A study released by LendingTree in 2024 revealed that over 18 million homeowners in the U.S. are house poor. This means that a homeowner is spending so much of their income on the mortgage and other home-related expenses that they don’t have enough money to meet their other needs. Fortunately, there are ways to know if you fall in that category and how to avoid or get out of it.
Housing costs include a mortgage, homeowners' insurance, property taxes, utilities, and general maintenance. And a new homeowner who doesn’t have an emergency fund to cover these expenses would likely be considered house poor, according to Chase Bank. Other signs of being house poor are struggling to pay other bills, taking on an additional job, living paycheck-to-paycheck, and cutting back on essentials such as food and healthcare.
To avoid becoming house poor, prospective homebuyers should set a budget and consider a less expensive starter home or condo. No more than 28% of monthly gross income should go to the mortgage, insurance, and property taxes. It is also important to build an emergency fund for other unexpected expenses.
If someone is extremely house poor, Rocket Mortgage suggests refinancing the mortgage, limiting spending on non-essentials, dipping into savings, or getting another source of income. If none of these work, selling the home might be necessary.
California, Hawaii, and New York have the highest percentages of home-poor households. West Virginia, Indiana, and Arkansas have the lowest percentages.