Is too much house making you house poor?

I keep hearing stories from people who, after buying their first home, become immediately overwhelmed by the financial toll of homeownership, especially when they spend more than they can actually afford. And, when buying your first home, it can be so easy to get in over your head. When we were in the process of…

Michelle Schroeder-Gardner

Last Updated: April 9, 2023

Disclosure: This post may contain affiliate links, meaning if you decide to make a purchase via my links, I may earn a commission at no additional cost to you. See my disclosure for more info.

Is too much house making you house poor?I keep hearing stories from people who, after buying their first home, become immediately overwhelmed by the financial toll of homeownership, especially when they spend more than they can actually afford. And, when buying your first home, it can be so easy to get in over your head.

When we were in the process of buying our first home, we were given a pre-approval amount of $150,000.

If we would have bought a house for that amount, I’m sure it would have led to us being house poor, which is when you buy more house than you can actually afford. While that amount may not seem like much to some, it was more than enough to purchase a good starter home in St. Louis, where we were living at the time.

This $150,000 number seemed high to us because we were quite young, just 20 years old, and we both had mediocre jobs. Yes, we were both working full-time, but our yearly salaries put together were still very low, and I definitely do not think we should have been approved for $150,000. If I remember correctly, our annual take-home income was only around $30,000.

Thankfully, we did not buy a house that was $150,000. Instead, we made sure to buy a house for much less because we didn’t want to be stressed out by large monthly mortgage payments that we couldn’t afford.

According a report on Trulia about home buying trends (this is not sponsored in any way), homebuyers are spending more and more money in order to buy a house. And, I’ve personally noticed this when I’ve talked to people. People are going bigger and bigger when it comes to purchasing a home, which means many people are likely spending over their actual purchasing ability.

I did some more research, and according to Business Insider, Americans are spending approximately 37% of their take home pay, on average, to put towards housing.

That is a lot of money to spend on housing, especially if you are not aware how this will impact your financial life. This can lead to being house poor, which can cause even more problems.

If you are unfamiliar with the term, house poor means you have spent most of your money on your mortgage without leaving enough for additional expenses.

Being house poor can lead to many problems in your life. While having a roof over your head is a great thing, it can be easy to let home expenses get the best of you if you don’t do enough research before you buy.

You might be surprised by how many people are house poor, and just because your neighbor or friend has a nicer house than you does not mean they are doing better than you. So many people see housing as a status symbol but don’t really think about how this may impact their financial situation.

Related articles:

Below are some of the many different ways being house poor can limit you. When buying a home, please keep the following in mind.

Are you house poor and house broke?


Can you afford all of your home expenses?

Are you house rich cash poor?

Buying a home can easily lead to being house poor if you don’t do enough research on the total cost of homeownership. This can limit you because you may be even more house poor than you originally thought.

When some families buy a home, they don’t think about the total cost of their house. While you may be able to afford the monthly mortgage payment, you may not be able to afford things like insurance, taxes, utilities, etc.

When you find a house that you think is right for you, you need to make sure that you can afford ALL of the costs that come with that house.

Just because you can pay the monthly house payment doesn’t mean that you can afford everything else that goes with it. There are ongoing costs when buying a house, which is something that many homebuyers forget about.

In fact, according to Zillow:

  • U.S. homeowners, on average, spend more than $9,000 per year in hidden homeownership costs and maintenance expenses.
  • U.S. homeowners pay an average of $6,042 per year in unavoidable hidden costs: homeowners insurance, property taxes and utilities.
  • U.S. homeowners pay an average of $3,435 per year in annual optional costs, including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing.

