Discover what it means to be “house poor” and learn how to avoid this financial misstep.

When choosing a home, buyers often want to stretch their budgets to get the property they desire. However, it’s important to remember than those who stretch too far might find themselves “house poor,” which means most of a buyer’s income is spent on their home. You might be thinking, “Don’t mortgage lenders limit borrowing as a percent of income to prevent this from happening?” While lenders do limit mortgage payments to around 28% of gross income, keep in mind that there are many other expenses associated with home ownership that buyers—especially first-time buyers—can easily overlook. Here’s a rundown on what owning a home really costs.

The mortgage is the minimum you pay each month

There’s an adage that says for renters the rent amount is the maximum they pay each month; for homeowners the monthly mortgage is the minimum they pay each month. Homeowners often face higher expenses due to things such as property taxes, homeowners insurance, HOA dues and more. But those things don’t cover the costs of running and keeping up a home.

Homeowners are on the hook for maintenance and repairs

If an appliance in your rented home needs maintenance or repair you call the landlord, and they take care of it. For homeowners, when an appliance breaks down, the cost of repairs comes out their pocket. Washer, dryer, refrigerator, water heater, HVAC system—it’s not a matter of if, but when something will fail. A homeowner must be prepared to cover regular maintenance and repairs on appliances as needed, and including the cost to replace them.

Getting the look you want takes cash

A rewarding experience for many homeowners is transforming an ugly duckling of a house into an Instagram-worthy home. However, even the average cost of paint ($25-$60/gallon), vinyl plank flooring ($900 for 200 square feet, plus installation) or new windows (approximately $300 each) adds up quickly. Unless the house you buy perfectly matches your aesthetic preferences, be financially prepared for updates.

Every component of a home has a limited life expectancy

A home can last decades, even hundreds of years if built well with quality components. However, nothing lasts forever and many components will need to be replaced throughout the life of a home. Southdown Homes provides these guidelines for housing and appliance lifetimes:

• Garage doors: 20-50 years
• Dishwashers: 10 years
• Fiberglass tubs and showers: 10-15 years
• Laminate countertops: 10-15 years
• Sealers and fillers: 1-5 years

The age of your home, how well it’s been kept and the quality of components used will affect your budget as a homeowner.

Remember, your mortgage is only part of the cost of home ownership

When selecting a home, consider working with an inspector to estimate the remaining life for the home’ components. If you learn the roof only has five more years of reliable service and a replacement would cost $18,000, start saving for the replacement right away.

Many experts recommend setting up a dedicated savings account that’s equivalent to 1% to 2% of the home’s purchase price for home repairs and updates. For a $300,000 home, that means reserving $3,000 to $6,000. For homeowners who don’t have enough set aside when repairs or replacements are necessary, a Consumers home equity line of credit can provide access to cash when you need it most.

Consumers helps thousands of members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800.991.2221.

*All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions.