House Poor

House poor summary:

• House poor means too much of your income is going toward your housing costs. 

• Being house poor could compromise important financial goals, like building your emergency fund or saving for retirement.

• You’re typically considered house poor if you spend more than 30% of your income on housing costs, though this number could be different depending on your budget.

House poor definition and meaning

House poor describes a person or family whose housing expenses—such as mortgage payment, property taxes, insurance, utilities, and maintenance—take up a disproportionately large portion of their monthly income. Being house poor means a person has little money left over for other essentials, savings, or discretionary spending. 

When too much of your income goes toward your home, you can't easily afford to do other things. 

Key concept: Spending a disproportionate amount of income on housing expenses.

More on house poor

Being house poor is less about the size or quality of the home, and more about the imbalance between housing costs and a person’s overall income. 

Someone could be house poor living in a large, luxurious house or in a smaller, more modest rental apartment. Whether they’re house poor or not comes down to how much of their income goes to pay for that housing.

Types of house poor

Here are some clear ways to quantify being house poor:

Government guideline. If you spend more than 30% of your gross income on housing (rent or mortgage, property taxes, insurance, utilities), the government considers you cost-burdened.

Stricter financial expert guideline. The convention financial expert guideline says spending more than 25% of your income on housing could be a risk to long-term financial health.

Debt-to-income ratio (DTI). Lenders look at your total monthly debt payments (including housing). If your DTI is above 36% to 43%, it could indicate you’re stretched too thin.

Savings check. If high housing costs leave you with little or nothing to save each month, that’s another sign of being house poor.

Lender approval. Mortgage lenders typically want your housing payment to be under 28% of your income. Additionally, they prefer your total monthly debt payments, including your mortgage and other obligations, to be less than 36% of your income.

Key attributes of being house poor 

Here are some of the key attributes that go along with being house poor. You:

• Worry about paying essential monthly bills because so much of your income pays your mortgage.

• Spend so much on your housing that you can't afford routine maintenance and repairs or to furnish your house.

• Live paycheck to paycheck or struggle with debt and may need debt relief because your high housing costs mean there’s not enough left over for other expenses. 

• Can’t work toward other financial goals because of the amount of money you spend on your rent or mortgage each month. 

• Risk being unable to make your mortgage payment if there’s a bump in the road, such as a job layoff or a sudden illness.

Real-life examples of house poor

Here’s how being house poor could look in a person’s life. 

Ann buys a house with a mortgage payment of $2,000, and her monthly take-home is $4,000. Her mortgage takes up 50% of her take-home pay, leaving her with just $2,000 to cover all of her other costs. Her high housing costs mean she can’t save for retirement or stash money in an emergency fund. She lives paycheck to paycheck. 

Steve rents a one-bedroom apartment for $1,900 a month in the city. He earns $3,500 a month after taxes, so more than half of his income goes to rent. After utilities, groceries, his car payment, and student loans, Steve has almost nothing left for savings or unexpected costs. Even though he doesn’t own his place, he feels house poor because so much of his income is tied up in housing, leaving little room for anything else. He worries each month about being able to afford his rent and other costs.