Before making a home purchase, you should think about how much this house will cost you in the long run. There are many ways to think of this, such as:

  • Property taxes- These vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may vary by thousands of dollars annually. This can add up to a lot of money in the long run. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually, and a difference of just $3,600 a year is $300 a month for life.
  • Gas– Many homes use gas to run the hot water heater, the stove, and so on.
  • Electricity– Generally, the bigger your home, the higher your electric bill.
  • Sewer– This isn’t super expensive, but if you own a home, then this is a bill you may have.
  • Trash– This isn’t super expensive either, but it does cost money.
  • Water (and possibly irrigation)- Depending on how you use water and where you live, water bills can vary widely. I know many who live in areas where the average water bill is a few hundred dollars each month.
  • Home insurance- Home insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance, and know that it can add up quickly depending on where you live. Flood maps, for example, are easy to access and should be checked before understanding the cost of insurance and home ownership.
  • Maintenance and repairs- No matter how old your home is, even brand new homes, repair and maintenance costs will eventually come into play. In fact, U.S. homeowners pay an average of $3,435 per year in optional costs, including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing. But, don’t forget about things like needing a new roof or other repairs that may come up!
  • Homeowners association fees- This can also vary widely. You should always see if the house you are interested in is part of an HOA. The fees may be high, and it may involve rules you may not like.
  • Home furnishings- Furnishing your home can be done cheaply, but I know some who buy huge homes and can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?

Always remember to add up the total cost when deciding to buy a house!


Can you still afford the rest of your life?

If a lot of your money goes towards home-related expenses, this means you have less money for other things in your life.

This can prevent you from doing the things you want and can stop you from being able to reach financial freedom.

Being house poor may mean:

  • You can’t retire when you want.
  • You can’t go on a vacation.
  • You’re stuck at your job.
  • Your finances may make you too afraid to reach your dream.
  • You can’t afford the other things in life you want.
  • You may never feel free because you feel stuck to a large monthly payment.


Is the house going to add stress?

Banks, many times, approve home loans with monthly mortgage payments around 30% to 35% and sometimes even as high as 50%, and I personally think this is too high in many cases.

While in some cities this may be normal (such as New York City or cities in California), having a monthly mortgage payment that is less than the amounts above will make life much less stressful.

This is because the lower your expenses are, the less things, like a layoff, a firing, a large unexpected expense, and so on will impact you both mentally and financially.

If a high percentage of your income goes to home expenses, just think about how you will be impacted if all of a sudden you made less money or if your monthly expenses suddenly increased. What if all of a sudden your home expenses consisted of 50% or more? What would happen?

Even when my monthly mortgage payment was around 25% of our monthly income, I still didn’t like that.

Like I said, depending on where you live this might be hard, but I do think the lower the percentage, the better.

If you are house poor and want to change your situation, I recommend the posts below:


If you haven’t purchased a house yet.

Now, if you haven’t purchased a house yet but are thinking about it, I want to help you from becoming house poor.

Whether you are a first time home buyer or if this is your second or third house (or more!), you should ask yourself some questions: 6 Important Questions To Ask Yourself Before Buying A Home. This article goes over things such as:

  • Whether or not you can afford a home.
  • The factors you should think about before purchasing a home.

And more.

I recommend purchasing less house than what you are approved for. While in some instances getting a house that is similar to what you are approved for is fine. However, in many, many instances, the average person is approved for way too much house.

Like I said above, many potential homeowners are approved for home loans that are somewhere around 30% to 35% of their salary before taxes.

That’s a lot of money. This amount is before taxes as well, which means that your actual monthly home payment would be a significant portion of your take-home income each month. Many who buy at the full approval amount cannot afford their homes due to the fact that it is such a significant percentage of what they earn.

If you don’t want to be house poor, make sure to buy a home that is less than what you are approved for. You should also add up all of the costs of owning a home and make sure it is an amount that you are comfortable with.

Now, remember, banks are not there to actually tell you what you can and cannot afford. Just because you are approved for an amount does not mean that YOU can afford it.

So many people think that the banks are protecting them and that pre-approval means affordability.

But, that just isn’t true!


Please have an emergency fund.

An emergency fund isn’t just to protect you if you lose your job or take a pay cut. They also exist to help you in case something goes wrong with your home.

