House Poor or House Rich?

I guess house rich. I like to travel and do other things and have other experiences. Plus, I'd hate to have to be conscious of pinching pennies.

I have always been house poor. It sucks. Be house rich and save for rainy day, trips, retirement and college. Jealous.

I would never intentionally put myself in a house poor situation. There is never anything good about being poor or living paycheck to paycheck.

I don't understand why you can't find a compromise. For instance, if purchasing a home for $300,000 will leave you "house rich" and purchasing one for $500,00 will leave you "house poor" then look at homes between $350,000 - $400,000. You have to have your "house poor" and "house rich" numbers figured out, so just "split the baby" so to speak.

House rich, that is just my own preference. As long as the home is comfortable and meets your basic needs it is somewhere to live. I would much rather go on vacation, have some extra spending money, and retire early.

We call it cash poor when your housing leaves you with little fun money. There is no right answer anyone can give you because the ultimate answer lies in what the housing market does and if you maintain job stability.

Owning a lot of house is kind of like a forced savings (depending on your loan). If you are cash poor for a nice house and eventually inflation is on your side and assuming you don't put yourself into a situation where you go bankrupt, then the big house is a great investment down the road. Its your retirement, your forced savings in the form of equity. This is way more true if you can get into a 15 year mortgage than a 30 year one.

The smaller house means more fun money. It also means you didn't force yourselves to invest and save away in the form of equity. So when you go to retire, you have less of an investment to cash out of.

the variables here are, what will the housing market do for or against you? what will inflation do for or against you? Will you be able to maintain your jobs and income so you don't default on the loan? No one here can answer those questions for you.

I can tell you that we opted to be cash rich and rent for a few years and it ended up being 7 years (while we waited out the housing market to correct). I don't regret it at all. But I can look back and know we would have lost money in the market had we purchased. When we are older, our lack of saving (building equity in our home) will probably hurt us. But thats not something we had control over. The market would not have allowed us to build real equity, only pay off the principle.

Much of what you want to know takes a crystal ball. What will the market do?
Will the value of your house go up or down? Will we be living on the edge if there is a job loss? Many people who bought the big house lost it all because they lived on the edge of what they could afford and when the market tanked they could not weather it. Others have bought the big house, eventually inflation was on their side, they had job stability and by the time they retired, the big house proved a great investment.

That said, it is wise not to put yourself on the razors edge of bankruptcy.

I think I'm kind of shocked by this question. Of course you don't buy a house that makes it so you can't buy other things (or take vacations, get take-out food, etc). You need to buy a house that fits your budget and leaves enough money for the other things in life that you need and want.

I always looked at my payment, I didn't care what I was approved for, I knew what my budget could handle so I wanted to know the monthly payment. This includes tax and insurance. So looking at a house that was well under what we were approved for didn't mean anything to me if the taxes and insurance would be too high - in other words that house was out of my budget, pass!

And you can't say you would only be house poor for 2-4 years. That completely contradicts what you said earlier. It's the what-if's that make a bigger mortgage scary...what-if something happens and your 2-4 year plan turns into 30 years of struggling? Don't buy something you can't afford - simple.

House rich....we practiced for two years living house poor, budgeted and carefully considered the move to house poor from house rich. We made the move in late February from house rich to house poor. Living house poor sucks in more ways than I can recount. After less than four months, we are now in the process of selling our overpriced house while we can still get out from under it. Sure we practiced living this way but it is not the same as living the stark reality of it. If you have any money savvy at all, you begin to wonder 'what on earth were we thinking, making this move?' I can't believe we'll be moving twice in one year but hopefully that gives you some inkling of the pain we are willing to go through to undo what we have done. House rich all the way for us and never again will we decide otherwise. Good luck.

Neither.
I'll stick with House Paid For.
I'll let you decide!

(I will add that never never never never never would enter into a situation in which we would render ourselves "house poor"! Seriously?)

