In my personal opinion, I do not think it is wise to be "house poor". If you buy at the top of your limit, are you financially prepared for an "oops" that comes along? Unfortunately, rainy days come and if you are at your max, and cannot take care of a repair, or an unexpected incidental, what are you going to do? When you buy in the mid-range or more affordable range, if an unexpected expense comes along, hopefully it won't be as much as a hardship to handle.

Hope this helps!

I think we do agree,

sorta, I just think you should plan for the future but know that there are no guarentees. People change, neighborhoods change.

Maybe it's better to buy something small and manageable that is about the same as rent and banking the amount of money that you WOULD be paying for a larger home for 3-8 years. Then even if your home doesn't increase, you'll have your savings for a juicy down payment and be used to making bigger payments.

30 years is a loong time to be broke

I was assuming that Concerned Mom had already decided that she was going to purchase. My opinion is that if you can't afford what you want you're better off renting than to buy, hold, sell and try to "move up" later.

Vicki, it may not sound like it but I agree with you. If you're not in it for the long haul, (and I mean LOOOONG haul) you're better off just not taking the plunge.

Vicki, I disagree. Dan was saying if you can plan on staying there 30 years - go for it. If the person plans on staying there 30 years the minor market fluctuations over the next few years doesn't matter. I'm not saying your assessment of what "caused today's problems" is wrong, but I would also add that a big part of the problem was that people looked at their homes as an investment first, and a place to live second.

Every new car that get driven off the lot goes down in value but people aren't ditching their new cars all the time... because people buy the car to use - not as an investment.

Dan, if as you say there is "no such thing as a "move up" market ", why would you want to max yourself out on a place that may go DOWN in value?

That is part of what caused todays problems. People got in to homes over their head and then when the value went down... they had nothing to lose and there was no reason to stay so they just walked away.

if you are putting yourself into a tight situation without expectation of increased income, you are setting yourself up for a crisis. It doesnt take much for the "stretch" to become a "tear". Are you prepared for a sudden job loss, major unexpected expense, a medical emergency...etc.

There is nothing wrong with a stretch if there is a solid plan, like being close to paying off a vehicle, having a guranteed significant pay increase...etc

Please sit with professionals and design your future. I have seen people make a decision to own a home and end up with a home that owns them.

Buy what you can afford and avoid the sleepless nights worrying about how the mortgage is getting paid.

My opinion is to buy something you absolutely LOVE and stay in it for 30 years even if it means you have to stretch. Make no mistake about it. There is currently no such thing as a "move up" market and won't be for a very long time. In order for a "move up" market to exist, homes have to show appreciation. That will be a long time coming.

There are many things to consider here. But one thing you want to start with is knowing what your other bills will look like under the two scenarios. With a more expensive home you may have larger utilities, or longer commute. On the other hand, what savings could you be looking at if you went with each option. Don't forget to consider the areas' appreciation! We're in a market where that is more transparent than at any other time. NOW is a great time to see if the homes that were so expensive 5 years ago are still appreciating...or severely depreciating.

Living on a temporary basis under the "strict" budget BEFORE making any commitment could be very eye opening. Try it first & see how much you can endure.

Good Luck!

Dorothy LaBar, Realtor, ABR, CTA, QSC
Rector-Hayden Realtors - Lexington KY

Let me answer your question by asking:

Do you find folding lawn chairs attractive and comfortable seating?

Do you enjoy sleeping on an air mattress?

Does camping in your back yard sound like the idea vacation?

How well can you sew?

Does your idea of a fun night out include catching fireflies to keep in jars so you have nightlights to read by?

How many days in a row can you eat Raman noodles?

Do you have an unbreakable guarentee that you or your spouse will never become --- unemployed, with child, injured for more than 5 days or make ANY kind of lifestyle change?

If you honestly think you will enjoy your four walls enough to be broke all the time YES Buy way more house than you are comfortable with.

Here's an idea. For a year, put the amount that you will pay for your "top of the limit dream home" in an account. If you can do that and be happy with your lifestyle based on the amount of money you have left..... well, you'll have quite a nice little down payment now won't you?

I'm not a realtor either but I thought I'd chime in with my opinion.

As everyone else has already stated, I don't consider 10 years to be a short period by any means but you also don't want to be house poor during those 10 years either. My husband and I just went under contract for our first home. We were looking for something that was large enough to grow into but small enough with the excess property space to expand and build equity. The key factor is location location location. Up and coming areas are a pretty safe bet. Don't be afraid of a bit of cosmetic remodeling either. For example, if you can find a home with good "bones" that looks like its from the 60s but in a great area, that might be a good investment. You might be able to get a great deal and with a little elbow grease, bring it into this century all the while building equity for the future.

Thats just my opinion though. Good luck in whatever you decide :)

Hello,
I understand your concern. Here is the std. line, it is better to puchase as much as you can and stay for along time. You may have to eat hot dogs. The problem is alot of times people don't eat hot dogs and get themselves into trouble.

