Why I Bought Less Home Than I Can Afford

by Christy Bieber | Published on Aug. 27, 2021

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A young woman is moving into her new home. She is sitting in a room filled with plants, unpacking.

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Spending less than I could was definitely the smartest decision for me.

When I went to the bank to get my home loan, I was approved to borrow a pretty good sum of money. That was all thanks to my income, good credit, and the fact I had a down payment saved. But I ended up purchasing a home for far less than the maximum amount the bank agreed to give me.

There are a few reasons why I did that.

Buying less home than I could afford made financial sense for me

While a home can be a financial investment, I don't view my house that way. I'm going to live in my house as long as possible and don't plan to sell it to make a profit or sell it when I retire in order to pad my savings account. So while my house may get more valuable as property values rise, and I'll acquire equity as I pay down my loan, I won't directly benefit from that financial appreciation for a long time, if ever.

Because my home isn't an investment, I wanted to make sure I have plenty of money to invest in other assets that would help me to become financially independent one day. I didn't want to spend so much money on a mortgage payment that it would be difficult for me to max out my retirement accounts, invest in taxable brokerage accounts, or save for other big purchases that I might want to make over time.

I also didn't want to lock myself into the large mortgage payments that would have come with the loan that the bank offered me. While I could afford them based on my current income, there's no telling when my earnings might potentially fall if I wanted to switch jobs, economic conditions resulted in my losing work, or if I wanted to cut back and spend more time with my family instead of working so much.

I knew if I committed to a really big mortgage payment, I would end up trapping myself in a situation where I couldn't make the choice to earn less income and where I would constantly be worried about a pay cut.

Rather than create a lot of financial stress for myself in the future or risk not being able to do other things I wanted with my money, I took out a much smaller mortgage than the bank offered -- and so I bought less home than I could afford to purchase. In fact, my husband and I made sure that the house we bought would be affordable even if only one of us were working. That way, if something happens to either of our incomes, we wouldn't be at risk of foreclosure.

Trusting the mortgage lender to decide how much you can borrow can be a big mistake since their interest is to lend as much as possible without increasing the risk of default. They only look at your debt levels to decide how much that is, not at your other life goals. You owe it to yourself to consider the big picture and make sure you aren't committing to a housing payment that will end up causing you financial problems over the long-haul.

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