Be house rich, because you NEVER know what could happen. We bought a house that was what we thought we'd need, and then the marked dropped, there were layoffs. It's too nerve wracking. Find a middle ground if you need more space, but do your best to have some surplus.

ETA: There are still many unknowns for your family. Since your FIL is terminally ill and you are planning on having your MIL live with you is a whole other story in itself. She may not want to move to America have you guys thought about that? She may have a support group there and you guys are all she would know here. You two may not get along at all living together (hell on wheels).

Trying to find the ideal location where you live is going to be a problem and you are now seeing it. The closer you live to the big city the more the taxes cost to run the local municipalities. Commute times have to be factored into being home or living in the next state and hubby having an apartment for during the week which means you would only see him on weekends.

You cannot count on anything until you have it in your hands. Two or four years can change many things and your husband being up for promotion and such can fail or disappear. So don't count your chickens before they hatch and be in a bind for 35 years to come. Who knows you two might not ever be together by then. Sorry for being so blunt. Let us know when you do finally build or buy a house.
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I would prefer to be house rich. I do not want to be a slave to a house and all of its trappings. Find something that fits all the needs of the family and is within a dollar range and buy it. When the kids leave home you can sell it and downsize. Or buy it with the intention of not ever moving again.

We cannot tell you which way to go. But I sure as heck would not want to lay awake at night worrying how I was going to pay for something because of the house. Repairs are always there and you cannot predict when they will happen.

Will you husband find a job that does not require him to travel so much? That would be a big factor in what I would pay for a house. He would have to be there to live in it and enjoy it.

You cannot plan for tomorrow only live for today. I like security and cushions so I don't go bonkers. To each his own.

the other S.

Can you elaborate on what would change in the 2-4 years to make you no longer house poor?

I'm terrified of being house poor--we're shopping well under the mark that we can get approved for because I don't want to have to play the "what if's" in my head for the next 30 years.

ETA: Have you considered buying a condo for your MIL instead of moving or adding on? You can get a decent 1 bedroom condo for anywhere from $50-80k.

I guess I am house rich. The house is paid for. It is sort of small for us, but I would rather deal with that than move to a bigger house and have a mortgage again. I love the location of my home, it is a good neighbourhood and we are close to great schools. I do not enjoy hanging out at home. I would rather be out and about having fun than sitting around the house. My kids are already 9 and 12, so we are at the stage where we don't really have many toys taking up lots of space anymore, and soon enough they will be out of the house.

House rich. I have been house poor and it SUCKS! I don't ever want to work for a house again!! I want the house to work for ME!

We were looking a new houses. Our kids have moved out and I wanted to "down size". Big house, one story is my version of downsizing! Anyhoo, housing in Houston's north side has skyrocketed in the last year. A house we looked at 18 months ago for 275,000 is now 360,00-400,000. I don't think so!!! Keeping my two story and we are in the middle of remodeling our kitchen.

I like having money at the end of the month! I like being able to go on vacations. I like being able to not worry about bills. My husband and I have worked really hard to get to this point and I'm not willing to sacrifice our fun and joy for a new home. Nope not worth it.

You can't look at percentages! If our income is $1mm a year, 28% leaves a ton to cover living expenses, savings etc. If it's $200k a year, it leaves much less. You should do an income statement for your family. Include annual savings goals and an "accrual" for house maintenance. Spending on a house can be lumpy. You have to make sure you can save to have the cash when you need a new roof and a bathroom needs to be remodeled etc. Every year you should be putting money aside unless it was an above average spend year. Banks don't care about this stuff really.