Your roof could spring a leak, a tree may fall on your home, a pipe may burst, there may be an electrical problem, and more. Homes have many things that can go wrong, and you never know if something may need to be fixed.

By having an emergency fund, you will have money set aside to help you if something were to go wrong. An emergency fund prepares you for unexpected expenses and means you won’t need to go into debt to manage them.

Are you house poor? How much of your monthly budget goes towards housing?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Nice Article. I agree too much house can make you poor. House prices in NZ have gone crazy with the medium income to medium house ratio at about 9 to 10. But on the other hand, if you don’t buy a house, you end up paying the mortgage off a house you don’t own through high rents. The way I get around this is to pay as much down on the mortgage as we can. No sure if it is the best idea, but the mortgage will be gone in 8 years.

    1. Paying off a mortgage in 8 years is great!

  2. We actually downsized last year by half. While we weren’t necessarily house poor in our old home, downsizing has freed up a lot more money and time!

    1. Wow, awesome! Yes, downsizing has so many benefits.

  3. My wife and I sometimes catch ourselves looking at our friend’s large home with jealousy. Then we remember that we will be better off in the long run because our mortgage/income ratio is so good. Plus there is no need for a bigger home, ours is just perfect.

    – Adam

  4. Ana Melendez

    I love your blog! Every time i read a new post i am always learning something new. Thanks to your blog i am motivated to start a blog as a side hustle since my day job income is not enough. I want to be debt free and i am encouraged to follow Dave Ramsey plan on Total Money makeover which i why i was looking into what side hustle i can do from home and i found your blog. Thanks so much. Keep doing what you’re doing because is great!

  5. Kayla

    Such a good reminder. I currently own a small condo and as much as I want to buy a big fancy house, I know that by the time I’m 53 it will be paid off! Then we can focus on traveling and living life 🙂

  6. Will

    I couldn’t agree more with this post!! I have been planning a post on this subject for a while now. My wife and I got preapproved for 400k in January. We both make very average salaries and could never see affording that. We now have a contract on a house for 190k!

    1. Good job for realizing this! It’s crazy what people can get approved for.

      1. Will

        Had to come back and give an update. The appraisal came in at 202K and we were able to negotiate $4K in repairs!! So somehow in the crazy Dallas Fort Worth market we as the buyers got a deal on a house that is actually in really good condition!

  7. The Curious Frugal

    We have the smallest house out of any of our friends or family. We’re at just over 800 SF for two adults and a toddler. Sometimes I would like more house. That’s usually when I want to have a nicer/bigger space for guests to stay. But it doesn’t seem like the best idea to buy more house for people who will come to visit maybe once a year. Our mortgage will be paid off in less than two years so we’re pretty pumped about that.

    1. Less than two years is amazing!

  8. Kris

    We are currently looking for a home and have been for about a year now. And we live in a HCOL(SF Bay Area) and so we have to be really sure that when we do eventually buy a home that we will be their for the long run. When we get serious about buying a particular home we will be careful to prevent being house poor especially in this area. We have to see how much the mortgage will be and how it factors in with the rest of our expenses. We don’t want to be in a situation where we won’t have any type of savings each month.
    Currently, our savings rate is over 70% and when we do buy a home, we know that percentage will drop and would be okay with even a 10% savings rate, it’s better than not having any savings at all.

  9. Mrs. Picky Pincher

    Soooo true. There’s much more than a mortgage to consider when you buy a house. I knew that going in, and I was still shocked by the amount of monthly bills and repairs. Home ownership isn’t for everyone, and we need to remember that unconventional living styles (like RVs) or renting are also great options. It all depends on your lifestyle and needs. I think home ownership was right for us, but it isn’t for everyone.

    1. Yeah, it definitely all depends on the person!

  10. Mark

    I was trapped in the “house poor” cycle many years ago. Luckily learned my lesson and now have a townhouse that will be paid off in a few years. This is an important reminder for younger people starting out, especially in a high cost of living area. Great article

  11. Peter Griffiths

    Much the same over the pond here in the UK, but most of the expenses are the same if you rent or own – for example the utilities would be the same.