If it were my daughter, I'd suggest 1st they consult a Realtor, such as myself, I can help them thru the process and make it easy for them.

Secondly, they need to look at their current finances, goals, etc. and take into consideration the economy at this time. They need to see what they want to pay monthly for mortgage and what money they have to put down on a home.

It is certainly their best investment!
Thank you,
Sherlyn

Thanks for the responses.

If I were you I would buy wherever is decent and comfortable and that you think you can stay for a long time. But don't stretch to the limit and you should have some extra savings just in case for a temporary job loss or extra expense for a speeding ticket for the month.

You can't change what is around you, the neighbors, the stores, schools etc... but you can make improvements to the house. You can move up later if you want and able to... but shouldn't put yourself in a position where you either have to move because of financial hardship or because the neighborhood.

There are many things more important than a house,as long as you have a safe ,cool or warm place to come home to after a day of work.
The idea of stretching to buy a home was born in periods that house would appreciate faster than the average inflation and also used by people that were on the lower end of a reliable carreer ladder.
I hope that most people have learned that house prices and carreers are nowadays very unpredictable.
I have done the stretching myself ,but always in a way that I still never had to worry about money.
Money problems are the root of many evils, including marriage problems .
You can have a very good life living in a smaller home ,with money left over for some toys,vacations ,and entertainment. I have seen the alternatives of big,nearly empty houses ,cars to match the house and debt up to their ears. If you want to invest, use the stockmarket or other investment products ,but not your house.

I'm not a realtor, but I just bought a house and thought about this a long time. First of all, I don't consider 10 years a short amount of time... but I really believe the value in owning a home is in staying there a long time - the longer the better.

So, IF you can afford the home you would stay in longer, I would get that one - But you have to be able to afford it in real life, not just on paper. It's okay if you're a little tight, but if you're going to be up at nights wondering how you're going to pay the mortgage or not be able to afford to go out to dinner once in a while, it's not worth it. On the other hand, I believe we're about to hit a stretch of big inflation, so what's $1000 this year might only seem like $700 in a few years, yet assuming you have a fixed rate your mortgage, your monthly payment will remain the same. I also feel it's kind of a bad sign if you're already planning on moving out before you move it. And while 10 years is a long time, if you move out after 10 years, you'll probably be ready after six.

good morning.........what a great question.......i have done low and higher risk mortgage financing for almost 15 years......the worst that could happen is to close on your dream home and live on the edge every month financially........you don't have to stretch now because prices are so reasonable...there are bargains everywhere.....what you also need to watch is after you buy, you will probably be flooded with credit card offers.....credit card debt is one of the highest cost per-thousand debt you can have.......the savings you scienced out when purchasing your home could quickly vanish with just a small amount of credit card debt. i hope that helps......bob mcclure- success mortgage partners- plymouth, michigan....

Dear Concerned Mom,

I am a Realtor, and here are my thoughts both professionally and personally. Now is probably not the time to stretch your budget because of the economy. I usually choose to be a bit conservativ, But now is definately the time to purchase a home. Let me know if I can be of more assistance to you and or your child.

Make sure you can afford it, now and for the foreseeable future. You don't want to be house poor, it's not worth it.

I agree with Jeff.

No one knows what the future holds for homeowners in the short term or how long it will take before the market gets better. However, in the long term like the ten years you mentioned, it is a better outlook. Buy a more affordable home. This way, you will be able to fix things if they get broke, provide more of a down payment and perhaps not need the PMI or even be able to save for vacations or other things.

Being house poor is a part of what got this country in trouble. People bought homes that are at the top of their affordability, unable to have the funds for closing costs and little as a down payment. Things are tight from the get go. A few months down the road, something happens. Transmission gets shot in the car, 3yr old stuffs the toilet with a few rolls of toilet paper requiring a plumber, whatever.

Having a more affordable home also allows you to update the home while you are living there. This way, when it comes time to sell, your home would demand a higher price and could be sold a lot quicker. Being house poor, you would not be able to do this and the consequences will be seen when trying to sell the home when it comes time. Bottom of the list of similar homes, getting low offers and sitting on the market much longer.

Hope that helps,

Terrence Charest, e-Pro

It depends on many factors. In the days of rapid home appreciation people would stretch to their financial limits knowing that it would be likely that their home would be appreciating 5- 10% or even more annually and they could tap into the equity ( this is where many people got into trouble ) or " move up.
I advise my clients to spend what they can afford without being " house Poor" where the payments are so high you cannot afford to spend on vacations, or live a comfortable life style. You should also have 6 months of income saved for a " rainy" day. You should look at your house as a home where you live first and as an long term investment second. Of course Location, Location, Location of where you buy is very important. Good luck on your purchase, this is a great time to be a buyer of real estate.