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Making a decision to become house poor?

post #1 of 87
Thread Starter 
We are thinking about doing this. We live in an okay house in an neighborhood that could be better (though it could be worse) some of our schools are okay and some are really a problem. Now that things are costing less we are considering selling our house and buying one in a better area...it will completely change our money situation though. We really don't struggle here and would struggle if we move - that beng said we will probably have to send the kids to private school if we stay here (also creating a struggle at some point...)

Has anybody been in a pretty comfortable housing situation and changed it up for longer term goals? Is this stupid?
post #2 of 87
In this economy? Never, ever, ever would I consider such a thing. We might be going thru a period of deflation right now, but inflation is just around the corner with all the money the Fed keeps printing from thin air.

I would sit tight for at the very least a year. Start saving the difference your mortage payments would be to see what the really feels like to be spending that much more on a mortage. If at the end of the year, you still feel the same and the economy is still the same if not better, then you have all that much more money in savings.

Do you have a 6 month emergency fund? I would certainly have that well in place before making any kind of such a move in today's economy.

It's going to get worse before it gets better.


Good luck in thinking this all over.
post #3 of 87
I would not want to be house poor. I have a good friend in this situation and she can't even go out to eat every once in a while cause money is so tight. Back when we lived in a shady area and had a tiny apaprtment, I used to be jealous of her nice home and cars... but they don't ever actually get to leave their house! Not saying that is similar to what you are considering but it's what i thought of and as much as I think it's important to live in a area with good schools and low crime, I wouldn't want to put my family in the position to knowingly struggle financially, yk?
post #4 of 87
Quote:
Originally Posted by wildmonkeys View Post
we will probably have to send the kids to private school if we stay here
This is the part that I would think long and hard about. How much difference would it make to send your kids to a private school? What if you were super involved in the school instead, and also did lots of at-home tutoring? I have a good friend who went to a really bad public school in Miami, but because she was motivated and her parents put lots of emphasis on education, she did really, really well. She feels she was able to participate in lots of extracurricular activities she wouldn't have been able to in another school, because there wasn't much competition. She was a big fish in a little pond, IYKWIM. And, if you were saving money on private school, you could be putting that much more into their college funds.
post #5 of 87
Well... It's not an all or nothing proposition. Would you consider significatly tightening the belt now to save up a good down payment. That way you would potentially lower your monthly payment at the new house, and you would get to see what living on less would feel like, and you could see if it was worth it.
post #6 of 87
I wouldn't want to become house poor in any economy, even a good one.
post #7 of 87
We just put an offer in on a new house. It has the space we have been wanting, in the school district we feel we need to be in (to avoid private school) and was a 'deal'. That said, we will be paying dual mortages until this house sells and we have increased our mortage payment by a good amount. While it is not an ideal situation, we did save up a good amout for a downpayment, paid off all of our debt and built up a good 'buffer' in savings to get us through before we made the decision to buy. For us the school was a HUGE factor, espically since we have 4 kids we will be putting through school. This at least gives us the option of public school.
post #8 of 87
It really depends on the numbers. If it's going to be hard for you to pay your bills then of course it's a bad idea. If it means leaner vacations or whatever then that's different. I'd have to see the numbers.
post #9 of 87
It may be a good market to buy, but it's a terrible one to sell. Put the current house on the market, and reconsider it if and when you get a good offer. There's no rule that offers need to be accepted, and chances are you won't get a decent one for a long time, which gives you plenty of time to think about it. In the meantime, save like crazy to make it more doable.
post #10 of 87
Being house poor is horrible. Your kids aren't going to think "well we're hungry and we don't have much food, but it's ok I have my own room!" You also aren't going to be thinking "well at least we have this lovely home, we have to sit in the dark and it's cold, but we got our house!"

That might sound a little dramatic, but when things get tough that is exactly the type of senario you may be looking at.

It's really draining and depressing. I wouldn't even think about this idea.
post #11 of 87
Depending where you are, it's not a very good time to sell, but there are deals if you are buying.

I would personally move if family safety issues were at stake, or the schools were so terrible that the children couldn't attend. Do you know the specific school your kids would attend? If so, have you visited, been in the classroom, met the teachers, etc.? I ask because sometimes we think a situation is terrible, when the day to day reality is actually OK. Just wondering about the assumption of needing a private school.

I guess we are technically "house poor" as we are in a high COL area. We don't really go out to eat and live a fairly simple life. We chose our location for family safety and good schools. Everything else is gravy after that. I don't really care if I have extra spending $$ if I don't feel safe and my children aren't receiving a good education. Our housing is our priority at this point, and any extra we sock away.
post #12 of 87
Real estate in DC still has a long way to fall before it is in line with the median income. If you really want to do this, sell you current house, rent for a year or two, bank the savings, and then venture back out into owning later.

