House Rich and Cash Poor

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Everyone has one purchase they couldn't afford and bought anyway. For some servicemembers, houses fall under that category. It wasn't so long ago that it was acceptable to buy a house that was out of your price-range.

Today, that plan isn't a wise financial strategy but homebuyers are still being forced into mortgages they can't afford, according to a publish report. Some mortgage specialists, real estate agents, and loan officers might still advise that first-time buyers purchase as much as house as they can afford. However, buyers should beware before entering into any financial commitment that could lead to financial ruin.

Homebuyers can avoid falling into the house rich and cash poor trap by using the following rules from

  • Be realistic about income. This means homebuyers will need to calculate income to ensure that the mortgage payment, homeowners' insurance and property taxes don't exceed more than what the homeowner will be able to pay.
  • Make sure that you are debt free. Even the slightest bit of debt can put a homebuyer so far behind in monthly payments that they will never catch up.
  • Be mindful of lending industry. More lenders have loosened their criteria, knowing that the vast majority of their borrowers will do whatever it takes to pay their mortgage - even if it means trashing the rest of their financial lives.
  • Watch inflation -- Rapidly rising prices in the 1970s and 1980s meant you could count on hefty annual raises. That's not the case in the new millennium. You can't rely on double-digit income boosts to help make the mortgage payments.

If must buy your dream house now then there are a few ways that you can stretch your income to afford the home:

  • Don't worry about retirement -- Many civil servants have terrific pensions. In fact, pensions are so good for this group that they just have to contribute a few dollars to an individual retirement account -- or Thrift Savings Plan for servicemembers.
  • Income projected to increase -- If you have a job that can guarantee a significant pay increase and waiting isn't an option, then stretching might work out, but ensure that the pay increase is on its way.

Servicemembers do have more financial resources -- such as VA Loans -- available to help them buy the home of their dreams, but it's important to stay within your budget to avoid financial ruin when looking for that dream house.

For more information, visit's Home Buying section.

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