HOUSE POOR: Best Easy Guide to Buying a House Poor Credit (+ Free Tips)

house poor

People who are in this condition are short of cash for non-essential items, like entertainment and recreation. They are prone to having trouble meeting other financial needs. In this article, we have been able to compile all you need to know about house poor, house poor meaning, cash-rich house poor, and buying a house poor credit.


House poor is a terminology used in describing people who spend a huge amount of their overall income on payment of a mortgage, home purchase, payment of property taxes, and maintenance of properties. 

Sometimes, House poor can be said to be cash poor, house rich.

House Poor

House poor arises first from increasing an already tight budget to purchase a house. It starts by spending so much on a house which can sometimes lead you into this situation known as house poor.  

If you want to avoid being house poor especially if it’s your first time purchasing a home, financial advisors highly recommend that homeowners shouldn’t spend more than 30% of their net income on a housing purchase.

Furthermore, do not take the risk of putting yourself in a tight corner where you tend to become house poor. Carefully find a place with a reasonable range of housing costs that your budget can comfortably handle.

For cases where you desperately need to own your dream home, You may need to consider looking for ways to increase your income. 

You may need to pick up a side gig where you can be making extra cash.

Already house poor and looking for a way out and a permanent solution, you may likely need to consider selling off your present home and purchasing a less expensive one. Regardless of the stress that comes with it, it may be the best solution at this point.

What exactly is house poor meaning and how can an intending homeowner avoid it?

House Poor Meaning

For the House poor meaning, it is spending a huge percentage of your monthly income on a house, making it very difficult for you to achieve your other goals (financial or personal). 

Being house poor is possible regardless of your net income as long as you’re spending so much on the property.

As a result, you tend to channel almost all if not all of your income to the mortgage thereby making you house poor.

Cash Rich, House Poor.

For the average U.S, owning your own home is an American’s Dream.

Over time, it has become a nightmare to many people because of this cash-rich, house-poor situation.

For instance, Buffett has lived in a particularly comfortable house for most of his youthful life. The house was purchased in 1958 for approximately $31,500. He referred to it as his third-best investment. 

The said house was worth $31,500 in 1958, in today’s dollar estimation, it will be approximately $250,000.

In his words, he decided to go for a house he could afford at the time not because of any investment that will appreciate with time.

His focus was on the idea of a home for living instead of a castle building. 

When you misplace the two, things can go wrong.

Moreover, wealth is not attained by just investing, but wealth is attained by avoiding irrelevant expenses.

This little wisdom was what helped Warren Buffett to grow his wealth over the years.

Wondering if you are under the category of house poor? 

Here are some signs to know that you’re spending way too much on house ownership and at the expense of your total financial capacity.

#1. Do you constantly worry about your ability to fund your monthly mortgage payment?

The moment you begin to dip hands in your savings to fund the monthly payment, at that point, you should know you are house poor.

#2. When you don’t have funds set apart for emergencies probably because you don’t have enough money left after paying for the monthly mortgage.

#3. When you obviously don’t have any space in the budget to come up with a retirement fund

#4.  When there are other needs staring at you in the face but you feel so helpless. Probably because the cost of the house ownership holds you back from meeting those needs. Situations when you have to cancel out recreation or enjoyment plans, travel plans, etc is a house poor situation.

#5. When you spend a huge part of your income on paying for your housing. 

Buying a house poor credit

Going on, we will take you through the easy steps you should take when you are buying a house with bad credit. This is to enable you gift yourself the best.

There are important questions you need to answer before buying a home with bad credit. They include;

#1. How bad is your credit?

#2. What is your source of income and how steady is it?

#3. Do you have any outstanding debts?

#4. Are lenders in the area ready to work with you? 

Here are steps to buying a house poor credit

#1. Know your credit report

The first step, certainly, is to discover the credit score you are working with and know where exactly you are to start from.

You can get an accurate credit report from, but the free package has a limit of one year.

#2. Pay off outstanding debts

Your debt-to-income (DTI) is more important to any mortgage lender than your credit score is.

It works by simply comparing the sum of your monthly debt payments to the sum of your monthly income. 

This helps a lender to have a sense of your financial capacity. It helps them know how many percentages of your income you have left for your monthly expenses.

To calculate your outstanding debts, calculate the sum of payment for your monthly debt like student loans, etc plus the total of a mortgage payment you have been planning. 

After this, proceed to divide it by your accurate monthly income. 

Clearing your outstanding debts leaves a good impression on lenders. It will also help to improve your credit score.

Again, it will lower your debt-to-income ratio.

Note that the Lenders will prefer debt-to-income ratio that is below 36%.

#3. Establish your budget 

This calls for self truth. Before fixing your gaze on a dream home, 

Especially one with outrageous price, be sure it’s something that you can afford comfortably on your own.

You should never be in the position to buy more house than you can afford thereby becoming “house poor”. 

However, when buying a house with bad credit, you tend to pay a higher interest, as a result, it’s advised to buy a home below your means. 

It’s advised to only spend an average of 28% of your annual income on a mortgage.

#4. Save and make a down payment

When you are purchasing a house with bad credit, saving up a reasonable amount to make down payment can make your qualification easier with lenders. 

Making a down payment means you will have to work to pay up a smaller loan. 

However, To make a down payment of the purchase price, it’s advised to make one of 20%.

#5. Leverage an Federal Housing Administration loan

FHA loans are made to make  homeownership easier and possible for people who may find it hard to normal loan. 

They are mostly constructed for first-time house buyers.

They save cost than that of a private lender. 

To qualify for a FHA Loan, You will need a minimum credit score of 580 or an average of 3.5% minimum down payment. 

If your credit score ranges between 500-579, you may need an average of 10% down payment to get an FHA loan.

In conclusion, buying a house poor credit is very possible but you have to consciously leverage on these steps. 

Even if it’s not looking like you can buy a house right now, you can work towards it when you make it a goal.

House Poor FAQ

Is it okay to be house poor?

Being house poor is possible regardless of your net income as long as you’re spending so much on the property. As a result, you tend to channel almost all if not all of your income to the mortgage thereby making your house poor.

What does house rich mean?

This means you have more equity in your home than in cash. You have more equity in your home than money in your bank account.

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