Market Watch, April 23, 2021, How much income should you spend on homeownership? How to avoid being ‘house poor’
Learn to budget for a home and repairs so you have some money left over.
Andy Hill discovered he was house poor soon after he bought his first home in 2004. When Hill put 10% down on the 1,200-square-foot house in Royal Oak, Michigan, a suburb outside of Detroit, he was surprised to find out he had to pay private mortgage insurance, which initially was $158 a month. Heating the poorly insulated home was also more expensive than Hill thought it would be. To make ends meet, the 22-year-old had to take out a home equity line of credit.
Saving 1% of the property’s value is a good starting point for maintenance expenses a year, says Ibijoke Akinbowale, director of the Housing Counseling Network at the National Community Reinvestment Coalition.