So, a couple of terms that I've heard thrown around before that I think are helpful to explain. Being upside down on your home.

 

What does that actually mean? Well, truthfully, in today's market, you don't encounter that much. But basically, being upside down on your home means that you owe more on your house than what it's actually worth. In order to do that in this market, you for the most part have had to have taken out some sort of a second mortgage. People do that for all sorts of reasons. Maybe that's for home improvements. I've seen people do that for medical expenses, but some sort of loan where the original mortgage that you use to purchase your house has been had more money tagged onto it for a second mortgage. Now this can also take place in areas where property values dramatically decrease. Here in Northeast Arkansas, you really haven't seen that, or if you just loaned your absolute maximum on a house and it hasn't increased in value.

 

The other thing that can happen is if you overspend on home improvements for a given area, certain neighborhoods kind of hit a ceiling on how much a house is worth. And so that $150,000 house that you bought surrounded by other $150,000 houses doesn't necessarily go up dramatically in value. If you do $70,000 or $80,000 worth of improvements to it, that could put you in a situation where you are upside down on your house, especially if you borrowed money to make those improvements. So, in order to sell the house instead of getting a check when you sell, you would actually have to write a check to pay off those loans. The other question that I get or the other term that I hear is being house poor. House Poor truly is one of the mottos that I'm trying to stay away from one of those things that I want to avoid in any scenario. What I tell people is I don't want you mad at me when you're writing your house payment. And really what being house poor means is that you have yourself in a situation where you've borrowed so much to purchase your home that your payment paralyzes you from doing the other things that you want to do in life. So, what I want for all of my clients is to be in a financial situation when they buy a house that they feel comfortable with their payment.

 

But it's not going to put a great strain on their budget every month when they go to make that payment, especially if it means cutting out things that you value, whether that's travel or extracurricular activities with kids or maybe that special car that you want or any of your hobbies. I'd hate for you to cut those things that you love and enjoy short just to squeeze a little bit more of square footage into a new house or I don't know, put you just in a situation where you're not satisfied. So hopefully that clears up a couple of questions that you might have if you have heard any terms that just don't quite make sense to you as you've explored home shopping or home selling, I'd love to sit down with you and tell you a little bit about what those are.