What House Can You Really Afford?

What does “value” mean to you? To me, the word “value” means priceless—things money cannot buy.

The problem with the American mentality is that we put such importance on material things and not on things that are valuable.

I cringe when I read inspirational or financial books that encourage people to strive to buy their “dream home.” What kind of message does that send? That people can only be as happy as the size of the home they live in? That they are better parents for providing a bigger home for their children?
The economic and real estate collapse we’ve recently endured should deliver a big message for those people striving to buy their “dream home.” I’m going to tell you: Do not buy your dream home. Learn what you can afford on paper, and then buy a home for half that price.
I know…you’re thinking, “WHAT?”
Let me explain. After my husband finished school in 2007, we decided to buy our first home. We went online to a dozen different mortgage calculators, and we sat down with a mortgage broker. The mortgage calculators asked about our income and any debt we had.
We had no debt except our car payments, so the average mortgage calculator said we could afford a $450,000 home. I looked online and found some very beautiful homes in that price range around the Austin area. It was exciting to see we’d be able to buy a three-thousand square-foot home, with a bonus room, office, four or five bedrooms, island kitchen with granite counter tops and possibly a swimming pool.

It was like a giant carrot was dangling in front of us. My husband and I spent our weekends driving by these homes, and imagined living in one of them very soon. But one thing puzzled us. Each time my husband and I “crunched some numbers” and saw what our new budget would be, we never had enough money (or we were stretching our budget too thin). We asked each other, “Why do these mortgage calculators tell us we can afford a $450,000 home when our own calculator tells us otherwise?”
Mortgage calculators don’t ask you about the valuable and priceless things you want and need to do for your family. If you buy a home at the maximum you qualify for (which most Americans do), then you’ll have very little left for the most valuable things in life, or you’ll pay for the valuable things anyway and end up in credit card debt.
Here’s a list of things that are valuable to my family that the mortgage calculator never asked about:

Pre-school for 2 children: $10,000 per year
College fund for both kids: $233 per month
Retirement planning, IRA, investments: $650 per month
Life insurance (for both me and my spouse): $120 per month
Health insurance: $820 per month
Disability and catastrophic insurance: $225 per month
Sponsoring three children in Africa: $105 per month
Tithing and charitable contributions: $550 per month
Gym membership: $49 per month
Soccer classes for 2 kids: $110 per month
Ballet class: $54 per month
Gymnastics class: $48 per month
Swimming lessons: $300 per year
Tickets to professional sports games: $500 per year
Tickets to concerts and theater performances: $500 per year
Sea World/Entertainment: $1,000 per year
Organic groceries: $4,000 per year
Doctor visits, co-payments: $600 per year
Landscaping, home upgrades: $3,000 per year
Birthday, baby shower gifts, etc.: $600 per year
How in the world would we have been able to afford a $450,000 home and still pay for pre-school for both children, soccer/ballet classes, summer camp, Sea World, health insurance, doctor visits, organic groceries and donations to charity? Right, we couldn’t have afforded it without using credit cards.
So, we chose to buy a modest home for $215,000—half of what we’d qualified to buy! Our house doesn’t have granite countertops, and we don’t have a swimming pool. We converted one of the bedrooms into an office and our landscaping is sparse. But by buying a house for half of what we qualified for on paper, we have the ability and freedom to invest in our future, donate to charity, start a business, send our children to the best schools in town, eat quality food and travel the world—all without incurring a nickel of debt.
Sure, it was a bit deflating to my ego to go shopping for a 5,000 square-foot home with all the bells and whistles and end up buying a home half that size. But now that we’ve lived in our home for almost four years, I realize it was the best decision we ever made. If we had bought a $450,000 home, would we be happier than we are now? Of course not. Would our friends respect us and cherish our friendship more? I hope not (if so, then they weren’t really friends anyway). Would my parents be more proud of me? I don’t think so.
So why do we do it? Why do we feel pressured to go too far and buy the most house we possibly can—and then live under constant stress to pay for it all?
“Money does not buy happiness; Scripture asserts this, research confirms it. Once you reach the median level of income, roughly $50,000 per year, wealth and contentment go their separate ways, and studies find that a millionaire is no more likely to be happy than someone earning one-twentieth as much.” — Nancy Gibbs, Time magazine, April 27, 2009
What’s valuable to you and your family? What is priceless? Budget for these things first, and then see what you have to spend on a home. In five, ten or twenty years when you look back on your life, what do you want to see? That you barely made your payments on your home each month, or that you were able to do everything you ever wanted to do with your family stress and debt-free? Picture your family in a smaller, more manageable home. Would your marriage be any different? Would your friends abandon you? Of course not.
What kind of home can you afford—really afford?



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