How Do I Buy a Home Without Becoming House Poor?

Buying a home is one of the biggest financial decisions most people make, and in today’s market, it can feel especially overwhelming. Prices are high, the future of still high interest rates is unknown, and competition can be intense. Under all of that sits a very real concern: “How do I buy a home without feeling stretched, stressed, and house poor?”

Becoming house poor happens when too much of your income goes toward your home, leaving little to no room for savings, leisure, flexibility, or unexpected expenses. The good news: this is avoidable with a values-based, intentional approach to planning.

Here’s how to evaluate affordability in a way that protects your long-term financial wellbeing, with a special section for homebuyers in California and San Diego.

1. Focus on What You Can Comfortably Afford, Not What the Lender Says You Can Afford

A lender’s approval amount represents the maximum they’re willing to lend, not the amount that supports a healthy lifestyle. The best way to determine your affordability is by calculating a specific percentage of your monthly income for housing expenses.

A good rule of thumb for most households:

• 25%–30% of gross income for monthly housing expenses (mortgage + property taxes + insurance + HOA, if relevant)

• Up to 35% of gross income if you have stable income, no consumer debt, and strong emergency reserves or resources.

This range typically keeps budgets balanced while supporting long-term goals like retirement savings, vacations, childcare or pet care, or other life priorities. It very well may differ in your case, so please meet with your advisor to discuss the right percentage for you before committing to a home purchase.

2. Protect Your Cash Flow by Avoiding the “All-In” Down Payment

Many buyers drain their savings to make their offer stronger or reduce their monthly payment. But emptying your cash accounts- especially in the first year of homeownership- is extremely risky and is one of the fastest paths to feeling financially strained.

Aim to keep 3–6 months of expenses in cash to lower the risk of being house poor.

This will need to be updated once you know your new ongoing housing costs. Also, if you can't cash flow things like moving expenses, immediate repairs, and furniture as you go, make sure to save up extra padding in your emergency fund ahead of closing.

A home shouldn’t cost you your financial safety net. Your base emergency fund should not be used for expected expenses, so that it can be there for you if something costs more than it should, there is a surprise repair, or anything else comes up.

3. Account for Ongoing Costs Beyond the Mortgage

The mortgage is only the beginning. Every home comes with recurring and occasional expenses that add up.

Plan for:

• Property taxes (varies by state/municipality)

• Homeowners insurance

• HOA dues if buying a condo or in a managed community

• Higher utility bills if you are moving to a bigger space, or no longer living with roommates. The difference can be significant.

• Maintenance and repairs, which typically run something like:

  • 1–2% of the home’s value annually for single-family homes

  • Can be slightly less for condos, depending

Costs like mortgage loan interest, insurance, PMI (restarting in 2026) and property taxes may be tax-deductible, helping offset increased housing expenses and supporting your long-term financial well-being.

4. Stress-Test Your Numbers

Before making an offer, explore a few “what-if” scenarios:

• What if insurance premiums rise?

• What if property taxes adjust after the purchase?

• What if you lose your job?

• What if you have to go on disability, and have a few months of lower income?

• What if you want to travel, start a family, change jobs, or go back to school in a few years?

Your goal is not just to afford the payment today, but to maintain flexibility over the long-term. The first few years are usually the hardest and riskiest as you're just starting to build equity. It's best practice to have a five-year plan for these sorts of things.

5. Keep Your Lifestyle in the Budget Equation

A home should support your life, not limit it.

Ask yourself:

• Can I still enjoy the activities that matter to me?

• Will I have room in my budget for giving, saving, or traveling?

• Does the expected mortgage payment allow me to sleep well at night?

Your home should enhance your quality of life and not make you feel like you need to live like a hermit to afford it (a slight exaggeration, but you get my gist).

A Special Note for California and San Diego Buyers

California homeownership comes with a few unique considerations that can meaningfully affect affordability. If you’re evaluating homes in San Diego or elsewhere in the state, pay special attention to the following:

1. Property Taxes and Supplemental Bills

• Base property tax rates are high, often falling between 1%–1.25% of assessed value.

• California buyers also receive a supplemental tax bill shortly after purchase- an extra cost many first-time buyers don’t anticipate. I was surprised by this bill myself when we bought our condo some years ago, and my clients have reported having similar experiences if no one told them when they bought their first home. It's important to plan for this expense.

2. Insurance Market Shifts

Homeowners insurance premiums have risen across the state due to wildfire risk and market changes. Some carriers have paused or limited new policies.

• Get insurance quotes early in your home search.

• Don’t assume rates will be comparable to your current insurance.

3. HOA Fees in Coastal and Urban Areas

Condos and townhomes in cities like San Diego, San Francisco, and Los Angeles often come with HOA dues ranging from $300 to $800+ per month, depending on amenities and building age.

4. Competition and Pricing Patterns

California’s high demand means:

• Bidding wars are common in certain price ranges

• You may need to be flexible on location, size, or home type

• Pre-approvals and working with buyer's agents is key to staying competitive

• Patience pays off. A rushed decision is often what leads to feeling house poor.

With proper planning, these factors don’t have to be dealbreakers—they just need to be accounted for.

Final Thoughts

Buying a home doesn’t have to mean sacrificing the rest of your financial life. The above information is intended to help you maintain financial security while also achieving the exciting goal of buying your own home. With the right structure, a realistic plan, and a clear understanding of your values, you can purchase a home that sustainably supports your financial wellbeing.

If you’d like help running the numbers or stress-testing affordability based on your goals, I’m always happy to dive in with you.

• • •

Have questions? Drop a comment on this post.

Need help building or updating your financial plan? Get in touch.

📌 Sage Financial Planning LLC is a California RIA providing values-based financial planning and financial advice in San Diego, CA and nationwide via virtual meeting platforms. Sage Financial specializes in serving those who believe in closing the wealth gap: First Generation Wealth Builders who want to change their financial family trees for the better, as well as values-based clients who want to not only achieve financial security and freedom for themselves, but who want to support their communities in meaningful ways and leave the world better than they found it.

For more information on our holistic financial planning offerings, please visit our Service Options page.

#financialplanning #money #moneymindset #goals #success #personalfinance #millennialfinance #genzmoney #womenandmoney #financialwellness #financialfreedom #CFP #moneymanagement #financetips #moneygoals #financialliteracy #financialeducation #financialindependence #FI #FIRE #financialadvisorsandiego #financialplanner #financialplannersandiego #smallbusiness #womenbusinessowner