What Is House Poor?

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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 mortgage payments, property taxes, 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. 


Between 2011 and 2021, the median home sales price in the United States went up more than 76%, while the median household income only went up about 41%.

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 mortgage, property taxes, and insurance.

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

According to Jon Sanborn, co-founder of Brotherly Love Real Estate, 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 mortgage. 

If you have other debt, like a student loan or auto loan, you’ll need to take that into account as well. If you’re already paying $200 a month in student loan debt, you should ideally keep your monthly mortgage 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. 

Consolidate Debt

If you have outstanding debts in addition to your mortgage, you may be able to consolidate debt into one loan. You could take out a debt consolidation loan that you use to pay off your current debts, or make a credit card balance transfer.


You can also take out a home equity loan and use that to pay off any other debt you have. That will reduce your number of monthly payments and may reduce your interest rate, if your other debts have higher interest rates. 

If you choose to consolidate your debt using a home equity loan, keep in mind that you may lose your house if you don’t pay it off.


If you’re able to get a lower interest rate now than when you first took out your mortgage, 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 mortgage 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 mortgage, 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. 

Get Rid of PMI Payments

Once you have 22% equity in your home, your private mortgage insurance (PMI) loan will be automatically canceled. However, you may be able to stop your PMI payments before that. If home values have increased dramatically since you purchased your home, you may want to have your home reappraised.

You might also want to take out a home equity loan, or HELOC, and use that to pay off enough of the down payment on your primary mortgage to stop making PMI payments. 

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, Zigmont 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, a three to six month emergency fund, and a 20% down payment,” he said.  

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 mortgage and property 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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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Childfree Wealth. “Life and Financial Planning.”

  2. Census Bureau. “Income, Poverty and Health Insurance Coverage in the United States: 2011.”

  3. Census Bureau. “Income in the United States: 2021.”

  4. Census Bureau and Department of Housing via Federal Reserve Economic Data (FRED). “Median Sales Price of Houses Sold for the United States.”

  5. Brotherly Love Real Estate. “About Us.”

  6. Consumer Financial Protection Bureau. “Debt-to-Income Calculator,” Page 2.

  7. Spirit Financial Credit Union. “Rule of Thumb for Mortgage Refinancing.”

  8. Rocket Mortgage. “How Much Does It Cost To Refinance a Mortgage?

  9. Consumer Financial Protection Bureau. “When Can I Remove Private Mortgage Insurance (PMI) From My Loan?

  10. Consumer Financial Protection Bureau. “Monthly Payment Worksheet,” Page 3.

  11. Federal Deposit Insurance Corporation (FDIC). “Loans and Mortgages.”

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