House Poor

Written By
Paul Tracy
Updated July 18, 2021

What is House Poor?

House poor is used to describe a homeowner who spends too large a portion of his or her income on home ownership, leaving too little for discretionary spending.

How Does House Poor Work?

Typically, home ownership expenses, including mortgage, insurance, and taxes should comprise no more than 28% of a family's gross income.

In a quickly rising housing market, it sometimes becomes difficult to find a house within the "qualifying" range.  Indeed, many new homebuyers seek to capitalize on rising housing values by buying a home above their means.   Mortgage lenders offer a variety of loan products that cater to these overleveraged purchases, such as deferred principal repayments and adjustable rate mortgages.  These products lower the initial debt costs for the homebuyer, but may become unwieldy when rates rise or home values fall unexpectedly.

Using these mortgages, homebuyers may try to buy a house more expensive than they can really afford, often leveraging two incomes, bonuses, discretionary spending (vehicles, recreation, and vacations), and even retirement savings.  That leaves little room for non-home expenditures, such as education, and even furniture, as well as unexpected events, such as job loss, sickness or any temporary absence from the workforce.

[If you're ready to buy a home, use our Mortgage Calculator to see what your monthly principal and interest payment will be. You can also learn how to calculate your monthly payment in Excel.]

Why Does House Poor Matter?

Overreaching in the housing market has become a problem for homeowners and the economy as a whole.  For homeowners, it limits the financial flexibility which is necessary to save, accommodate a sudden layoff, or even take a vacation.  For the economy, it hampers non-household consumer spending and thereby reduces the demand for and production of consumer goods worldwide.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about House Poor.
Be the first to ask a question

If you have a question about House Poor, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about House Poor, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about House Poor

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms