Here's What Happens if You Spend Too Much on Your House

When you buy a house, you must be careful not to spend too much. Ideally, you do not want to end up with a mortgage bill and other housing costs that exceed 25% of your monthly income.

If you stretch your budget and spend too much on purchasing a home, you could face some serious consequences. Here's what could happen if you've overspent on purchasing your property.

You risk foreclosure

The biggest risk you face when you overspend is that you will get foreclosed on. If you are unable to make your mortgage payments, your lender will take your house and sell it. You will experience serious damage to your credit if this happens to you.

And depending on how much the mortgage lender gets for the sale, you may lose any money you put in as the lender will cover its own costs and fees first with the sale proceeds before you get a dime. You'll likely have lots of late fees to pay and homes sold in foreclosure often sell for less, so chances are good you won't get much money -- if any -- after the forced sale of your home.

You'll have to compromise on other financial goals

Even if you are able to avoid defaulting on your loan, there are other major consequences of spending too much on your house. Namely, you'll have too little money left for everything else.

If you sink a huge portion of your monthly income into your mortgage and other housing costs, you will have to live on what's left. This may not leave you enough to cover necessities without going into debt. Or, if you can cover the bills and other essentials, you may not have any money left over to save for retirement or for big purchases like vacations or vehicles.

Remember, every dollar you commit to your mortgage is money that your future self can't spend on other things. And you'll have to stick to your commitment for decades -- often 15 or 30 years, depending on how long your home loan is (unless you sell and end up paying the costs that go along with doing so).

You may be trapped in your job

If you are stretching to pay your mortgage, you may not be able to afford any reduction in your income. This could mean you can't look for a new job or change careers if you want to, if doing so would cause a pay cut. If you or your spouse decide you'd rather stay home with your kids, this option may also be off the table once you are committed to covering a high mortgage payment.

You will face ongoing financial stress

Finally, another major consequence of spending too much on a house is you will likely be in a constant state of financial stress. Even when you aren't necessarily consciously thinking about it, you may have a nagging worry in the back of your mind that you can't afford to spend what you want due to your high housing payment.

You don't want to spend your life just working to pay down your mortgage without doing anything else that matters. So, be conservative when you make your home purchase. You won't regret it.