My husband and I bought our home in April of 2007. We had been looking for several months before we found a great house at a great price that February. It was a foreclosure though, so the entire process took a couple of more months after our first offer. In the end, we accomplished our goal of buying way less house than we could afford.
Why We Wanted Less Than We Could Afford
As some of you may know about me, I don’t like debt. It makes me itchy. So my biggest reason for wanting an inexpensive home was so that we could pay it off as quickly as possible. Our second reason was that we wanted a mortgage payment small enough that we could afford to pay it even if one of us lost our job. Our $114,000 house fit the bill.
The $92,000 loan was low enough that we will be able to pay it off in 10 years or less without too much stress. Plus the $740 monthly payment for 15 years in the beginning was doable in case of job loss. The new refinanced $504 payment is even better. We overpay to $900 every month religiously, but we do have that extra $400 to play with now if the need ever presented itself.
We were approved for a $160,000 loan to start with, but then we wouldn’t have been able to put 20% down right off the bat. I appreciated having solid equity in our home even when the housing market crashed in 2008. It is nice to have that equity available as another backup in case we ever have to use more than our $15,000 emergency fund can handle. I rather take out a home equity line of credit right now than be forced to sell stocks when they are at their lows.
Another big benefit of affordable housing is the complete lack of stress. We never have to worry about making our monthly payment. It’s small enough that we could even keep our house for more than a year and a half if we both lost our jobs. That means that even if my husband was thrown out of the school system at the same time blogging became unprofitable, our emergency fund, Roth IRA’s, and stocks could keep our bills paid (including the mortgage) for more than 18 months if necessary. I love that sense of safety.
Avoid Buying Up to Your Limit
In short, I would highly suggest staying well under the amount you could afford to spend to buy a house. Yes, a $160,000 home might have been bigger or better in some way to our $114,000 home, but we may have had more financial stress in our lives. Our house is big enough and new enough to provide for all of our needs without needing any money poured into it. The nice extras we may have passed up wouldn’t have been worth the extra stress to me.
How about you? What do you think of buying less home than you can afford?
The following is a post from staff writer Crystal Stemberger at Budgeting in the Fun Stuff, where she writes about finding the balance between paying your bills, saving for your future, and budgeting in the fun stuff along the way.