This is a true story that I hope will serve as a warning to other first-time home buyers. My wife and I rented a home for the first five years of our marriage. After us working, saving, and scrapping for half a decade, my promotion enabled us with what we thought was the financial freedom to finally be able to afford our first home.
We wanted to do everything right from the get-go. We hired a mortgage consultant and we shared all of our private financial information including what assets we owned, our pay stubs, and shared details about our plans for the future. Our consultant told us what we could afford and even secured us a pre-approved mortgage.
It was great to able to shop for our first home, knowing that our pre-approved mortgage allowed us to sign on the dotted line, without having to worry about more than our down payment.
If we only knew what we know now we could have avoided being house poor
Of course, at the time we had no idea what house poor meant. Now we understand that it means that what we can afford are only guidelines and we needed to take more into consideration than our down payment, ongoing mortgage payments and moving expenses.
This is how we became a financial slave to our home
We were wise enough to factor in our car payments, utility bills, entertainment budget and so forth but we were completely unprepared for the “hidden costs of owning a home.”
Our first jarring experience was within the first few days of moving in. After a particularly cold winter night we turned on the kitchen tap and no water came out. Moments later we heard a burst, followed by what sounded like water pouring into the basement. Unfortunately, that is exactly what it was.
Our pipe froze and burst. This caused an incredible amount of damage to the walls, carpets and all of the items that we were storing in the basement. This was a disaster that could not be foreseen. We had a home inspection performed before purchasing the home and everything checked out. The roof had recently been replaced and the plumbing was in good condition. In any case, this cost us a great deal of the budget we had set aside for minor repairs, painting and the new dishwasher, which we quickly realized would have to be put on hold.
And Then…
The second unforeseeable event was caused by our neighbours, who immediate complained that every house on the street had a landscaped front yard, and our home’s plain and overgrown front yard was lowering their property value. We planned to stay in our home to raise a family and the last thing we wanted was to upset our new neighbours. We already knew that come spring, we were going to have to hire a landscaper, or learn very quickly.
These may seem like minor examples as far as home buying experiences go but for a young couple on a budget, we wish we hadn’t spent our upper limit because now we see first-hand how easy it is to go from comfortable to house poor.
This article is really helpful for us who are planning to own a house. Thanks for sharing your experience. Unforeseen expenses can really hurt so I think it is always good be prepared for those things. Thanks again.. nice read.
The bottomline is really to be a smart consumer. We should always look for the hidden costs. We should examine the breakdown of the fees so we know what we are paying and what we are not paying for.
You are right …. there are “good” dollars to be spent on a home which contribute positively to the “investment” immediately and there are “not so good” dollars which take time to recoup the investment …. if ever!!
Yes. The thing about home ownership that new homeowners need to remember is that you’re the landlord now! When my own first home surprized me for the first time: it was sewage leaking from the main drain in the basement. It was a big unforeseen bill… One I hadn’t factored into my life. I’m not quite housepoor… But I am at the mercy of fate a lot of the time.at least now I’m ready for the possibility of disaster! Somehow, that helps.
I can definitely relate to what you’re saying, and I feel your pain. I think everyone has at least once at one time or another, had second thoughts about their home purchase. So don’t think for a minute that you’re alone in this. It’s just a fact of life. Murphy’s Law has the uncanny ability to take effect shortly after you close on your home.
I wish we realized some of these things when purchasing our first home. But, like many things, you don’t really realize them ahead of time.
its nice and show the reality of life and also it give’s an idea about the purchase of a house. thanks.
I really agree with you, FlanneryCam. Buying a new home should be considered as a major investment. Your financial outlay may be significantly huge but you could ensure its cost-efficiency. If you will be too stingy, you may end up with a house not worth the investment at all. You may also realize soon that you have higher unforeseen expenses. The maintenance requirements should be factored in.
Owning a home is really expensive due to the required maintenance expenses that, unfortunately, happens regularly. Add to this are the unexpected repairs that require money to do. There is really need to look forward and plan you expenses. At least you learn that now and from here on, you know what to do.
I live in the US and in today’s market it is scarier than in the past. I bought my first home just before the real estate boom for $140,000 and was fortunate to sell it months prior to the big bust for $415,000 ( It was a 800 SF rambler w/basement). When your home is appreciating at this rate it would be difficult to be house poor, however the home we bought after of course we purchased at top dollar and would probably now consider us house poor as the house has lost about 20% of its market value since we have moved in. We are here for the long haul but I will not make any non functional improvements until the market changes.
Very nice guide, I will use this.
Wow! This goes without saying, you must definitely plan for unforseen expenses on a home before you invest any further. I learned this lesson with my mother’s home which my siblings and I inherited, we began to see the burden that it came with when we decided to take over the mortgage. Whew!
I know how this is also unfortunately. When I first moved out from my parents me and my twin sister decided to get a house together rather than an apartment because she didnt want to. We never realized how hard it would be, it was difficult for the first year and we decided to go our separate ways. But living with just what you need… or at least try to with a house is quite difficult in my opinion.
That is very sad to hear. But things do happen that are unforeseen. I knew of a woman who purchased a home, and soon after she had a problem with a large tree on the property, with roots that had wrapped around her pipes, and the tree had to be removed, leaving her with a large bill.. How would you know such? So I would guess that having a cash reserve is one way to be prepared. Thanks for sharing. Hopefully it gets better.
A plumbing contractor can run a camera through the pipes to see if there is any evidence of pipe damage but not too many Buyers avail themselves of this service or are prepared to bear the cost when purchasing a home.
We need to manage our finance efficienly because every dollar help us to choose what type of house that we can purchase
A very enlightening story, something very similar to what we went trough. It is one of those “if I knew then what I know now” moments.
The worst of the whole situation is, when you are in house buying mode, you just want to get it done, move in and settle down. The advice of others (even well meant) sometimes gets dismissed as their blabbering or interference.
At least you are not a church mouse poor yet, and it does get better.
William, that is an interesting suggestion that I had not heard of, regarding the camera checking the pipes. Thanks.
Thank you for sharing. I understand how you must have felt! Some people are not familiar with home renovations and how to take care of a home. It takes time and energy to repair the roof, pipes, heating system, and etc.. If one do not do regular repairs, something bad could happen and it could be costly too! It is good to invest in a quality home and it is also important to do regular up-keep around the home.
Totally agree with every one’s post. Thanks for the advice as well. These days you have got to examine everything down to the detail. Don’t want anything coming back to hurt you later on.
Very concise and helpful article. I will make sure I listen to your words when I am going to buy a house first time. I am sure that it’s a huge disappointment going from comfortable to poor. But as in life, we learn from our mistakes.