Christian Debt and Finance Resources, Advice

Too much home for your health?

  • Larry Burkett Co-CEO of Crown Financial Ministries
  • Published Dec 17, 1999
Too much home for your health?
Caution: Buying a house at the upper limit of your financial capability can be hazardous to your economic health.

Normally, the maximum that should be spent for housing is about 33 to 38 percent of your net spendable income (NSI) -- that's after giving and taxes. Housing expenses include mortgage, property taxes and insurance, utilities, and maintenance.

Staying at the lower end of the range will result in a far more workable budget for most families. In fact the lower the better. Extreme financial problems can develop when a family purchases a house at the upper limits of their financial capability.
  • John and Mary, with an annual NSI (Net Spendable Income) of $32,000, decide to designate 36 percent, or $11,520, for Housing. That's $960 a month.
  • They find a 15-year-old house they really like and are convinced it fits their budget. The monthly mortgage payment is $805, and the escrow account for property taxes and insurance is $148-a total of $953. John and Mary feel comfortable, knowing they are right at 36 percent of their NSI.
  • However, shortly after they move in, a heavy rain reveals several leaks in the ceilings of three rooms and the basement. When the weather clears, they discover that a new roof, downspouts, and underground drainage system are required. The repair costs force John and Mary to borrow money, and they choose to take a second mortgage on the house.
  • The $210 monthly payment on the second mortgage increases the housing portion of their budget from 36 percent to 44 percent of their NSI. All at once, what was to have been John and Mary's dream home has become the nightmare house of financial bondage.
  • What went wrong? The housing portion of a budget must include maintenance and utilities, and John and Mary didn't figure those items into their housing budget when they purchased the house.
Financial problems can quickly arise when families buy homes they can't afford. Even new homes will require maintenance and repairs; and money for taxes, insurance, and utilities must be set aside. The decision on whether to buy new or used, or to rent, should be based on real needs and financial ability, rather than on internal or external pressure or unrealistic fantasy.

If you buy a used house, consider having the house checked by a licensed, bonded inspector. Then you'll know whether extensive repairs or improvements will be needed before you buy or move in.

Of course, if repairs are needed, the best scenario probably would be for the present owner to have all of them completed before the sale; or, the selling price could be adjusted down enough for you to be able to do the repairs later to your satisfaction. If that can't happen, maybe the Lord has a different and better house for you.

As always, the best advice comes from Jesus who said, "Which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish it, all who observe him begin to ridicule him" (Luke 14:28-29).

To read more of Larry Burkett's financial expertise, click here to visit the Larry Burkett Store, where you will find such resources as Money Matters Gold budgeting software and the Home Buyers Kit.