    1. Interesting! The expenses can vary widely over here, such as with maintenance, utilities, property taxes, and more.

  12. When we started looking at houses a few years ago, our mortgage lender approved us for more than I knew we could reasonably afford. We already knew all about Dave Ramsey and his recommendation that your mortgage be no more than 25% of your take home pay. Luckily, we were able to find a home that fit well within our budget. We were even more fortunate that we had a padded emergency fund because we’ve had thousands of dollars in unexpected repairs over the course of two years! I’m glad you recommended having an emergency fund at the end of this post. Homeowners especially need funds set aside for unexpected expenses!

    1. Yes, an emergency fund is great!

  13. We never had a house payment that exceeded 15% of our take home pay which made becoming financially independent very easy. Partly that was because we live in a house much more modest than most people who achieve the corporate rank I did. Also because we have stayed in one rural location my entire career and houses, land, taxes and insurance cost very little here. Avoiding becoming house poor is one good argument for choosing rural life over metro life if you can still find metro wages in the country like I did. Not to mention zero traffic and commute times measured in single digits of minutes.

  14. Kelly

    Great article. I definitely can’t afford anything where I live. $400k might get me a garage. Livable houses are in the 700k’s. Decent would be 800-900k.

    Yet, people are buying left and right and always above the asking price. Not sure if they’re loaded or stretching very thinly.

    1. It’s just crazy how expensive housing is in some areas!

  15. My best friend almost got divorced over this issue. He and his wife bought a Mcmansion, and after the first couple of months things started to go bad. One month they had a $900 air conditioning bill! His wife was literally in tears at the money they were spending for a bunch of empty rooms. I think they were squarely in the keep up with the Joneses mode. Thankfully, after a short separation, they sold it and wound up staying together. This is a real issue, and I’m sure what happened to my friend happens to others, not always with the happy ending.

  16. This is a great summary of the hidden costs of homeownership that no one really discusses. Most people are interested in the monthly mortgage payment to figure if they can afford a home. With super long mortgages 30-50 year available you can really become house poor soon by buying a home you should not be buying.

    Bigger home is more property tax, more maintenance, more things to go wrong, higher insurance, etc.

    I think there has been a huge trend that the millenial generation and gen Y are starting to shun home ownership and rent instead. Curious how that will play in the market (less demand might mean housing prices drop drastically).

    Doctors commonly make mistakes (I sure did) because of the easy to obtain doctor mortgage loans. You can get a large mortgage home while having a huge debt loan because the banks are banking on your future earning power. It can set up people for failure, especially if they buy a house during residency (I bought 2 actually while I was a resident)

    1. That is interesting to know about the doctor mortgage loans!

  17. I think it all depends on the specific person, the other fees that may have to pay, etc. For some people 30% may be fine, but for others 30% may be too much.

  18. Marleigh

    Yes we love our modest 1500 sq ft house thats perfect for the two of us and a mortgage thats less than 500.00. We joke that if things went bad we could at least still afford the mortgage on a part time income. Plus we hope to pay it off in 5 to 6 years. Its nice to be able to fix it up the way we like because the note is so low it leaves money for those things instead of having rooms with no furniture and not decorated.

  19. Future Blogger

    Great post. I’m a mortgage banker for over 30 years. I make my living originating home loans and can honestly say that more often than not I scratch my head when I peer deep into the finances of the majority of buyers I encounter, no matter what their income level.

  20. Such a good post! I’ll send it to my adult kids who will be making buying decisions in the next few years. My husband and I made the decision to sell our home and downsize last year to a more affordable place in a nice (but less expensive) community not too far away from our office. Was a year of hard work and living a bit of a nomad life until we could find the right place. But the home across from us rents for much higher than our mortgage, so we’re glad we stuck it out.