Choosing a home can be one of the most stressful and exciting things you ever do. For most of us, buying a home will be the largest purchase we ever make. It’s a big deal!!
Oftentimes, when you are in the buying process, you are all hopped up on those new home dreams and visions and you end up either completely maxing out your pre-approval amount or even going over it and really overextending your budget. This is all in the name of the “perfect house.”
I get it, I have totally been there, but I would caution you against buying the most house you can afford the payment on. Buying a home that is outside a comfortable financial range for you, one that you will have to work a little bit more for is not a good idea.
The best gift you can give yourself when you are buying a new home is to buy less house than you can afford. I know how tempting it is to throw out the budget while home shopping, but that would be a mistake.
AND, I always say, “nothing in life is permanent until you die,” so you can always move if you really hate your home and are in a position to upgrade later. It’s a bit morbid, I know, but it really helps to put things in perspective. You can always change things, no matter what they are.
Before you pull the trigger on buying that super expensive home of your dreams. Before you embark on the craziness that is finding your new home and get all hopped up on those feel-good endorphins, you should know why you should buy less house than you can afford.
Why You Should Buy Less House Than You Can Afford:
Your home can withstand sudden life changes.
The way your life looks the day you sign on the dotted line for a home is guaranteed to change at some point. Imagine if you have overextended yourself based on what you thought you could maintain for your income, but unexpectedly, that income went away. What the heck would you do?
If you have bitten off more house than you can chew, you have left yourself vulnerable to outside forces.
Take my family, for example, my husband had this amazing, stable job with excellent pay. When we moved last year, I was adamant we keep our payment the same or lower (mostly because I liked where our budget was at and didn’t want to change). Could we afford more?? Yes, we could have, but I didn’t want to have an increased house payment with every move.
So, we went with a comparable mortgage and kept our payment the same. Fast-forward one year and that job is gone. Our income drastically changed and we didn’t see it coming. Because we bought less house than we could afford, we are not at risk of losing our home, even with the change in income.
When you buy less house than you can afford, you are giving yourself the security of being able to afford your home no matter what happens in your life. The last thing you need on top of a stressful life change is to lose your home too.
You won’t be house poor.
Dave Ramsey always says, “Your best wealth building tool is your income.” He’s absolutely right. This is true when it comes to your home too. If you buy more house than you can afford, you have made yourself house poor. All of your income is going to be tied up in a house payment. Yuck!
Imagine instead, buying less house than you can afford. Your mortgage is a very manageable payment and you still have plenty of income left every month. That income can then be used for living, giving and investing in your future.
If you tie up too much of your income in your house payment, you are limiting your future. And for what? A bigger house that leaves you feeling stressed out and is robbing your future wealth? Totally not worth it.
Buy less house than you can afford. You do not want to be house poor.
Your home will cause you to spend more money.
This may sound crazy, but it is totally true! We live in a world full of comparison and judgment. Even the most vigilant people can still be subject to the comparison trap. Think about where you live now: is the outside of your home as nice as your neighbors? Do you have decorations on par with what they have? Is your car at the same level of nice as theirs?
Think about these things.
Now, no matter where you live, imagine upgrading to a super nice neighborhood, with HOA dues, the lawns are perfectly manicured and there is a standard for Christmas decorations. Everyone drives nice cars and has decorations and flowers outside for every holiday.
Would you spend more money to meet the living standard? Absolutely!
I had never thought about this before, but then I read The Millionaire Next Door (great read, by the way!). In the book, they talked about being careful where you moved to because location would influence your spending.
If you lived in a blue-collar neighborhood full of America’s working class, you would keep your standard of living on their level. If you are a doctor and you move into a doctor’s neighborhood, you will increase your standard of living to meet those around you. There will be a pressure to “keep up with the Joneses.”
It’s inherent and something you can’t easily ignore. They discussed how the most successful millionaires are those doctors who lived in a blue-collar neighborhood and kept their standard of living way below their means. This was much easier to do when they were surrounding themselves with people living at the same standard.
All of this is to say, be careful WHERE you choose to live. If you put yourself in a neighborhood that is going to cause you to spend more money than you have just trying to maintain the standard of your home, watch out! This will then trickle over into your cars, your clothes, your activities and more.
We can’t help this without a big fight because we are creatures of comparison. How we feel about ourselves is usually relative to something else. We feel like our house is cute if those around it are less cute. We feel successful if those around us are less successful. Right or wrong, that just tends to be how the majority of us think.
Keep the location of your home in mind when you are house shopping. You may just be getting a complete lifestyle upgrade you weren’t banking on and definitely can’t afford.
Your home will keep your family closer.
I have not experienced this yet myself, but I have friends who can attest to this. More square footage equals more space to avoid each other. I currently live in a 1400 sq.ft. home and that is plenty of space for a family of four.
When you start to increase your home size, you may start to notice everyone spreading out and spending less time together. Check this out (according to a general Google search):
In 1950, the average house size was ~983 sq.ft.
In 1970, the average house size was ~1,660 sq.ft.
In 2015, the average house size was ~2,687 sq.ft.
That is insane!!! The other thing to think about is, on average, the number of children people are having is decreasing. So before there were more kids in a small space and now we have fewer kids in a bigger space.
How much space do we really need to live? Instead of everyone being off in different corners of your home, bring everyone together with a smaller space.
As a bonus (and I care about this one), a smaller space will also take less time to clean, which also means fewer cleaning products to buy. All of this is better for your budget!
Your home will be paid off sooner.
If you buy less house than you can afford, you will be able to pay off your home much sooner. This is just simple math. If you have a lower payment, more of your income is available for other things:
If you have a huge monthly payment for your home, you are never going to get ahead anywhere else in life. You do not want to be house poor and not have any of your hard-earned money available to get to work on all those other important financial things you should be doing.
Imagine what your life will look like when you have a paid for home. You own your home. Can you imagine? You will have your entire income to work with for other things that are important to you.
Buy less house than you can afford and get it paid off ASAP!
When you decide to buy a home, you are going to want to fulfill all of your dreams and desires. It is so important to keep in mind, the reality of what you are really signing up for. Buying less house than you can afford will increase your security, help you achieve other financial goals faster, keep your standard of living manageable and might even bring your family closer together!
Enjoy the process of finding a home, but don’t bite out more house than you can afford. You want your home to be a blessing, not something that financially puts you at risk.
Did you buy less house than you can afford?
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