National Consumer News

Why you should buy a house below your means


Charis Rebecca Brown,

Often when you begin your house hunting journey, you picture the perfect house that has everything you want. You might dream of a glorious mansion, a chic city condo, a comfortable suburban home with sidewalks and big trees — or perhaps you’d prefer a charming cottage on the beach or cabin in the mountains. Maybe being near friends and family is the most important thing, or maybe you want a lot of land for your furry friends.

No matter what your dreams are when it comes to home ownership, don’t let the price of a home derail your overall financial health long term. Just because you can qualify for a bigger house doesn’t mean you should buy one.

When beginning the house hunting journey with a realtor, a good realtor will understand your likes and dislikes, and show you properties that align with your preferences and your budget. But, a great realtor also knows what’s going to make everyone in the process more money — and that’s encouraging you to buy a bigger house.

This is not a knock on realtors, because I know some very good ones who are personal friends! But even though there are realtors who are awesome people, you need to know that buying a house is probably going to be the single biggest purchase you will make in your entire life, and making a poor choice or not having all the facts can set you up for heartache later on.

From midsize, to big, to tiny

In the 1950s, soldiers came back from World War II and began starting families. Homes and neighborhoods cropped up everywhere. Suburban “Levittowns” became communities of choice for young couples just starting out.

From there, homes sizes and prices kept going up. In 1973, the median square footage of a home was about 1,500, while in 2013, it was 2,500! Homes have certainly grown, with the exception of the recent tiny house movement. In this housing shift, people are deciding to live in 100-600 square foot spaces to pay off student loans, eliminate medical debt or rebel against the idea of consumerism and live minimally.

I don’t blame them. Consider the difference between buying a $150,000 house and a $300,000 house over time, at the same interest rate:

$150,000 home

  • $15,000 down
  • $93,199 interest paid
  • $288,274 total paid

$300,000 home

  • $30,000 down
  • $186,398 interest paid
  • $576,548 total paid

As you can see, doubling the home purchase price also doubles the total amount you’d pay on your home, including all the interest. That’s a lot of money that could be used to fund a retirement or IRA account, plan for your child’s college or save for the unexpected!

Save big by doing a 10 or 15-year mortgage

Another reason you should consider buying a home for a lot less than you can afford is the ability to do a shorter-term mortgage.

Check out the savings comparing a $300,000 home with a 30-year mortgage to one at the same price with a 15-year mortgage:


  • $30,000 down
  • $186,398 interest paid
  • $576,548 total paid


  • $30,000 down
  • $86,563 interest paid
  • $415,738 total paid

Cutting the time you’ll pay on your mortgage in half cuts the amount you’d pay in interest dramatically! It might be a little more challenging to make the higher monthly payments, but that’s why it’s beneficial to choose a home below what you can actually afford.

Imagine what kind of retirement you could have if you were able to put $99,835 in the bank, (the difference in interest paid), and allowed it to grow over time. The difference in money earned and saved would be huge!

e able to prepare for the unexpected

Nobody plans to have difficult setbacks in life, such as joy layoff, disability or divorce. But the fact of the matter is, these things do happen, and it’s better to prepare yourself financially if they ever do.

If you decided to buy a house that puts a strain on your financial life without any room for error, this can be a dangerous move. What happens in the event of a job transition, a cut in pay or a medical emergency? Hopefully you’ll have emergency savings, disability and life insurance for any of these kinds of unexpected situations, but in the event that the inevitable happens, will you have what you need to continue to make monthly mortgage payments?

This is why it’s better to have margin in your monthly spending and choose a house below your means.

Consider different goals for home ownership 

When you begin the house-hunting journey, the goal shouldn’t be to buy the biggest house you can afford. Instead, the goal should be to buy a house you can enjoy and still be financially freed up to fund your retirement, save for the unexpected, plan for your children’s education and reach other financial goals. If you can do it, take out a 10 or 15-year mortgage to pay off your home quicker.

Buying less house than you qualify for will ensure that you are in charge of your mortgage, and that it never gets the better of you.

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