Don't believe the hype. This isn't a "great buying opportunity." Yet.
post #13 of 87
Quote:
Originally Posted by dolcedaze View Post
It may be a good market to buy, but it's a terrible one to sell. Put the current house on the market, and reconsider it if and when you get a good offer. There's no rule that offers need to be accepted, and chances are you won't get a decent one for a long time, which gives you plenty of time to think about it. In the meantime, save like crazy to make it more doable.
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post #14 of 87
We are house broke. We only make about $20K a year and our mortgage is over half of that. We do live in a nice neighborhood, but it is an association of condos with big yards. I feel safe at night and trust all my neighbors. For us, we are just on the poorer side despite our mortgage. At first it was very hard, and at times it still is, but I also think it has to do with your outlook and attitude. Knowing that I can send the kids in the backyard to play without worrying is freedom. You will have to decide if you would rather have stuff and fun events while living in current location, or a safe home. I of course would prefer both, but if I had to choose, I am glad to live in a safe place. I also would think hard about the private schools. I do think may be a little better than public schools in some ways, but I went to a private school one year and the kids were mean. Something I commonly hear is that kids in private school are doing all the same things as kids in public schools, they just aren't getting caught-their parents trust them because they can put on a good show. Another option however, is to bloom where you are planted. I have a good friend who lives in our ghetto part of town. The bus stop is right in front of her house. She planted all kinds of flowers around it despite warnings from neighbors that they would be demolished, but she had hope that if she made things look nice that others would respect it- they did. Try to inspire your neighbors and you might have a bigger effect than you could imagine.
post #15 of 87
I would actually have to see numbers to know whether or not this is a good idea for your situation, but we are house poor. We moved last year and were able to make a huge down payment from the proceeds of our last house. But our mortgage payment increase by a lot. For the first year we were here, we were really struggling financially but I wouldn't change a thing. The best part about our new town is that we don't have to put on a show like we have more money than we do. There's no pressure to keep up with the Joneses, because even though the Joneses have more money than we do, they are doing a lot of the same crunchy things we are doing. If moving to a better town meant I'd stand out a the poorest family in town, then I wouldn't do it.

Either way you decide, this is a huge decision to ponder. Run the numbers and really think about whether or not you can live without the things you'll have to forgo. But for us, we'll never be able to buy toys or go on expensive vacations or have really nice cars or go out to eat a lot, but it's a very good trade off and we're happy to make the sacrifice.
post #16 of 87
How house poor are you talking? What percentage of your take home pay would it be? Other debts? We go round and round on this and for 2 years always say no to moving in the end. We have so far decided to get out of cc debt (almost done!), save 3-6 months expenses in an emergency fund and then revisit the house issue.

Btw, our house payment would be marginally more each month, its the moving expenses and hooking up utilities and risk of something going wrong that would kill us right now.
post #17 of 87
Don't do it. We are completely house poor, and I hate it. I regret our decision every single day. We had enough money when we bought the house, although I suppose we were still considered house poor. Since we bought it, my husband's income was reduced DRASTICALLY and he had to take on a second full-time job. We not only don't have enough money now for extras, but not even necessities. Forget eating out, we need new tires for our car something fierce and we can't get them unless we get enough money gifts for Christmas from our parents.

If I could go back in time, I would kick my own butt before I got a chance to sign the papers. Before we bought it, we lived in a town I absolutely HATED. It was small (200 population) with NOTHING in the town but a bank and a post office. I never felt safe there because there was lots of drugs and no police presence. Regardless, I'd rather live there forever than have this horrible feeling of not being able to pay our bills.

In no way do I think prices are done dropping. Wait. Save up as much money as you can. Think seriously about what will happen if your income goes down after you are already house poor. How will you make ends meet?

Can you sell your current house and just rent in a better area with better schools? At least if rent gets to be too much, you can just leave.
post #18 of 87
Becoming house poor is never a good move, but in this economy it would be pretty much the worst move you could make.
post #19 of 87
I don't know anyone who was house poor who has been able to stay in their house for more than 3 years.

I think it's a bad idea.
post #20 of 87
Quote:
Originally Posted by Denvergirlie View Post
I would sit tight for at the very least a year. Start saving the difference your mortage payments would be to see what the really feels like to be spending that much more on a mortage. If at the end of the year, you still feel the same and the economy is still the same if not better, then you have all that much more money in savings.
I think this is great advice. Don't forget to add in how much more you will be paying in taxes, insurance, and any HOA fees. It's better to find out now if it is too much for you rather than 6 months after you buy it. If you do decide to buy, you can use the money as part of a down payment. If not, you have a nice chunk of money set aside for savings or tuition.

We were looking at buying this past summer but decided against it mainly because we would have been house poor and that is way past my financial comfort zone.
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