All this is fluid. We bought this house coming up on 12 years ago now. We were a little tight but not a lot. We did fine. Cost of living in general was much different now.
Now, here we are 11+ years living paycheck to paycheck in that same house that we even refinanced to a lower rate. Why you ask? My husband was laid off. He is our sole income. It took him nearly 7 months to finally become re-employed. We ate through out entire savings account. The cost of literally everything from the HOA fee to water rates to gas and electric and trash collection have risen substantially in cost to what they were when we first moved in. In order to get re-employed my husband took a pay cut. We are now in debt and can't get out. This is also an older house, built in the 70s. We've replaced or repaired so many things over the years but there is always something and no money to do it with anymore since our savings account is gone.
There is no way to answer your question because things and circumstances change so much. I would love to have a house that fit my family of 5 instead of us living sitting on top of each other because there is no more room. Not going to happen unless we win the lottery at this point so there you have it. We're trapped.

Jane answered very well. And as Veruca said, this is the longest house search ever. But one more thing to consider. Bigger house = bigger expenses not just house payment-wise. People are usually shocked when they go to sell and add in improvements to calculate their basis how much they spent over the years on maintenance and improvements. Nevermind property taxes and utilities. One way we have built wealth is to keep housing costs very low. No mortgage... That enabled us to invest in other assets such as stocks and bonds which have virtually no transactions costs unlike the 5-6% fee to sell a house. Those stocks and bonds have easily kept pace with housing appreciation especially if all the upkeep of a house is netted out. Of course, borrowing big if an asset appreciates is the biggest way to gain. It's the simple math of leverage. So depends on your outlook and risk tolerance. You can't get that from other people... This is a personal decision you need to make. Happy medium seems pretty good to me... Neither house rich if it means your day to day living is unpleasant nor house poor if you buy more house than you really need just bc you want a big house. I've never found it to be such a hard decision.

There are so many factors that go into this decision, if you really want to make a proper decision, J.. I'm sure I'm not thinking of all of the pertinent factors (and not every factor is for every person), but here's what I can think of:

Mortgage deduction for your taxes (your tax advisor needs to be consulted for this) Sometimes it doesn't make financial sense to NOT have a mortgage if you are going to own a home anyway.

Understanding that the costs of keeping up a house can dwarf your mortgage - If you buy a house that needs a lot of work, you end up spending so much money getting it where it needs to be. Just having a good report on the house before you buy doesn't mean that you won't have problems...

Differences in opinion between you and your husband in terms of how to spend money on your house: you two bicker far too much about spending on house maintenance. (sorry for the pointed opinion) Your husband says he'll fix something and fights you spending $30 to have it done (a miracle that you can have ANYTHING done for $30 in the Chicago area!) If I had a husband like that, I'd be buying a house with the least amount of work as totally possible. (And I wouldn't even TALK to him about getting something fixed. Period.) The stress on your marriage that this kind of stuff puts on you is NOT worth it.

Living on top of each other in a house that isn't idea in terms of space can help you keep your "stuff" at bay. So many people fill up whatever space they have, and that makes you just have more to have to take care of. In your case, J., you are very organized. But just because you're organized doesn't mean that all your "stuff" doesn't cause you stress. It does, even if you don't recognize it. That's a good argument for not buying a huge house.

Picking a house with good house flow and key areas that mean the most to your family, like the right kitchen, can make all the difference. Having the part of the house where the family ACTUALLY spends the most time is more important than other things that a house has.

To be honest, if you have to think about take out food versus house payment, the house is too expensive. Different people have different ideas about how much money to spend on a good vacation - some go camping and spend much less than a trip to Cancun or Europe. Knowing what works for YOUR family and budgeting properly is what you need the most.

Knowing you, you've thought of a lot of things to help you already. The thing I'm most surprised about is your remark about 2-4 years. That seems to mean that hubby might get moved with his job. If that were the case with me, I would NOT be buying a house right now. Honestly, if you do, you will lose money selling that house, even if his company helps you sell it. I'd stay in your current house and tough it out.

I guess I'd have to say we're some of each. We paid for our 30-year-old house one load of lumber at a time as we built it slowly over 3 years. We have only inexpensive furnishings. The house itself is well built, but so small that it doesn't have much market value, and we've had to repipe, reroof, and replace windows in the past 2 years. Big ouch.

