House Rich, Cash Poor: How One Couple’s “American Dream” Home Nearly Tanked Their Finances

“While our original $150,000–$170,000 price range would have put our housing costs at a manageable 30% of our total income, springing for a $200,000 loan shot that number up to just shy of 50%.“

For many people, a logical step after completing college is often purchasing a home and inching closer to the American dream.  And yet, there are pitfalls to obtaining a home that can lead to financial stress and the inability to reach important short-term and long-term financial goals.

This article describes how one couple took all the right steps to prepare for a home purchase, but eventually decided to purchase a home that cost more than they planned to spend on housing.  The reason was simple:  They fell in love with a home that was too expensive when compared to their total income.  The article continues to describe what happens next in their attempt to regain their financial health.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

• Stress the necessity of preparing a realistic budget that reflects mortgage payments, insurance, taxes, repairs, etc when purchasing a home.
• Share the advantages and disadvantages of owning versus renting a home.

Discussion Questions

1. Given your goals and lifestyle, how important is home ownership to you?
2. What steps should you take to prepare for purchasing your dream home?
3. Assume you have found your dream home and you can afford the payments, insurance, taxes, repairs, etc. What steps are necessary to negotiate the purchase and obtain financing?