No matter what you know you can spend, the house you really want will be just out of your price range. It may have everything you want, but it is just above what you can afford. This happens to people who can afford a $150,000 home and those who can afford a $1 million home. It’s always just a little pricier.

Stretching your finances to fit your dream home is common today. Whenever I have applied for a mortgage, the lender always says I can afford more than I have calculated. While you should look to your finances and spend within your means, there are some reasons that people increase the price range of their home purchase.

Using money you don’t have

If a home is more than you can afford, you will have to finance. You may be surprised to find that you qualify for a higher mortgage than you thought. While it pays to be conservative, you may find that the risk is okay for you. There are mortgages available that require as little as 10% down. If you plan to stay in the home for a long time, you will gain equity, though slowly.

Let’s look at the numbers. You buy a house for $150,000 with $15,000 down. The house appreciates by 10% each year for two years. You have made $30,000 in the increased value of your home. That is a 200% return on your investment. If you had purchased a $200,000 home with the 10% appreciation, your gain would have been $40,000. This is a best case scenario, not all homes appreciate to this extent.

Added tax benefits

There may be added tax benefits to having a larger mortgage. The interest paid on most mortgages is tax deductible. The more you borrow, the greater your tax shelter.

More stability in getting what you want now

Moving is awful. It sounds fun, but really stinks when you get into doing it. There are many financial and emotional stresses to buying and selling a home. You could buy a smaller home now and move up in a few years, but it might not be worth it to you. You could just buy the bigger and more expensive home and stay in it for a long time.

Look at the closing costs for buying, selling and buying again. It may be better just to buy the more expensive home. And you get what you want.

But, it all comes down

What goes up comes right back down. House prices will eventually fall. Interest rates, economies and the weather can affect the value of your home. You should make sure that you are buying a home that will hold its value at the least. You know that you are stretching yourself, don’t do it for something that is worth less than you put into it.

There are many options out there when buying a home. You can buy conservative and worry-free in your price-range. Or you could stretch a bit and be content in getting what you want. There isn’t anything wrong with making sacrifices to make your finances work.