But we've always lived on an exceedingly small income, so being able to sacrifice everything for a few years at the beginning was worth it for us, and we've even been able to build a small retirement account. With a more expensive house, we'd have little left over for other necessities, like groceries and medical costs. Never have had the budget for extras like travel, restaurant meals and furs. The trick, for me, is to keep my expectations low, and I'm happy.

I am house 'potential' right now...lol

Got this house for a SONG (1923 craftsman in need of repair)...so slowly getting things done!

Once kids are done with HS, I can hopefully sell it at a substantial profit...or stay here, and rent out rooms? Not sure yet, but it has been a great experience to bring this house slowly back to its original beauty.

I guess, for now, I am house satisfied' if that makes sense

we had that tough choice to make 14 years ago, when we sold our starter home. we had a family powwow to discuss whether we should add onto our little house (which we had severely outgrown) and have more money for play, or get the farm that was my dream and keep the horse at home, and have less disposable income. i was touched beyond words when the guys all voted to find a farm.
at first we were house poor, but as the dh's income went up and the boys moved out, the equation has shifted. the real cost to living here is my husband's commute, which is brutal. but we live in paradise!
paradise always comes at a cost.
khairete
S.

You should ideally budget about 1/3 of your come home income for housing, utilities, repairs, maintenance, and insurance. If you sell the house you are in right now for pennies on the dollar you won't be making as much as you think. If you hold on to it a few more years housing might go back up and it might stay the same or even fall again. One never knows how the market will fluctuate.

I would not want to do without so I could live in an expensive home. That makes no sense to me. IF IF IF the house in question is a remarkable deal then I might be so tempted I'd give in.

A friend of mine bought a mansion, it's really a large brick home but when you walk in you feel like you're in a mansion.. It's entryway is 3 floors high, the floors are marble, everything in this house is pristine. They have several small kids and I imagine they'll have more. This house has 5 bedrooms, 4 bathrooms plus a guest 1/2 bath on the first floor. They looked at this house a couple of times. The owner had it overpriced of course and she was selling it herself.

When all was said and done the owner came down over $300,000 on the price just to sell it. Now think about this. The MOST expensive house in my town sold for $600,000. It is THE most expensive house in our town, seriously.

SO this woman wanted out from under her house so much that she probably came down to a minimal amount because that's all she owed on it.

My friends house payment is so stinking low! Now if I could get a beautiful mansion like this house, pay less than $300.000 for a gorgeous impossibly perfect home I'd be tempted. Can't tell you HOW tempted I'd be to bust my budget.

But if I was not that impressed with the house and saw white walls, white silk curtains, white carpet, everything so pristine and thought about gooey hands, mud, food, spills of drinks, etc...then that house might not be so appealing to me. I don't know.

If there was a nice 4 bedroom brick home in an older residential area that didn't need updating or need landscaping or anything like that and it was for sale at $125,000 then I don't think I'd have to give it any thought. I'd take the least cost house because I could put in marble floors, I could paint it white, I could put white curtains up, I could do whatever I wanted to it and have tons of money to pay someone else to do it for me..

More money instead of more house, it's too hard to enjoy something when you can't pay for it.
LOTS of things come up down the road with a house, we just had to pay 17K on new windows for our 11 yr old house. BRAND NEW, built for us house. If we had bought the house a house where we didn't have an extra cushion of monthly income then we would have had a problem.
Job loss (my husband lost his job of 24 yrs in 2010, we thought we were immune after that long with a company!), car accidents/repairs, buying trees, fertilizer, etc. - if you are having to spend every penny of your money every month on the needs and don't have extra then it's too hard to create new money.
****after reading your so what happened I have to say that 28% income on housing is not bad at all, and not house poor, it sounds like it's just going to kick out some of your savings, so you have a HUGE cushion now, and will have a smaller, but still there, cushion if you get this house. In that situation I WOULD BUY THAT HOUSE. Put at least 20% down so you don't have PMI, and do not count on your property value going up either.

