How much house can I afford?

The general rule of thumb is to keep your housing costs at or below 30%, though there is some leniency. If your other obligations are low and you’ve got a significant cash cushion in the bank, you may consider a little extra debt to secure the house you want.

How much should I put down on a house?

The average down payment in the United States is just 7% for first-time homebuyers and 16% for experienced buyers. This is a lot less than the 20% many believe to be the standard. That said, there are benefits to paying more upfront, like lower payments, no mortgage insurance, and more equity.

How can I avoid becoming house poor?

The simplest way to avoid becoming house poor is to plan ahead. Understanding your expenses and finances can help you stay within your budget. It's also wise to have an emergency fund to cover any unplanned costs associated with homeownership, like a broken water heater or a leaky roof.

I’m house poor. Should I refinance or recast my mortgage?

Both options may reduce your payments, though there are some key differences. Recasting is when you make a lump sum payment to your mortgage company, which can lower your monthly payments. Refinancing is taking out a new loan with different terms, ideally at a lower interest rate.If you’re struggling with payments and do not have a lump sum of money to use to recast your mortgage, you may only be able to refinance the loan.

What type of loan should I get? Fixed-rate or adjustable?

There are pros and cons to both types of loans. A fixed-rate loan offers stability because your interest rate will never change for the life of the loan. An adjustable-rate mortgage (ARM) has a lower initial interest rate, but it can change periodically, which could result in a higher monthly payment.

What other costs should I expect when buying a new home?

In addition to your down payment, you will also have closing costs, taxes and even the cost of new furniture to consider. It’s important to factor in all of these additional costs when budgeting for your new home.

I am pre-approved should I accept the loan?

Sometimes banks will pre-approve loans for more than the home buyer can actually afford. It’s best to aim for something within your means.

What Is House Poor? And How To Avoid It