Option 4: Find a side hustle<\/h2>\n

There are two ways to pull yourself out of the house-poor hole you are in. You can either reduce your bills to lessen the strain, or you can make more money.<\/p>\n

So, let\u2019s focus for a second on getting more cash in your pocket. Do you have skills you can use to freelance? Do you have a car you can drive for rideshare? Can you walk dogs, get a second job bagging groceries, wait tables, or babysit? In addition to earning more money, you\u2019ll be working so much you\u2019ll have less of an opportunity to blow your hard-earned cash on shopping or eating out (bonus!).<\/p>\n

Option 5: Sell some things you don\u2019t need<\/h2>\n

Chances are, you\u2019ve got a whole lot of stuff hiding away in your basement, attic, closets, or spare bedrooms that you just don\u2019t need. Why hold on to that stuff? Sell it!<\/p>\n

While you might not make a lot of money from one individual item, selling as much as you can does add up. In fact, there are loads of personal finance websites that will teach you the ins and outs of selling your unwanted stuff online. Here are a few:<\/p>\n