I've been looking for a couple months. I haven't found anything that is worth spending $350,000 on a 3200 sq ft home, which is too big for us anyway. These are houses that have no decent upgrades for that price & very high property taxes; $10-13,000. It's been a rocky search. We are considering building. I'm in a 2800 sq ft house now and it's a bit too big IMO, I'd rather be in a 2200-2500 sq ft home. So I understand why you are frustrated w your search.

Of course anyone would rather have more money in their pocket at the end of the day, but there comes a time when your pockets are filled and you need to let go of having so much cushion cause your nerves are shot from living on top of each other. I only say this cause you say you have a ton saved and have all basis covered in case of an emergency.

What counties are you considering?

I'd rather be house rich. I've been the other way and it's miserable.

If the house you're thinking about takes just 28% of your income and you have no other debt you can certainly afford it. You are neither rich or poor. The only way I'd buy a less expensive house would be if I wanted to save money for future expenses such as schooling for kids or retirement. Or if you value spending less on a house so you can spend more for cars, furniture, travel, everyday expenses, etc.

As I understand what you're saying is that you're anxious about buying this house because you've not spent this amount of your income on housing. Most of us are anxious when we try new things and make large purchases. I thought I couldn't afford my house but I bought it anyway. I found that not only was I able to make mortgage and related expenses but my way of living did not change. The 30% is a guideline because over many years financial experts have found that the average family can maintain a comfortable life style while paying that amount.

I think it all depends on where you are in your life. The world is a different place now with some people still reeling from massive layoffs, long term unemployment and a housing market that collapsed in some areas, so my answer would be different now than when we were starting out. When we were first entering the housing market and from house 1 to 2 and from 2 to 3, we were house poor for a short period of time and it was an acceptable risk. We had no debt other than the house and we both had good jobs, benefits and opportunities for upward mobility in our jobs. Within a year or two of each move, our salaries caught up so our mortgage payment became an acceptable ratio. During that year or two , we didn't buy furniture or go on vacations. Moving up in those houses (which did increase in their value) allowed us to build lots of equity. Now on the other side, when we were downsizing, we selected something we were very comfortable paying for even on retirement salaries (so now we are saving lots for retirement)

House rich. What's the point in killing yourself to pay for a house? That's not a life, and a mortgage is fifteen to thirty years. '

I can't imagine how this 2-4 year scenario would play out, unless you know for sure someone will get a big raise. You cannot count on the market going up, as we've seen.

For me this is a no brainer. Definitely "house rich". There are always the what ifs and the unknowns. Even with the best laid plans, things can happen. Jobs loss, health issues, car accidents, natural disasters, etc. It is so much better to have that back up and to feel secure just in case things don't continue to go according to plan. I am basing this on my own experience. We are house poor but that was not the plan. We prepared, we were both working, we had a savings account, we had a home, we owned our cars, we took vacations, etc. When our daughter was born with medical problems everything changed & we have struggled ever since. We couldn't have prepared for this. I long for the day that I can breath a sigh of relief and be house rich again. Enjoy your life, have fun! You are one of the few people I know that is house rich. You should be proud of your accomplishments.

house rich. no question.

i love looking at 'better' homes, but know we are doing the right think living below our means for housing. I figure we can rent a vacation house every now and then for the nicer experience.

Your property tax is crazy. On a 1 million dollar house it would be $25,000 vs. only $10,000 a year where I live.

Without a doubt, house rich. I hate to worry about money and would rather have a smaller conservative home any day over a big expensive home. We afford our home on my husbands salary alone right now and I'm going back to work in the fall- my first thought was we'll put our home on the market and buy something bigger...but we'd be crazy! I would so much rather have more money for other things- vacations, fun, school, etc.